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 JUNE 30, 1999
( ) 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 July 31, 1999, 11,772,933 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
six month periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
These interim consolidated financial statements should be read in conjunction
with the Company's latest Annual Report on Form 10-K for the year ended December
31, 1998.
2
PARKERVISION, INC.
BALANCE SHEETS
June 30,
1999 December 31,
ASSETS (unaudited) 1998
------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 7,339,511 $10,569,435
Short-term investments 10,018,800 11,077,394
Accounts receivable, net of allowance for
doubtful accounts of $38,405 at June 30, 1999
and December 31, 1998, respectively 1,138,914 805,880
Interest and other receivables 155,742 183,823
Inventories, net 3,594,774 3,237,567
Prepaid expenses and other 1,234,339 1,023,011
----------- -----------
Total current assets 23,482,080 26,897,110
----------- -----------
LONG-TERM INVESTMENTS 8,000,000 8,000,000
----------- -----------
PROPERTY AND EQUIPMENT, net 3,171,204 2,760,335
----------- -----------
OTHER ASSETS, net 3,086,041 2,592,565
----------- -----------
Total assets $37,739,325 $40,250,010
=========== ===========
The accompanying notes are an integral part of these balance sheets.
3
PARKERVISION, INC.
BALANCE SHEETS
June 30,
1999 December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) 1998
------------------------------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 776,169 $ 609,523
Accrued expenses:
Salaries and wages 345,090 178,792
Rebates payable 104,174 108,185
Warranty reserve 109,583 99,656
Other accrued expenses 339,224 220,389
Deferred revenue 152,506 33,404
------------ ------------
Total current liabilities 1,826,746 1,249,949
------------ ------------
DEFERRED INCOME TAXES 18,091 18,091
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 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, 11,772,933 and 11,718,678 shares issued
and outstanding at June 30, 1999 and December
31, 1998, respectively 117,729 117,187
Warrants outstanding 3,242,265 3,257,625
Additional paid-in capital 53,284,144 52,543,817
Accumulated other comprehensive income 12,941 72,241
Accumulated deficit (20,762,591) (17,008,900)
------------ ------------
Total shareholders' equity 35,894,488 38,981,970
------------ ------------
Total liabilities and shareholders' equity $ 37,739,325 $ 40,250,010
============ ============
The accompanying notes are an integral part of these statements.
4
PARKERVISION, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenues, net $ 2,626,969 $ 2,589,781 $ 5,096,720 $ 4,554,775
Cost of goods sold 1,595,711 1,492,396 3,228,514 2,824,986
----------- ----------- ----------- -----------
Gross margin 1,031,258 1,097,385 1,868,206 1,729,789
Research and development expenses 1,339,467 885,287 2,510,456 1,882,855
Marketing and selling expenses 1,108,497 1,305,239 1,857,208 2,268,230
General and administrative expenses 1,122,143 650,087 1,928,645 1,169,734
Other expense 69,948 0 69,873 0
Interest income (345,460) (390,406) (744,285) (793,701)
----------- ----------- ----------- -----------
Net loss $(2,263,337) $(1,352,822) $(3,753,691) $(2,797,329)
=========== =========== =========== ===========
Basic loss per common share $ (0.19) $ (0.12) $ (0.32) $ (0.25)
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
5
PARKERVISION, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,263,337) $ (1,352,822) $ (3,753,691) $ (2,797,329)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 346,073 178,600 674,674 332,076
Provision for obsolete inventories 60,000 60,000 120,000 90,000
Loss on disposal of property and equipment 69,949 0 69,949 0
Changes in operating assets and liabilities:
Increase in accounts receivable, net (380,401) (922,465) (333,034) (866,052)
(Increase) decrease in interest and other
receivables (40,480) (108,854) 28,081 109,236
Decrease (increase) in inventories, net 108,760 203,519 (477,207) (920,258)
Decrease (increase) in prepaid expenses 103,763 321,184 (211,328) (27,615)
Increase in other assets (353,314) (274,024) (736,924) (301,373)
(Decrease) increase in accounts payable and
accrued expenses (197,232) (609,456) 457,695 151,702
Increase in deferred revenue 26,253 12,920 119,102 15,754
------------ ------------ ------------ ------------
Total adjustments (256,629) (1,138,576) (288,992) (1,416,530)
------------ ------------ ------------ ------------
Net cash used for operating activities (2,519,966) (2,491,398) (4,042,683) (4,213,859)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investments 0 0 1,000,000 5,500,000
Purchase of property and equipment (612,515) (434,903) (912,750) (722,351)
------------ ------------ ------------ ------------
Net cash (used for) provided by investing
activities (612,515) (434,903) 87,250 4,777,649
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 157,513 89,649 725,509 239,089
------------ ------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS
(2,974,968) (2,836,652) (3,229,924) 802,879
CASH AND CASH EQUIVALENTS, beginning of period
10,314,479 5,772,724 10,569,435 2,133,193
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 7,339,511 $ 2,936,072 $ 7,339,511 $ 2,936,072
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
6
PARKERVISION, INC.
CONDENCED 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-K for the year ended December 31, 1998
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include overnight
repurchase agreements and U.S. Treasury money market investments totaling
approximately $7,511,000 and $10,032,000 at June 30, 1999 and December 31,
1998, respectively.
RECLASSIFICATIONS. Certain reclassifications have been made to the 1998
statements of operations in order to conform to the 1999 presentation.
2. 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 June 30, 1999 and 1998 is
11,766,348 and 11,391,388, respectively. The weighted average number of
common shares assumed to be outstanding for the six month periods ended
June 30, 1999 and 1998 is 11,747,351 and 11,369,251, respectively.
3. INVENTORIES:
------------
Inventories consist of the following:
June 30, 1999 December 31, 1998
------------- -----------------
Purchased materials $ 2,236,609 $ 1,996,573
Work in process 112,110 241,676
Finished goods 1,668,865 1,406,664
----------- -----------
4,017,584 3,664,913
Less allowance for inventory obsolescence (422,810) (407,346)
----------- -----------
$ 3,594,774 $ 3,237,567
=========== ===========
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4. SIGNIFICANT CUSTOMERS
---------------------
For the three months ended June 30, 1999, Vtel Corporation (Vtel) accounted
for approximately 36% of total revenues. For the three months ended June
30, 1998, Vtel and one other customer accounted for approximately 45% and
10% of total revenues, respectively.
For the six months ended June 30, 1999 and 1998, Vtel accounted for
approximately 29% and 35% of total revenues, respectively.
5. STOCK OPTIONS
-------------
On May 26, 1999, the Company granted nonqualified stock options to purchase
an aggregate of 500,000 shares of its common stock for $30.00 per share
pursuant to an employment agreement. These options were not issued under a
plan and expire five years from the date they first become vested. Options
to purchase 250,000 shares vest ratably over a five year period commencing
on June 1, 2000. Options to purchase the remaining 250,000 shares vest
fully ten years from the date of grant, but may be accelerated based on
certain performance criteria.
On June 10, 1999, the Company's shareholders approved an amendment to the
1993 Stock Plan (Stock Plan) to increase the number of shares of Common
Stock subject to the Stock Plan from 2,000,000 to 3,500,000. Options to
purchase 1,506,820 shares of common stock were available for future grants
under the Stock Plan at June 30, 1999.
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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.
RESULTS OF OPERATIONS FOR EACH OF THE THREE AND SIX MONTH PERIODS ENDED JUNE 30,
- --------------------------------------------------------------------------------
1999 AND 1998
- -------------
Revenues
- --------
Revenues for the three months ended June 30, 1999 increased by $37,188 as
compared to the same period in 1998. The number of camera systems sold during
the three month periods ended June 30, 1999 and 1998 were 372 and 381,
respectively. The average selling price per camera system decreased from
approximately $6,800 for the three months ended June 30, 1998 to approximately
$6,600 for the three months ended June 30, 1999, due to the mix of products
sold. In addition, revenues for the three month period ended June 30, 1999
included approximately $175,000 in PVTV studio revenue from a corporate studio
installation.
Revenues for the six months ended June 30, 1999 increased by $541,945 as
compared to the same period in 1998. This increase is primarily due to an
increase in camera systems sold. The Company sold 703 camera systems during the
six month period ended June 30, 1999, compared to 609 systems during the same
period in 1998. The average selling price per camera system sold was
approximately $7,100 and $7,000 for the six month periods ended June 30, 1999
and 1998, respectively.
For the six months ended June 30, 1999, revenues included approximately $350,000
for a PVTV Studio system and third party videoconferencing equipment which were
sold at or near the Company's cost in order to establish a corporate beta
environment for PVTV studio.
9
Gross Margin
- ------------
For the three month periods ended June 30, 1999 and 1998, gross margins as a
percentage of sales were 39.3% and 42.4%, respectively. For the six month
periods ended June 30, 1999 and 1998, gross margins as a percentage of sales
were 36.7% and 38.0%, respectively. Margin fluctuations are, in part, impacted
by the mix of products sold. In addition, a slight reduction in margins resulted
from the pass through of a beta studio and related third party equipment at
little to no margin during the first half of 1999. This decrease was somewhat
offset by a decrease in production costs for the same periods.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses were $1,339,467 and $885,287 for
the three months ended June 30, 1999 and 1998, respectively, and $2,510,456 and
$1,882,855 for the six month periods ended June 30, 1999 and 1998, respectively.
The increases of $454,180 and $627,601 for the three and six month periods,
respectively, are primarily a result of the outsourcing of certain application
engineering functions related to the Company's Direct2Data technology, offset
somewhat by decreases in personnel and prototype materials related to PVTV
Studio development.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses were $1,108,497 and $1,305,239 for the three
month periods ended June 30, 1999 and 1998, respectively. The decrease of
$196,742 is primarily due to a decrease in trade show expenses.
Marketing and selling expenses for the six month periods ended June 30, 1999 and
1998 were $1,857,208 and $2,268,230, respectively. The decrease of $411,022 is
primarily due to decreases in trade show expenses, production and personnel
costs. The Company incurred significant trade show and advertising production
costs in 1998 for the launch of its studio product line.
General and Administrative Expenses
- -----------------------------------
For the three month periods ended June 30, 1999 and 1998, general and
administrative expenses were $1,122,143 and $650,087, respectively. For the six
month periods ended June 30, 1999 and 1998, general and administrative expenses
were $1,928,645 and $1,169,734, respectively. These increases are primarily a
result of increased personnel cost, increased use of outside professional
services, and the amortization of prepaid consulting fees. The Company added an
executive officer in June 1998 and a wireless business development officer in
June 1999 and has increased the use of legal and other consulting services in
connection with its wireless technology.
Other Expense
- -------------
Other expense consists primarily of losses due to the disposal of trade show
booths and related equipment due to obsolescence of the booth design and
materials.
10
Interest Income
- ---------------
Interest income was $345,460 and $390,406 for the three month periods ended June
30, 1999 and 1998, respectively, and $744,285 and $793,701 for the six month
periods ended June 30, 1999 and 1998, respectively. The decrease in interest
income is due to the Company's use of proceeds from maturing investments to fund
operations during 1998 and 1999, offset by the sale of equity securities in
1998.
Backlog
- -------
As of June 30, 1999, the Company had a backlog of approximately $460,000.
Backlog consists of orders received that generally have a specified delivery
schedule within three to five weeks of receipt.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1999, the Company had working capital of $21,637,243, a decrease of
$4,009,918 from $25,647,161 at December 31, 1998. This decrease in working
capital is primarily due to the use of cash to fund operations during the first
half of 1999. The Company's principal source of liquidity at June 30, 1999
consisted of $17,358,311 in cash and short-term investments. Until the Company
generates sufficient revenues from product sales or licensing fees, it will be
required to continue to utilize its working capital to cover the continuing
expense of research and development, marketing and general administration. The
Company believes its current cash and investments 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 continues to evaluate 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.
All 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. Although the Company's Y2K compliant products 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 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 October 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.
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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 1. 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 Number other discounts to market price registration terms of exercise or
sale Title of security sold afforded to purchasers claimed conversion
- ------------------------------------------------------------------------------------------------------------------------
5/99 Common stock 6,000 Received proceeds of $60,000 4(2) Warrants granted
7/16/96 exercisable
through 7/16/02 at an
exercise price of
$10.00 per share
5/99 Options to purchase 250,000 Options granted - no 4(2) Exercisable through
common stock consideration received by 6/1/09; options vest
granted pursuant to Company until exercise over five year period
an employment commencing 6/1/99 at
agreement an exercise price of
$30 per share
5/99 Options to purchase 250,000 Options granted - no 4(2) Options vest 5/26/09
common stock consideration received by but may be accelerated
granted pursuant to Company until exercise based on the
an employment achievement of certain
agreement gross margin
objectives. Options
are exercisable up to
five years from the
date they first become
vested at an exercise
price of $30 per share
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable.
12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting on June 10, 1999. The shareholders elected
Messrs. Jeffrey Parker, Todd Parker, Richard Sisisky, David Sorrells, William
Hightower, Francesco Bolgiani, William Sammons and Arthur Yeager and Ms. Stacie
Wilf as directors and approved an amendment to the 1993 Stock Plan to increase
the number of shares subject to the Stock Plan from 2,000,000 to 3,500,000. The
following is a tabulation of votes cast for and against and abstentions for each
director and for the amendment to the Stock Plan:
Votes Cast
---------------------------------
Name For Against Abstentions
--------------------------------------------------------------------
Jeffrey Parker 10,024,353 168,475 0
Todd Parker 10,024,253 168,575 0
Richard Sisisky 10,024,253 168,575 0
David Sorrells 10,024,353 168,475 0
William Hightower 10,024,353 168,475 0
Francesco Bolgiani 10,024,353 168,475 0
William Sammons 10,024,253 168,575 0
Arthur Yeager 10,024,353 168,475 0
Stacie Wilf 10,024,353 168,475 0
Votes Cast Abstentions
or broker
For Against non-votes
--------------------------------------------------------------------
Amendment to the
Stock Plan 6,047,627 115,052 4,030,149
ITEM 5. OTHER INFORMATION. Not applicable
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 June 30, 1999.
13
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
August 13, 1999 By: /s/ Jeffrey L. Parker
----------------------
Jeffrey L. Parker
Chairman and Chief Executive Officer
August 13, 1999 By: /s/ Cynthia Poehlman
---------------------
Cynthia Poehlman
Chief Accounting Officer
14