UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________to_________
Commission file number 0-22904
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PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2971472
(State or other jurisdiction of I.R.S. Employer ID No.
incorporation or organization)
8493 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
(904) 737-1367
(Address of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 30, 1998, 11,409,236 shares of the Issuer's Common Stock, $.01 par
value, were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of ParkerVision, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. All adjustments which, in the opinion of
management, are necessary for a fair presentation of the financial condition and
results of operations have been included. Operating results for the three and
nine month periods ended September 30, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998.
These interim consolidated financial statements should be read in conjunction
with the Company's latest Annual Report on Form 10-KSB for the year ended
December 31, 1997.
2
PARKERVISION, INC.
BALANCE SHEETS
September 30,
1998 December 31,
ASSETS (unaudited) 1997
------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 9,794,027 $ 2,133,193
Short-term investments 11,107,987 18,815,957
Accounts receivable, net of allowance for doubtful
accounts of $20,899 and $38,405 at September 30,
1998 and December 31, 1997, respectively 1,355,960 660,947
Interest and other receivables 149,768 386,634
Inventories, net 3,261,320 2,970,087
Prepaid expenses and other 832,213 610,915
------------ ------------
Total current assets 26,501,275 25,577,733
------------ ------------
LONG-TERM INVESTMENTS 5,001,064 9,494,404
------------ ------------
PROPERTY AND EQUIPMENT, net 2,767,767 2,541,123
------------ ------------
OTHER ASSETS, net 1,827,341 1,071,772
------------ ------------
Total assets $ 36,097,447 $ 38,685,032
============ ============
The accompanying notes are an integral part of these balance sheets.
3
PARKERVISION, INC.
BALANCE SHEETS
September 30,
1998 December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) 1997
------------------------------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 799,145 $ 560,106
Accrued expenses:
Salaries and wages 221,234 313,267
Other 493,239 259,096
Deferred revenue 42,062 20,973
------------ ------------
Total current liabilities 1,555,680 1,153,442
------------ ------------
DEFERRED INCOME TAXES 4,678 4,678
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares
authorized, none issued or outstanding 0 0
Common stock, $.01 par value, 20,000,000 shares
authorized, 11,404,312 and 11,337,707 shares
issued and outstanding at September 30, 1998
and December 31, 1997, respectively 114,043 113,377
Warrants outstanding 3,795,532 3,795,618
Additional paid-in capital 46,148,785 45,920,419
Unrealized gain on investments available for sale 103,541 0
Accumulated deficit (15,624,812) (12,302,502)
------------ ------------
Total shareholders' equity 34,537,089 37,526,912
------------ ------------
Total liabilities and shareholders' equity $ 36,097,447 $ 38,685,032
============ ============
The accompanying notes are an integral part of these balance sheets.
4
PARKERVISION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Revenues, net $ 3,079,494 $ 2,887,216 $ 7,634,269 $ 8,974,645
Cost of goods sold 1,692,122 1,598,302 4,517,108 4,930,412
------------ ------------ ------------ ------------
Gross margin 1,387,372 1,288,914 3,117,161 4,044,233
Marketing and selling expenses 747,400 841,455 3,015,630 2,665,108
Research and development expenses 825,644 723,461 2,708,499 2,171,534
General and administrative expenses 694,106 519,566 1,863,840 1,357,012
Interest income (354,797) (233,047) (1,148,498) (576,087)
------------ ------------ ------------ ------------
Net loss $ (524,981) $ (562,521) $ (3,322,310) $ (1,573,334)
============ ============ ============ ============
Basic loss per common share $ (0.05) $ (0.05) $ (0.29) $ (0.15)
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
5
PARKERVISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (524,981) $ (562,521) $ (3,322,310) $ (1,573,334)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 205,019 145,571 537,095 457,042
Provision for obsolete inventories 60,000 30,000 150,000 110,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net 171,039 676,142 (695,013) 62,028
Decrease in interest and other receivables 127,630 92,537 236,866 84,681
Decrease (increase) in inventories, net 479,025 (614,157) (441,233) (1,101,526)
Increase in prepaid expenses (193,683) (97,185) (221,298) (156,763)
Increase in other assets (642,847) 0 (944,220) (22,758)
Increase (decrease) in accounts payable and
accrued expenses 229,447 (285,652) 381,149 567,252
Increase (decrease) in deferred revenue 5,335 (9,089) 21,089 (21,921)
------------ ------------ ------------ ------------
Total adjustments 440,965 (61,833) (975,565) (21,965)
------------ ------------ ------------ ------------
Net cash used for operating activities (84,016) (624,354) (4,297,875) (1,595,299)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments 0 (16,243,524) 0 (16,243,524)
Proceeds from maturity of investments 7,000,000 0 12,500,000 4,000,000
Purchase of property and equipment (47,886) (498,020) (770,237) (1,249,082)
------------ ------------ ------------ ------------
Net cash provided by (used for) investing
activities 6,952,114 (16,741,544) 11,729,763 (13,492,606)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock (10,143) 21,805,865 228,946 22,386,866
------------ ------------ ------------ ------------
Net cash provided by (used for) financing
activities (10,143) 21,805,865 228,946 22,386,866
------------ ------------ ------------ ------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS 6,857,955 4,439,967 7,660,834 7,298,961
CASH AND CASH EQUIVALENTS, beginning of
period 2,936,072 4,413,726 2,133,193 1,554,732
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 9,794,027 $ 8,853,693 $ 9,794,027 $ 8,853,693
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
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PARKERVISION, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
-------------------
There have been no changes in accounting policies from those stated in the
Annual Report on Form 10-KSB for the year ended December 31, 1997.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include overnight
repurchase agreements and U.S. Treasury money market investments totaling
approximately $9,631,000 and $1,845,000 at September 30, 1998 and December
31, 1997, respectively.
2. COMPREHENSIVE INCOME
--------------------
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting of Comprehensive Income" (SFAS
130). SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. Comprehensive income is defined as
the change in equity (net assets) of an entity during a period from
transactions and other events and circumstances from non-owner sources.
The Company reported total comprehensive income for the quarters ended
September 30, 1998 and 1997 of $(440,581) and $(562,521), respectively.
Adjustments to total comprehensive income for the third quarter of 1998 and
1997 included net gains of $84,400 and $0, respectively. The Company's
total comprehensive income for the nine months ended September 30, 1998 and
1997 was $(3,218,769) and $(1,573,334), respectively. Adjustments to total
comprehensive income for the nine month periods ended September 30, 1998
and 1997 included net gains of $103,541 and $0, respectively. These changes
reflect a market value increase in available-for-sale securities for the
quarters and nine month periods ended September 30, 1998 and 1997.
3. LOSS PER SHARE
--------------
Basic loss per share is determined based on the weighted average number of
common shares assumed to be outstanding during each period. Dilutive loss
per share is the same as basic loss per share as all common share
equivalents are excluded from the calculation as their effect is
anti-dilutive. The weighted average number of common shares assumed to be
outstanding for the three month periods ended September 30, 1998 and 1997
is 11,404,198 and 10,500,720, respectively. The weighted average number of
common shares assumed to be outstanding for the nine month periods ended
September 30, 1998 and 1997 is 11,381,348 and 10,215,099, respectively.
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4. INVENTORIES:
------------
Inventories consist of the following:
September December 31,
30, 1998 1997
----------- -----------
Purchased materials $ 1,952,562 $ 1,948,581
Work in process 526,197 378,859
Finished goods 1,131,467 1,059,699
----------- -----------
3,610,226 3,387,139
Less allowance for inventory obsolescence (348,906) (417,052)
----------- -----------
$ 3,261,320 $ 2,970,087
=========== ===========
5. SIGNIFICANT CUSTOMERS
---------------------
For the three months ended September 30, 1998 and 1997, Vtel Corporation
accounted for approximately 30% and 16% of total revenues, respectively.
For the nine month periods ended September 30, 1998 and 1997, Vtel
Corporation accounted for approximately 32% and 38% of total revenues,
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
- --------------------------
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result",
"management expects" or "Company expects", "will continue", "is anticipated",
"estimated" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are cautioned not to place undue reliance on such
forward-looking statements, each of which speak only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected, including the timely development and acceptance of new
products, sources of supply and concentration of customers. The Company has no
obligation to publicly release the results of any revisions which may be made to
any forward-looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.
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RESULTS OF OPERATIONS FOR EACH OF THE THREE AND NINE MONTH PERIODS ENDED
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 AND 1997
- ---------------------------
Revenues
- --------
Revenues for the three months ended September 30, 1998 were $3,079,494, as
compared to $2,887,216 for the three months ended September 30, 1997. This
increase of $192,278 is primarily a result of an increase in the average selling
price per camera system. The Company sold 439 camera systems during the three
month period ended September 30, 1998, at an average selling price of
approximately $7,000 per system. This compares to 448 camera system sales for
the three month period ended September 30, 1997, at an average selling price of
approximately $6,400 per system. The increase in the average selling price per
system is due to the mix of products sold, offset somewhat by a promotional
price reduction on certain single-chip camera systems during the third quarter
of 1998.
Revenues for the nine months ended September 30, 1998 were $7,634,269, as
compared to $8,974,645 for the nine months ended September 30, 1997. This
decrease of $1,340,376 is a result of a decrease in the number of camera systems
sold, offset by revenues generated from the Company's first beta site sales of
its studio system and an increase in the average selling price per camera
system. The Company sold 1,048 camera systems during the nine month period ended
September 30, 1998, at an average selling price of approximately $7,000 per
system. This compares to 1,485 camera system sales for the nine month period
ended September 30, 1997, at an average selling price of approximately $6,000
per system. The increase in average selling price is a result of the mix of
products sold and the sales channels utilized. Management believes the decrease
in camera system sales for the nine month period is primarily due to a change in
the focus of the internal sales organization toward its new studio product. The
Company anticipates its current sales efforts will result in increased revenues
from the studio product line in 1999.
Gross Margin
- ------------
For the three month periods ended September 30, 1998 and 1997, gross margins as
a percentage of sales were 45.1% and 44.6%, respectively. This increase is
primarily due to the mix of products sold and increased production efficiencies
when compared to the same period in 1997.
For the nine month periods ended September 30, 1998 and 1997, gross margins as a
percentage of sales were 40.8% and 45.1%, respectively. This decrease is
primarily due to the cost of placing a new product, the studio system, into
production, pricing discounts offered on the initial beta sales of studio, and
an increase in overhead costs, primarily facility rental costs, for the first
half of 1998 when compared to the same period in 1997.
Due to pricing promotions on certain single-chip products during the second half
of 1998, the Company anticipates a potential decline in gross margin as a
percent of camera system sales for the remainder of 1998. This decline may be
offset somewhat by changes in the mix of products sold.
9
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses were $747,400 for the three month period ended
September 30, 1998, as compared to $841,455 for the same period in 1997. This
decrease of $94,055 is primarily due to a reduction in travel and personnel
costs, offset somewhat by increased promotional expenses related to the
Company's studio product.
For the nine month periods ended September 30, 1998 and 1997, marketing and
selling expenses were $3,015,630 and $2,665,108, respectively. The increase of
$350,522 is attributable to increased trade show costs and wireless sales
expenses, offset somewhat by a reduction in travel and personnel costs.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses were $825,644 and $723,461 for
the three month periods ended September 30, 1998 and 1997, respectively. This
increase of $102,183 is largely a result of increased resources dedicated to the
continued development of the Company's wireless technology.
For the nine month periods ended September 30, 1998 and 1997, research and
development expenses were $2,708,499 and $2,171,534, respectively. This increase
of $536,965 is also attributable to increased resources dedicated to the
wireless technology.
General and Administrative Expenses
- -----------------------------------
For the three month periods ended September 30, 1998 and 1997, general and
administrative expenses were $694,106 and $519,566, respectively. This increase
of $174,540 is primarily a result of increased personnel and increased use of
outside professional services.
For the nine month periods ended September 30, 1998 and 1997, general and
administrative expenses were $1,863,840 and $1,357,012, respectively. This
increase of $506,828 is attributable to increased personnel, increased use of
outside professional services and the amortization of prepaid consulting fees.
Interest Income
- ---------------
Interest income was $354,797 and $233,047 for the three month periods ended
September 30, 1998 and 1997, respectively, and $1,148,498 and $576,087 for the
nine month periods ended September 30, 1998 and 1997, respectively. The increase
in interest income is due to the investment of the proceeds from the Company's
1997 offerings, offset somewhat by the Company's use of proceeds from maturing
investments to fund operations during 1997 and 1998.
Backlog
- -------
As of September 30, 1998, the Company had a backlog of approximately $740,000.
Backlog consists of orders received that generally have a specified delivery
schedule within three to five weeks of receipt.
10
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1998, the Company had working capital of $24,945,595, an
increase of $521,304 from $24,424,291 at December 31, 1997. This increase in
working capital is primarily due to increases in accounts receivable and
inventories. The increase in accounts receivable is primarily due to the higher
sales volume for the third quarter of 1998 when compared to the fourth quarter
of 1997. Increases in inventory reflect preparation for production of the studio
product line.
The Company's principal source of liquidity at September 30, 1998 consisted of
$20,902,014 in cash and short-term investments. Until the Company generates
sufficient revenues from product sales, it will be required to continue to
utilize this source of liquidity to cover the continuing expense of product
development, marketing and general administration. The Company believes its
source of liquidity will provide sufficient resources to meet its cash
requirements for the next twelve months as well as on a longer-term basis.
YEAR 2000 READINESS
- -------------------
The Company is in the process of evaluating the potential impact of the
situation commonly referred to as the "Year 2000" (Y2K) issue. This issue
concerns the inability of information systems to properly recognize and process
date sensitive information relating to the year 2000 and beyond. The inability
to properly interpret dates beyond the year 1999 could lead to business
disruptions.
The Company has formed an internal Y2K team to assess the Company's products,
its internal information systems and processes, and its third party suppliers
for Y2K readiness. The team has identified existing systems which require action
and is in the process of developing and executing plans to make corrections in
affected areas prior to the issue causing any disruption of normal business
activities.
The majority of the Company's products that are installed or available for sale
have either successfully passed Y2K compliance testing or have been deemed Y2K
not-applicable by virtue of the fact that they do not process date information
in any manner. The Company anticipates completion of testing for all of its
products by March 1999. Although the Company's Y2K compliant products have, or
will have, undergone the Company's normal quality testing procedures, there can
be no assurance that these products, or third-party products used with the
Company's products, do not contain undetected errors or defects associated with
Y2K date functions that may materially or adversely affect the Company.
The Company primarily utilizes third party software packages for its internal
information systems and processes. Many of these packages have already been
rendered Y2K compliant by the manufacturers, and as a part of ongoing support
agreements with these manufacturers, the Company is able to upgrade to Y2K
compliant versions at minimal to no additional cost. As a
11
result, efforts required to modify the Company's business systems have been
minimized. The Company expects its principal internal management information
systems to be fully Y2K compliant by mid-1999. The Company is examining and
taking steps to ensure that its manufacturing processes will not be interrupted
and its facilities infrastructure will not experience any failures or
difficulties as a result of the year 2000 issues.
The Company also faces risks and uncertainties to the extent that third party
suppliers of products, service and systems on which the Company relies do not
have business systems or products that comply with the Y2K requirements. The
Company has initiated communications with all of its significant suppliers and
customers to determine the extent to which the Company's systems and products
are vulnerable to those third parties' failure to remediate their own Y2K
issues. There is no guarantee that the systems or products of other companies on
which the Company relies will be timely converted and would not have an adverse
effect on the Company's systems or products. The Company's Y2K team is in the
process of identifying what actions are needed to mitigate vulnerability to
problems related to enterprises with which the Company interacts.
Based on the status of its assessment to date, the Company does not anticipate
significant costs or lost revenue associated with the Y2K issue that would have
a material adverse effect on the Company's operating results or financial
condition.
PART II - OTHER INFORMATION
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Sales of Unregistered Securities
--------------------------------
Consideration received and Exemption If option, warrant or
description of underwriting or from convertible security,
Date of sale Number other discounts to market price registration terms of exercise or
Title of security sold afforded to purchasers claimed conversion
- ------------- ----------------- ------ ------------------------------- ------------ ---------------------
8/98 Common stock 169 Received proceeds of $1,394 4(2) Underwriters warrants
granted 11/30/93
exercisable through
11/30/98 at an
exercise price of
$8.25 per share
12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1998.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ParkerVision, Inc.
Registrant
November 13, 1998 By: /s/ Jeffrey Parker
-------------------
Jeffrey Parker
Chairman and Chief Executive Officer
November 13, 1998 By: /s/ Cynthia Poehlman
---------------------
Cynthia Poehlman
Chief Accounting Officer
14