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, 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
-------
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 November 8, 1999, 11,778,988 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, 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
September 30,
1999 December 31,
ASSETS (unaudited) 1998
------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $15,135,910 $10,569,435
Short-term investments 0 11,077,394
Accounts receivable, net of allowance for
doubtful accounts of $42,626 and $37,308
at September 30, 1999 and December 31, 1998
respectively 1,304,767 805,880
Interest and other receivables 123,515 183,823
Inventories, net 3,720,964 3,237,567
Prepaid expenses and other 1,266,204 1,023,011
----------- -----------
Total current assets 21,551,360 26,897,110
----------- -----------
LONG-TERM INVESTMENTS 8,000,000 8,000,000
----------- -----------
PROPERTY AND EQUIPMENT, net 3,240,305 2,760,335
----------- -----------
OTHER ASSETS, net 3,251,777 2,592,565
----------- -----------
Total assets $36,043,442 $40,250,010
=========== ===========
The accompanying notes are an integral part of these balance sheets.
3
PARKERVISION, INC.
BALANCE SHEETS
September 30,
1999 December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) 1998
------------------------------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 1,332,357 $ 609,523
Accrued expenses:
Salaries and wages 336,562 178,792
Rebates payable 62,816 108,185
Warranty reserve 124,308 99,656
Other accrued expenses 304,500 220,389
Deferred revenue 348,840 33,404
------------ ------------
Total current liabilities 2,509,383 1,249,949
------------ ------------
DEFERRED INCOME TAXES 18,091 18,091
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Note 4)
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, 11,778,988 and 11,718,678 shares
issued and outstanding at September 30, 1999
and December 31, 1998, respectively 117,790 117,187
Warrants outstanding 3,232,025 3,257,625
Additional paid-in capital 53,370,009 52,543,817
Accumulated other comprehensive income 0 72,241
Accumulated deficit (23,203,856) (17,008,900)
------------ ------------
Total shareholders' equity 33,515,968 38,981,970
------------ ------------
Total liabilities and shareholders' equity $ 36,043,442 $ 40,250,010
============ ============
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,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Revenues, net $ 3,069,483 $ 3,079,494 $ 8,166,203 $ 7,634,269
Cost of goods sold 1,791,130 1,692,122 5,019,644 4,517,108
------------ ------------ ------------ ------------
Gross margin 1,278,353 1,387,372 3,146,559 3,117,161
Research and development expenses 1,872,834 825,644 4,383,290 2,708,499
Marketing and selling expenses 1,126,123 747,400 2,983,331 3,015,630
General and administrative expenses 1,050,649 694,106 2,979,294 1,863,840
Other expense 1,700 0 71,573 0
Interest income (331,688) (354,797) (1,075,973) (1,148,498)
------------ ------------ ------------ ------------
Net loss $ (2,441,265) $ (524,981) $ (6,194,956) $ (3,322,310)
============ ============ ============ ============
Basic loss per common share $ (0.21) $ (0.05) $ (0.53) $ (0.29)
============ ============ ============ ============
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,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,441,265) $ (524,981) $ (6,194,956) $ (3,322,310)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 369,893 205,019 1,044,567 537,095
Provision for obsolete inventories 60,000 60,000 180,000 150,000
Loss on disposal of property and equipment 4,191 0 74,140 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net (165,853) 171,039 (498,887) (695,013)
Decrease in interest and other receivables 32,227 127,630 60,308 236,866
(Increase) decrease in inventories, net (186,190) 479,025 (663,397) (441,233)
Increase in prepaid expenses (31,865) (193,683) (243,193) (221,298)
Increase in other assets (294,368) (642,847) (1,031,292) (944,220)
Increase in accounts payable and accrued expenses 486,303 229,447 943,998 381,149
Increase in deferred revenue 196,334 5,335 315,436 21,089
------------ ------------ ------------ ------------
Total adjustments 470,672 440,965 181,680 (975,565)
------------ ------------ ------------ ------------
Net cash used for operating activities (1,970,593) (84,016) (6,013,276) (4,297,875)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investments 10,000,000 7,000,000 11,000,000 12,500,000
Purchase of property and equipment (308,694) (47,886) (1,221,444) (770,237)
------------ ------------ ------------ ------------
Net cash provided by investing activities 9,691,306 6,952,114 9,778,556 11,729,763
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 75,686 (10,143) 801,195 228,946
------------ ------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,796,399 6,857,955 4,566,475 7,660,834
CASH AND CASH EQUIVALENTS, beginning of period 7,339,511 2,936,072 10,569,435 2,133,193
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 15,135,910 $ 9,794,027 $ 15,135,910 $ 9,794,027
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
6
PARKERVISION, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
-------------------
The Company has previously operated in a single reportable segment of
microelectronic hardware and software products and related technologies. As
the Company has completed the research of its wireless technology and is
moving toward commercialization of the technology, the Company has
redefined its reportable segments. Effective July 1, 1999, the Company has
two distinguishable segments that offer different products and services,
sell to different types of customers, and are managed separately. (See Note
5). Segment information is restated for prior periods to reflect the
revised segments.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include overnight
repurchase agreements and U.S. Treasury money market investments totaling
approximately $15,917,000 and $10,032,000 at September 30, 1999 and
December 31, 1998, respectively.
RECLASSIFICATIONS. Certain reclassifications have been made to the 1998
balance sheet in order to conform to the 1999 presentation.
2. LOSS PER SHARE
--------------
Basic loss per share is determined using 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 because their effect is
anti-dilutive. The weighted average number of common shares assumed to be
outstanding for the three month periods ended September 30, 1999 and 1998
is 11,775,809 and 11,404,198, respectively. The weighted average number of
common shares assumed to be outstanding for the nine month periods ended
September 30, 1999 and 1998 is 11,756,941 and 11,381,348, respectively.
3. INVENTORIES:
------------
Inventories consist of the following:
7
September 30, December 31,
1999 1998
----------- -----------
Purchased materials $ 2,428,113 $ 1,996,573
Work in process 107,836 241,676
Finished goods 1,636,665 1,406,664
----------- -----------
4,172,614 3,664,913
Less allowance for inventory obsolescence (451,650) (407,346)
----------- -----------
$ 3,720,964 $ 3,237,567
=========== ===========
4. SIGNIFICANT CUSTOMERS
---------------------
Vtel Corporation ("Vtel") accounted for approximately 28% and 30% of total
revenues for the three months ended September 30, 1999 and 1998,
respectively. For the nine months ended September 30, 1999 and 1998, Vtel
accounted for approximately 29% and 32% of total revenues, respectively.
5. SEGMENT INFORMATION
-------------------
The Company's segments include the Video Products Division ("Video
Division") and the Wireless Technology Division ("Wireless Division"). The
Video Division designs, develops, manufactures and markets automated video
camera control systems and automated production systems. The Wireless
Division develops and markets a wireless radio-frequency ("RF") technology
that the Company believes has widespread application and has the potential
to replace certain traditional RF hardware.
The Company primarily evaluates the operating performance of its segments
based on net sales and income from operations. The following table presents
financial information about the Company's business segments (in thousands):
Three months ended Nine months ended
----------------------- -----------------------
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
-------- -------- -------- --------
NET SALES:
Video Division $ 3,069 $ 3,079 $ 8,166 $ 7,634
Wireless Division 0 0 0 0
-------- -------- -------- --------
Total net sales $ 3,069 $ 3,079 $ 8,166 $ 7,634
-------- -------- -------- --------
8
LOSS FROM OPERATIONS:
Video Division $ (633) $ (75) $ (2,246) $ (2,373)
Wireless Division (2,140) (805) (5,025) (2,098)
Other (a) 332 355 1,076 1,149
-------- -------- -------- --------
Total net loss $ (2,441) $ (525) $ (6,195) $ (3,322)
======== ======== ======== ========
DEPRECIATION:
Video Division $ 140 $ 135 $ 413 $ 375
Wireless Division 95 62 254 169
-------- -------- -------- --------
Total depreciation $ 235 $ 197 $ 667 $ 544
======== ======== ======== ========
AMORTIZATION OF INTANGIBLES
AND OTHER ASSETS:
Video Division $ 26 $ 29 $ 77 $ 75
Wireless Division 103 53 297 117
-------- -------- -------- --------
Total amortization of intangibles
and other assets $ 129 $ 82 $ 374 $ 192
======== ======== ======== ========
CAPITAL EXPENDITURES:
Video Division $ 109 $ 25 $ 552 $ 367
Wireless Division 136 3 515 252
Other 64 20 154 151
-------- -------- -------- --------
Total capital expenditures $ 309 $ 48 $ 1,221 $ 770
======== ======== ======== ========
September December
30, 1999 31, 1998
-------- --------
ASSETS:
Video Division $ 7,596 $ 6,385
Wireless Division 3,816 2,753
Other (b) 24,631 31,112
-------- --------
Total assets $ 36,043 $ 40,250
======== ========
(a) Other represents interest income from investments.
(b) Other includes the following corporate assets:
September December
30, 1999 31, 1998
-------- --------
Cash and investments $ 23,136 $ 29,647
Interest & other receivables 123 184
Prepaid expenses 597 660
Property & equipment, net 680 616
Other assets 95 5
-------- --------
Total $ 24,631 $ 31,112
======== ========
9
6. SUBSEQUENT EVENT
----------------
In October, 1999, the Company signed a licensing agreement with Symbol
Technologies, Inc. ("Symbol") for a license of the Company's wireless D2D
technology. Symbol is a leading provider of mobile data management systems
and services for wireless local area networking ("WLAN") products. The
agreement provides Symbol with sole licensee status in the WLAN market
based upon Symbol incorporating the Company's D2D technology into the
majority of its future WLAN products. Under the terms of the agreement,
which has an initial term of six and one half years, the Company received
prepaid royalties and will receive additional payments over time.
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 NINE MONTH PERIODS ENDED
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1999 AND 1998
- ---------------------------
Revenues
- --------
Revenues for the three months ended September 30, 1999 decreased by $10,011 as
compared to the same period in 1998. Approximately 87% of the Company's revenues
for the quarter ended September 30, 1999 was attributable to sales of camera
systems and related accessories. The remaining 13% of revenue is attributable to
sales of the Company's PVTV Studio systems. All of the Company's revenue for the
three-month period ended September 30, 1998 was attributable to sales of camera
systems and related accessories. The Company sold 411 and 439 camera
10
systems during the three-month periods ended September 30, 1999 and 1998,
respectively. The average selling price per camera system decreased from
approximately $7,000 for the three months ended September 30, 1998 to
approximately $6,500 for the three months ended September 30, 1999, due to the
mix of products sold. The Company's studio sales for the three-month period
ended September 30, 1999 consisted of two systems with an average selling price
of approximately $200,000 per system.
Revenues for the nine months ended September 30, 1999 increased by $531,934 as
compared to the same period in 1998. This increase is due to an increase in
camera and studio system sales. The Company sold 1,114 camera systems during the
nine month period ended September 30, 1999, at an average selling price of
approximately $6,700 per system. This compares to 1,048 camera system sales for
the nine month period ended September 30, 1998, at an average selling price of
approximately $7,000 per system.
For the nine months ended September 30, 1999, revenues included approximately
$750,000 for the sale of studio systems and related accessories at an average
selling price of $250,000 per system. This compares to revenues of approximately
$300,000 for the same period in 1998 for studio sales at an average selling
price of $150,000 per system. The increase in average selling price is primarily
due to discounts offered on 1998 sales as the installations represented beta
sites.
Gross Margin
- ------------
For the three month periods ended September 30, 1999 and 1998, gross margins as
a percentage of sales were approximately 42% and 45%, respectively. For the nine
month periods ended September 30, 1999 and 1998, gross margins as a percentage
of sales were approximately 39% and 41%, respectively. The fluctuations in
margin are primarily due to the mix of products sold.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses were $1,872,834 and $825,644 for
the three months ended September 30, 1999 and 1998, respectively, and $4,383,290
and $2,708,499 for the nine month periods ended September 30, 1999 and 1998,
respectively. The increases of $1,047,190 and $1,674,791 for the three and nine
month periods, respectively, are primarily a result of increases related to the
wireless division. These increases are a result of application engineering and
prototype development expenses related to the Direct2Data technology.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses were $1,126,123 and $747,400 for the three month
periods ended September 30, 1999 and 1998, respectively. The increase of
$378,723 is due to increases in wireless business development personnel and
related costs for commercialization of the Company's D2D technology as well as
increases in product management resources related to the Company's video
division.
11
Marketing and selling expenses for the nine month periods ended September 30,
1999 and 1998 were $2,983,331 and $3,015,630, respectively. The decrease of
$32,299 is primarily due to decreases in trade show expenses and production
costs for the video division, offset by increased business development costs for
the wireless division. 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 September 30, 1999 and 1998, general and
administrative expenses were $1,050,649 and $694,106, respectively. For the nine
month periods ended September 30, 1999 and 1998, general and administrative
expenses were $2,979,294 and $1,863,840, respectively. These increases of
$356,543 and $1,115,454 for the three and nine month periods, respectively, are
primarily a result of increased use of outside legal and other professional
services in connection with the Company's wireless technology and the
amortization of prepaid consulting fees.
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.
Interest Income
- ---------------
Interest income was $331,688 and $354,797 for the three month periods ended
September 30, 1999 and 1998, respectively, and $1,075,973 and $1,148,498 for the
nine month periods ended September 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.
Backlog
- -------
As of September 30, 1999, the Company had a camera system backlog of
approximately $670,000 and approximately $500,000 of studio shipments pending
installation. Camera backlog consists of orders received that generally have a
specified delivery schedule within three to five weeks of receipt. Revenue for
studio shipments is generally recognized upon completion of installation which
is generally expected to occur within 90 days of shipment.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1999, the Company had working capital of $19,041,977, a
decrease of $6,605,184 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
1999. The Company's principal source of liquidity at September 30, 1999
consisted of $15,135,910 in cash and cash equivalents. 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.
12
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 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
has developed and executed 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. The majority of these packages have been
rendered Y2K compliant by the manufacturers, and as a part of ongoing support
agreements with these manufacturers, the Company was 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 were minimized. Currently, the
Company believes its principal internal management information systems to be
fully Y2K compliant. The Company continues to examine and take 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. Based on representations made by these suppliers and customers, the
Company believes the majority of its significant suppliers are Y2K compliant or
are in the process of implementing action plans for Y2K compliance. 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 has increased its inventory levels of
critical parts in order to help mitigate this risk. The Company continues to
monitor the Y2K status of its suppliers and identify actions needed to mitigate
vulnerability to problems related to enterprises with which the Company
interacts.
13
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
- ---------------------------------------------------------------------------------------------------------------
8/99 Common stock 4,000 Received proceeds of $40,000 4(2) Warrants granted
7/16/96 exercisable
through 7/16/02 at
an exercise price
of $10.00 per share
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable.
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 September 30,
1999.
14
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 12, 1999 By: /s/ Jeffrey L. Parker
---------------------
Jeffrey L. Parker
Chairman and Chief Executive Officer
November 12, 1999 By: /s/ Cynthia Poehlman
--------------------
Cynthia Poehlman
Chief Accounting Officer
15