-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dlr6vCdwviBTrf9qKaMLgw1AqGoDTPvy7Nx7FXK1lLbqXodu9RkIgAUHlOyzRgsN FEMQYoQNz6UQhGwYjE1S3A== 0001012709-01-500036.txt : 20010409 0001012709-01-500036.hdr.sgml : 20010409 ACCESSION NUMBER: 0001012709-01-500036 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARKERVISION INC CENTRAL INDEX KEY: 0000914139 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 592971472 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22904 FILM NUMBER: 1591107 BUSINESS ADDRESS: STREET 1: 8493 BAYMEADOWS WAY CITY: JACKSONVILLE STATE: FL ZIP: 32256 BUSINESS PHONE: 9047371367 MAIL ADDRESS: STREET 1: 8493 BAYMEADOWS WAY CITY: JACKSONVILLE STATE: FL ZIP: 32256 10-K 1 x10k-301.txt PARKERVISION, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 1O-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 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 of Incorporation) (I.R.S. Employer ID No.) 8493 BAYMEADOWS WAY JACKSONVILLE, FLORIDA 32256 (904) 737-1367 (Address of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE 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 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 --- --- Indicate by check mark if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-K contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ( ). As of March 23, 2001, the aggregate market value of the Issuer's Common Stock, $.01 par value, held by non-affiliates of the Issuer was approximately $243,167,239 (based upon $26.6875 per share closing price on that date, as reported by The Nasdaq National Market). As of March 23, 2001, 13,713,163 shares of the Issuer's Common Stock were outstanding. Documents incorporated by reference: Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2001 Annual Meeting are incorporated by reference into Part III. PART I ITEM 1. BUSINESS ParkerVision, Inc. was incorporated under the laws of the state of Florida on August 22, 1989. ParkerVision's operations consist of two operating segments - the Video Products Division ("Video Division") and the Wireless Technology Division ("Wireless Division"). All references herein to the "Company" refer to ParkerVision, Inc. and its wholly-owned subsidiary. Video Division - -------------- The Video Division is engaged in the design, development and marketing of automated video camera control systems, marketed under the tradename CameraMan(R) and automated production systems, marketed under the tradename PVTV Studio(TM). In addition, the Company provides training, support and other services related to these products. The Company sells its video products and education-based PVTV Studio(TM) systems primarily through audiovisual dealers and other equipment manufacturers throughout the United States as well as in Canada, Latin America and Asia. The Company primarily sells its high-end PVTV Studio(TM) systems direct to broadcasters in the United States and Canada. The Company's Video Division revenue percentages by product are as follows: Product/Service 2000 1999 1998 ------------------------------ -------- -------- -------- CameraMan(R)systems 59% 89% 97% PVTV Studio(TM)systems 36% 10% 3% Training and other services 3% 1% 0% Recurring support & other 2% 0% 0% The CameraMan(R) systems were initially developed to allow the creation of professional-quality video communication by non-professional video users. These systems include a proprietary "tracking" technology that allows a video user to appear in the video while also controlling the camera. The Company markets these systems to certain educational and videoconferencing segments of the commercial market where audiovisual solutions have become increasingly popular for communication, training, presentation, instructional and educational needs. The Company offers its CameraMan(R) products in a variety of application-specific packages designed for the distance education and videoconferencing markets. In addition, in 2000, the Company introduced a high-end digital CameraMan(R) system targeted toward the broadcast and professional video user. Since 1995, the Company has produced camera products for Vtel Corporation ("VTEL") under an Original Equipment Manufacturer ("OEM") agreement. The Company's PVTV Studio(TM) systems were designed specifically to meet the needs of studio production markets. The PVTV Studio(TM) product line includes a professional, broadcast quality video production system that integrates video, audio, machine control and camera control functions into an intelligent single-operator station. The system was designed to allow organizations to economize their resources by maximizing their production capabilities. A single operator can control, in parallel, the production functions that traditionally require as many as six to twelve individuals to operate. 2 The Company installed three PVTV Studio(TM) beta sites in 1998 in various vertical markets and worked extensively with its beta sites during 1998 to increase the technological capabilities of its system. Also during 1998, the Company focused on filing patents to protect its proprietary technologies related to the PVTV Studio(TM) system. The Company installed several "pilot" sites in 1999 within several vertical markets including broadcast, corporate and education. In the broadcast sector, this effort allowed for the integration of widely used third party equipment and products thus providing the Company with the opportunity to leverage the installed base of existing equipment into its sales efforts. In addition, in 1999, the Company introduced a digital version of its PVTV StudioNEWS(TM) package and an education-based version marketed under the tradename PVTV Learning(TM). During 2000, the Company continued to enhance the features, functionality and third party interfaces of its PVTV Studio(TM) systems. During 2000, the Company received a purchase contract from The Ackerley Group ("Ackerley"), a broadcast ownership group, for the purchase of PVTV Studio(TM) systems for several of Ackerley's news stations. Substantially all of these sites were completed in 2000 resulting in approximately $4,700,000 in revenue from system sales and services. Ackerley accounted for approximately 30% of the Company's revenues in 2000. Wireless Division - ----------------- The Company's Wireless Division is engaged in the development and initial commercialization of its Direct2Data(TM), or D2D(TM), technology. This technology is a wireless Direct Conversion radio frequency ("RF") technology that the Company believes will reduce the complexity, cost, size, and power consumption of radio tranceivers when compared with Super Heterodyne-based radio transceivers which the Company believes is currently the most widely deployed radio circuit architecture utilized in wireless communications. The Company is targeting applications such as cellular telephones and wireless local area networks ("WLAN"), among others. The Company's Wireless Division is in the early stages of commercialization and has not generated any revenue to date. The Company believes its D2D(TM) technology represents a completely new radio electronic circuit architecture that has the capability of replacing traditional RF heterodyne architectures. In 1998, the Company announced that its D2D(TM) technology allowed for a single-step direct conversion of an incoming modulated RF carrier signal directly to its baseband data, eliminating the need for the RF heterodyne architecture in RF receiver design. The Company later determined that its D2D(TM) technology could be applied to RF transmitter use for producing direct up-conversion for on-channel RF carriers. The Company's focus has been on the creation of zero intermediate frequency ("zero IF") radio system applications based on the D2D(TM) direct conversion technology. Zero IF radios eliminate all of the intermediate frequency stages currently utilized in broadly deployed multi-step conversion heterodyne transmitters and receivers. The Company believes the D2D(TM) architecture can be implemented in a wide range of semiconductor processes allowing the opportunity to integrate other system functions such as amplifiers, local oscillators, and baseband filters onto the same IC as the RF up and down-conversion to create highly integrated RF receivers, transmitters or transceivers. The Company believes its novel D2D(TM) technology represents a significant improvement in the development of radio tranceivers as it will 3 reduce complexity, size, power consumption and cost of many wireless communication systems. The Company also believes that for certain applications the technology improves performance when compared to the traditional approaches, as it simplifies the handling of the data extraction (receiver) process or the data transmission (transmitter) process of an RF carrier. The performance of the Company's D2D(TM) technology was independently confirmed by Questar InfoComm, Inc. ("Questar"), a subsidiary of Questar Corporation, which signed a letter of intent to jointly develop products utilizing the Company's D2D(TM) technology in 1998. Questar also purchased $5 million in ParkerVision common stock in a private placement transaction in December 1998. The Company is not currently in active dialog or development activities with Questar on the development of products. During 1998 and 1999, the Company focused much of its efforts on filing patents to protect its intellectual property and continuing to develop technology enhancements. The Company's development efforts in the second half of 1999 became focused on verifying the applicability of its D2D(TM) technology to specific industry standards-based applications including the IEEE 802.11b WLAN standard, GSM cellular application, CDMA IS-95 cellular application and the Bluetooth wireless personal area network standard. Although the Company believes the technology to be applicable to all of these wireless standards, the Company is currently in active development of D2D(TM) tranceivers for application to 2.4GHz IEEE 802.11b and 5.0 GHz IEEE 802.11a standards and CDMA IS-95/2000 1X/ and analog AMPs cellular standards. The Company expects to expand its development to additional industry standards over time in the future. In 1999, the Company completed the development of an IEEE 802.11b WLAN demonstrator that demonstrates several of the technological breakthroughs made possible by the Company's D2D(TM) technology. The Company also entered into a licensing agreement with Symbol Technologies, Inc. ("Symbol"), a leading provider of mobile data management systems and services for WLAN products. The agreement calls for D2D(TM) to be incorporated into the majority of Symbol's future WLAN products and for Symbol to be the sole licensee in the WLAN marketplace. Under the terms of the agreement, the Company received prepaid royalties and will receive additional payments over time for the sale by Symbol of products including the D2D(TM) technology. The Company continues to work with Symbol on the development of WLAN IC's for Symbol's products. Under the terms of the agreement with Symbol, the Company preserved its rights to develop and market its own D2D(TM)- based tranceivers for the WLAN marketplace as well as contract with others to incorporate into their own IC's implementations of the D2D(TM) technology developed by the Company. The Company also completed a D2D(TM)-based transmitter demonstration platform that the Company believes meets or exceeds the requirements of the CDMA IS-95 standard. Early in 2000, the Company announced that the identical D2D(TM) transmitter hardware was utilized to complete a demonstrator platform that the Company believes exceeds the GSM standard as well. CDMA is the fastest growing digital cellular standard in several regions of the world and is considered to be the most demanding of the current digital cellular standards in terms of radio transceiver performance requirements. GSM is currently the world's most popular digital cellular communications standard. The Company also announced its plans to develop D2D(TM) -based receiver platforms, which meet or exceed both the CDMA IS-95 and GSM standards. The Company believes that a CDMA IS-95 compliant receiver prototype that is built using the D2D(TM) technology will be complete in 2001 and that the Company will complete the design of its first CDMA IC's in late 2001. CDMA is currently the fastest growing cellular communications standard. 4 In March 2000, the Company acquired substantially all of the assets of Signal Technologies, Inc., a privately owned, Orlando, Florida based RF design firm which had previously provided application engineering and design services to the Company for the D2D(TM) technology. The assets of STI were acquired for approximately $2 million in convertible preferred stock. In addition, the Company employed all of the former STI employees and entered into employment agreements with several key employees. During 2000, the Company began expanding its engineering personnel in its Orlando facility and has plans to continue increasing its Orlando engineering staff in 2001. In addition to it's Orlando based design center, the Company maintained design centers in California, Utah and Jacksonville, Florida during 2000 for application engineering and design of WLAN and CDMA based applications of its wireless technology. In 2001, the Company determined that to achieve the best efficiencies in growing its wireless design staff that it would expand the engineering personnel in its Orlando and Jacksonville facilities while closing its Utah facility which consisted of a small staff of four engineers. In addition, in 2001, the Company moved a portion of its engineering activities from its California center to Orlando and Jacksonville thereby reducing the required resources in its California facility. Early in 2001, the Company completed its first highly integrated 2.4 GHz IEEE 802.11b WLAN D2D(TM)-based RF transceiver IC's which are currently undergoing testing. The Company believes that it will begin to demonstrate WLAN tranceivers to select prospective customers beginning in the first half of 2001. The Company also believes that it will require further design modifications to its first WLAN IC's and that achieving a commercially viable product will require iterative design modifications as the Company receives feedback from potential customers and conducts extensive testing on its first WLAN IC's. The Company believes that it is very common for multiple iterations of IC's, especially mixed signal RF IC's, to occur before a commercially shippable product is achieved. Early in 2001, the Company entered into an agreement with PrairieComm, Inc. ("PrairieComm"), a cellular chipset and embedded software developer, to jointly develop new chipsets using D2D(TM)-based RF transceivers and PrairieComm baseband processors for wireless devices, including cellular telephones. The Company also entered into an agreement with Texas Instruments Incorporated ("TI") for the development of interfaces between the Company's transceiver IC's and TI's baseband processors in the areas of wireless networking and cellular applications. In addition, TI has agreed to manufacture D2D(TM)-based IC's for the Company using various TI semiconductor processes. TI also purchased $2.5 million in the Company's equity securities in a private placement transaction. PRODUCTS - -------- Video Division - -------------- The Company's patented and patents-pending CameraMan(R) automated video camera control systems utilize a portable, computerized base which pans and tilts simultaneously to achieve fluid motion, into which is integrated a professional quality single-chip or three-chip imaging camera that provides the system camera control functions, such as auto-focus and auto-image control. The base unit also includes a proprietary automatic tracking capability. Additional peripheral devices are available to control the automatic tracking functions and to remotely control base unit and camera functions. CameraMan(R) camera products are offered in a variety of application-specific packages. 5 For the distance education market, the Company offers Presenter and Student Camera systems. The presenter system allows a presenter, or instructor, to wear a tracking device with built-in microphone, so that the camera will automatically follow the presenter's movements throughout a room. The student system includes a student response feature allowing students to "raise their hands" electronically by pressing a locator button on a microphone. The camera will then automatically recall the student's location thereby providing educators and students with an "eye to eye" level of communication. For the videoconferencing market, the Company offers a Personal Locator system. This system allows each videoconferencing participant to program his or her personal location preset and then recall that preset at the touch of a button on that individual's keypad. The system also includes a chairperson keypad with "system lockout" functionality for meeting control. For general-purpose commercial applications where a high-quality, full-featured pan/tilt system is desired but tracking capability is not needed, the Company offers a General Pan/Tilt system. This system is field upgradable to all other application-specific systems and, as a result, is easily adaptable to distance education and videoconferencing applications. All of the Company's single-chip application-specific packages are available in a VTEL-labeled product line. The basic difference between the VTEL-labeled products and the Company's other products is the ability for the VTEL products to be factory integrated with select VTEL equipment. During 2000, the Company introduced three-chip digital versions of its CameraMan product line. The digital CameraMan products are available in the application-specific packages including General Pan/Tilt, Presenter and Student Camera Systems. In addition, digital CamerMan systems are packaged with PVTV Studio NEWS and Learning systems and target the higher-end video user including broadcasters. Digital CameraMan systems are available in standard 4:3 aspect ratios and switchable 4:3/16:9 formats ready for wide-screen applications. The Company's analog automated camera control systems have list prices ranging from approximately $5,000 to $10,000 for a single-chip system and $19,000 to $30,000 for an analog three-chip system. The Company's digital three-chip CameraMan systems have list prices ranging from approximately $35,000 to $50,000. The Company's patents-pending PVTV Studio(TM) system provides fully integrated PC-based production systems with unique functionality. These systems often incorporate two or more CameraMan(R) single-chip or three-chip analog or digital camera systems with additional audio, video and machine control functions, a graphical user interface and software based on a Microsoft(R) operating system. A proprietary Transition Macro(TM) technology allows the system operator to build, revise and preview a production in storyboard fashion and then run the entire live or live-to-tape production with the press of one button. These systems also allow the operator to manually pause or interrupt the automated production, as needed, to insert changes. In addition to CameraMan(R) cameras, the PVTV Studio(TM) systems can work with other video sources such as satellite feeds, compression/decompression devices and manually operated or robotic cameras produced by other manufacturers. The PVTV Studio(TM) product line is currently available in two application-specific packages: PVTV Studio NEWS(TM) targeted for broadcast and cable production markets and PVTV Learning Studio(TM) targeted at educational environments including high schools, colleges and universities. 6 The PVTV Studio NEWS(TM) system is a switchable 4:3/16:9 aspect ratio digital production system that adds proprietary functionality such as Transition Macro(TM) technology that allows for "event driven" automation for one or two person "live" production control. Rundown Converter(TM) technology is also provided to integrate News Automation Systems such as AVID's iNEWS, Associated Press's News Center or ENPS and others to directly program the PVTV Studio NEWS system for a seamless newsroom work flow process. In addition, the system allows for dynamic changes such as adding, deleting or moving stories as required including the insertion of late breaking news in a live broadcast environment. The list price for a PVTV Studio NEWS(TM) system ranges from $290,000 to $450,000 depending on selected options. The PVTV Learning Studio(TM) is a baseline "value" priced offering for the education market. The system package includes a 8 video input, 3-D digital video effect, 15 audio input and 6 control port production studio with Script Viewer(TM) teleprompting system, Graphic Center(TM) character generator system and two digital CameraMan 4:3 aspect ratio, 18x zoom lens cameras. The system also comes packaged with a comprehensive curriculum with teacher manual, notes, quizzes, tests and 30 student workbooks. As an option, the system can also be purchased with on-line CD-ROM and Internet based tutorials and an "advanced" curriculum set. The system package is a single-source all digital production solution that facilitates the specification, design and procurement process for the customer. The PVTV Learning Studio(TM) package for the education market segment is priced starting at $175,000. The PVTV(TM) product line includes various package configurations including components that provide additional functionality. These components include the ScriptViewer(TM), Shot Director(TM) and CameraMan(R) camera systems. The ScriptViewer(TM) system is an automated teleprompter system that integrates with News Automation Systems and PVTV Studio NEWS(TM). The Shot Director(TM) is a multi-camera joystick controller which is compatible with single-chip analog and three-chip analog and digital CameraMan(R) camera systems and provides real-time camera control and setup configuration (Camera Control Unit (CCU) setup for 3-CCD cameras) functionality for up to sixteen CameraMan(R) cameras. The Shot Director(TM) is also offered as a stand-alone system for use with CameraMan(R) cameras. In 2001 the Company plans to introduce scalable versions of the digital PVTV Studio NEWS(TM) product line and also plans to launch the PVTV WebSTATION(TM) for Internet streaming broadcast applications. The Company believes its 2001 product line will address expanded functional requirements for broadcast networks, local affiliates and cable channels that produce news as well as address functional and price point targets to enable operating efficiencies with new startup opportunities for Internet-only webcasters. The new PVTV WebSTATION(TM) for News is a patent-pending system to be sold as an integrated solution with PVTV Studio NEWS(TM) or stand-alone for traditional production environments. The system allows for automatic editing of show elements for on-demand access, automatic links of advertising to specific show elements, on-line viewer assembly of customized newscasts and the linkage of graphics, data extended play segments, polling data and URLs by show elements. The graphical user interface of the PVTV WebSTATION viewer is designed to emulate an enhanced multimedia television. 7 Wireless Division - ----------------- The Company is currently focused on developing its own IC's for application to the 802.11(b) and (a) standards as well as IS-95 and CDMA 2000 1X cellular standards. The initial application for which the Company believes it will deliver its first commercially viable IC's is for the WLAN 802.11b standard. The Company believes the D2D(TM) architecture will allow manufacturers to reduce component costs, reduce power consumption and simplify design and manufacturing of WLAN products for enterprise, consumer and other vertical markets. The Company anticipates that it will begin demonstrations with reference designs and initial sampling of its first WLAN IC's to select targeted OEM customers during the first half of 2001. The Company has received its first WLAN IC from fabrication and is currently testing the performance of the IC. The Company is also developing a CDMA IS-95/2000-1X transceiver which also includes analog AMPs for use in mobile handset applications. The first IC's for CDMA are expected to be fabricated in the second half of 2001. The Company also plans to pursue strategic relationships with companies that produce IC's which complement the Company's IC's and early in 2001 has entered such relationships with PrairieComm and Texas Instruments. MARKETING AND SALES - ------------------- Video Division - -------------- The CameraMan(R) video camera control systems and the PVTV(TM) automated production systems are marketed to educators, corporate professionals and broadcasters who use audiovisual, telecommunications and production systems in distance education, videoconferencing, and live or live-to-tape broadcasts. In the education market, the Company targets universities, colleges, primary schools, hospitals/clinics, and corporate/government training facilities. The Company believes telecommunications technologies are a trend in education resulting in teaching programs which are more timely, more accessible, and more cost-effective per student. In the videoconferencing market, the Company targets corporations who are utilizing on-site videoconferencing rooms for long-distance training and communication among corporate personnel, customers, clients and suppliers. In the broadcast production market, the Company targets broadcast and cable networks/stations, independent studios and corporate, education, healthcare, religious and government studios. System sales are directed by an internal sales staff and a network of authorized audiovisual product dealers, telecommunication dealers and systems integrators who design and specify audiovisual and production equipment of various manufacturers. In addition, the Company maintains national account sales arrangements, such as the program with VTEL, for specific applications and targeted commercial markets. The majority of the Company's sales to date have been generated through its authorized dealers, primarily located in the United States. Since 1997, the Company has been expanding its audiovisual dealer network to include the international market, with a focus on Asia. Overseas sales, however, have not represented a significant portion of the Company's revenues to date. The Company also sells the majority of its automated production systems directly through its own sales force, primarily in the broadcast and cable segment. In addition to system sales, the Company also provides training and annual service and support contracts for its automated production systems. These services are supported primarily by internal trainers, project managers and support personnel. 8 The Company currently supports its distribution channels with marketing programs to promote its products. These include targeted trade advertising, direct mail campaigns, lead generation/fulfillment, tradeshow attendance and live demonstration facilities. In addition, the Company provides training of its dealers' and national accounts' sales, support and installation personnel. The Company's revenue percentages by distribution channel are as follows: Distribution Channel 2000 1999 1998 ------------------------------ -------- -------- -------- Direct 40% 10% 0% National Resellers 38% 53% 50% OEM Customers 16% 29% 39% International Resellers 6% 8% 8% VTEL accounted for approximately 16%, 29% and 35% of the Company's revenues in 2000, 1999 and 1998, respectively. The Ackerley Group, a broadcast ownership group, accounted for approximately 30% of the Company's revenues in 2000. No other customer accounted for more that 10% of the Company's revenues in 1999 or 1998. Wireless Division - ----------------- The Company began its initial commercialization of its wireless technology by focusing its efforts on commercialization through license arrangements with third parties. This resulted in a licensing arrangement with Symbol for wireless LAN. While the Company may in the future enter into new licensing arrangements for other market segments, the Company is currently focused on producing and selling its own IC's to product manufacturers in targeted markets. In the WLAN marketplace the Company's current plans are to sell IC's directly to OEM's who manufacture and sell products including WLAN Network Interface Cards ("NIC's") and Access Points ("AP's"). The Company has started building a staff of sales and marketing personnel for WLAN sales. This includes support staff for creating reference designs of the Company's WLAN IC's for use with other complimentary IC's to create complete NIC's and AP's as well as sales and marketing staff to build relationships with OEM's that the company plans on targeting for sales of its WLAN IC's. The Company may also pursue strategic relationships with other companies that produce complimentary IC's such as baseband processors and power amplifiers. The Company has entered into a relationship with PrairieComm to develop interfaces between the Company's cellular IC's and PrairieComm's baseband processor IC's. The initial collaborative efforts with PrairieComm will be focused on CDMA applications. Additionally, the Company entered into a relationship with Texas Instruments with an initial focus on developing interfaces between the Company's transceiver IC's and TI's baseband processors in the areas of wireless networking and cellular applications. In the cellular marketplace, the Company currently plans on targeting OEM's of handsets and other mobile devices that are used in conjunction with cellular wide area networks. The Company is likely to initially target selling its cellular IC's directly to OEM's that are targeted as customers of the companies with which the Company has strategic product development relationships, such as PrairieComm and Texas Instruments. It is also likely that the Company will develop over time its own set of targeted OEM's for the cellular and WLAN marketplace. 9 COMPETITION - ----------- Video Division - -------------- The videoconferencing industry, which includes distance education, is highly competitive. The Company is aware of certain other companies that have commercialized or developed technologies and products, which are competitive with certain functions of the CameraMan(R), automated camera control systems. Several manufacturers of pan/tilt heads compete with the Company's camera systems. Some of these pan/tilt heads have limited preset location capabilities, but they offer no tracking capabilities and must be operated manually. Some of the above mentioned products sell for more than the CameraMan(R) camera system while others sell at prices similar to, or less than, that of the CameraMan(R) system, but offer limited functions. Both Canon and Sony offer systems with certain automatic tracking capabilities. The Canon system requires integration of third party software and a personal computer with specific video hardware in order to perform certain tracking functions. The Sony system offers a visual/color-tracking technology embodied within their camera. While the Canon and Sony systems are offered at prices similar to, or less than, the CameraMan(R) system, the Company believes these systems have a significantly lower level of performance than the CameraMan(R) system and do not have the application-specific flexibility that is incorporated with the Company's products. The Company believes that it competes principally on the basis of the capabilities of the patented and patent-pending CameraMan(R) camera system, ease of system application, and system flexibility. The studio production industry is also highly competitive. Grass Valley Group, Sony Corporation, Panasonic Corporation, Ross Video, and E-Studio Live, among others, offer video switchers and various other products for studio environments. A traditional audio/video production environment involves the coordination of multiple operators who independently operate various pieces of equipment in parallel to achieve audio, video, machine control and camera control functions. The Company is not aware of any competitors who currently offer a system solution that integrates audio, video, machine control and camera control through a single interface and provides the technology to allow these functions to operate automatically and in parallel. In addition, the Company is not aware of any competitors who currently offer a level of automation with integration to news automation systems. The Company intends to compete based on the acquisition of patents on its proprietary patents-pending technology and continued enhancements of its system to offer users more automation and functionality than its competitors. The Internet production environment is in its infancy awaiting the "broadband" market. Broadband is defined as connections above the traditional 56 kbps modems. It includes ISDN, T1, DSL and Cable modem connections. ParkerVision's PVTV WebSTATION is targeted at this "broadband" market. In conjunction with PVTV Studio NEWS, the Company believes its products offer operational efficiencies which will be required by both broadcasters and webcasters to successfully produce and distribute content on the Internet cost effectively while the market matures. The Company intends to compete on its proprietary patent-pending technologies and continued enhancements of its system to offer users more automation and functionality than its competitors. Many of the Company's competitors, in both the videoconferencing and studio production industries, are well-established, have substantially greater financial and other resources than the Company, have established reputations for success in the development, sale and service of products, and have significant advertising budgets to permit them to implement extensive advertising and promotional campaigns in response to competitors. Certain of these competitors dominate their respective industries and have the financial resources necessary to enable them to withstand substantial price 10 competition, which is expected to increase, and downturns in the markets for communication products. Wireless Division - ----------------- The Company intends to compete in the wireless industry based on the unique attributes of its patent-issued and patent-pending D2D(TM) technology which the Company believes will provide one or more of the attributes of lower cost, smaller size, lower power consumption and better performance than other technologies and approaches of which the Company is aware. The Company believes that the competing approaches are either traditional Super Heterodyne multi-step up and down-conversion based transceivers or direct conversion transceivers which are fundamentally based on utilizing more traditional devices to achieve the Direct Conversion function instead of the Company's patented and patent-pending approach. Although the Company expects to compete in this market on the basis of its patented technology, it is possible that competitors will attempt and be successful at finding alternative solutions or will develop technology with benefits that are equivalent to or superior to the benefits of the Company's technology. The Company believes its wireless technology represents a significant advancement in the approach to processing RF carrier signals in the direct up-conversion (transmitter) and down-conversion (receiver) of the RF carrier to the base band analog data waveform. The Company believes that one primary source of competition will be from older technological solutions which designers and manufacturers are currently using and about which they are knowledgeable. The Company further believes that other developers of RF IC's will develop and introduce their own direct conversion transceiver IC's which will be another source of competition. The Company also expects competition to arise from other RF technologies that are emerging or currently under development that may provide equivalent or superior benefits to the Company's technology. Several wireless companies have announced the development of direct conversion or near direct conversion products including transceivers for use in GSM cellular applications, Bluetooth standard applications and WLAN applications. The Company believes several of these applications do not represent single-step direct conversion like the Company's D2D(TM) technology, but rather represent architectures that employ a low IF or other variation on traditional heterodyne-based up/down conversion architectures. In some cases, the Company does not have sufficient information to determine the approach these competitors have taken in their direct conversion products. At this time, the Company believes that it has the only direct conversion approach to date that is not fundamentally based on previous up and down-conversion devices and circuits, the most common being the heterodyne-based mixer or variants of such mixers. PRODUCTION AND SUPPLY - --------------------- Video Division - -------------- The Company engages in assembly operations for its automated video camera control and production systems at its facility in Jacksonville, Florida. The Company's operations involve the inspection of each component, assembly of the system's electronic circuitry and other components, a series of quality specification measurements, and various other computer, visual and physical tests, including product field testing to certify final performance specifications. The Company believes that it has sufficient production capacity to satisfy increased demand for these systems for the foreseeable future. The 11 Company obtains all of its component parts, including standard electronic components and specially designed components, from third-party manufacturers. The Company currently purchases all of its requirements of specially designed component parts from single-source suppliers. The Company owns the design and dies for such components and believes that alternative sources of supply for such components are available. In addition, the Company purchases the camera modules for its automated camera systems and several of the hardware components for its automated production systems from single-source suppliers. Alternative sources of supply would require modifications to existing systems. The Company maintains blanket orders and/or purchase contracts with these suppliers. The Company purchases other system components pursuant to purchase orders placed from time to time in the ordinary course of business. For the years ended December 31, 2000, 1999 and 1998, one supplier accounted for approximately 20%, 26% and 18%, respectively of the Company's component purchases. This supplier is the single-source supplier of the Company's camera modules for its automated camera systems. No other supplier accounted for more than 10% of the Company's component purchases in 2000, 1999 or 1998. At December 31, 2000, the Company had commitments to purchase camera modules and other parts totaling approximately $579,000 through 2001. The Company is substantially dependent on the ability of its suppliers, among other things, to satisfy performance and quality specifications and dedicate sufficient production capacity for components within scheduled delivery times. Failure or delay by the Company's suppliers in supplying necessary components to the Company would adversely affect the Company's ability to obtain and deliver products on a timely and competitive basis. The Company endeavors to mitigate the potential adverse effect of supply interruptions by carefully qualifying vendors on the basis of quality and dependability, and by maintaining an inventory of certain components, but there can be no assurances that such components will be readily available when needed. The Company's sales cycle for its camera and studio products is estimated to be from one to eighteen months. The period from execution of a customer's purchase order to delivery of a CameraMan(R) camera system is typically one to four weeks. The period from execution of a customer's purchase contract to delivery and installation for a studio system can range from three weeks to six months, depending upon peripheral equipment requirements and the readiness of the customer's site. The Company attempts to forecast orders and to purchase long lead-time components in advance of receipt of purchase orders to permit it to provide deliveries of completed systems within its standard delivery period. At December 31, 2000, the Company maintained an inventory of standard electronic and other system components of $2,970,724. Substantially all of the Company's systems are delivered to customers by common carrier. The Company offers a one-year limited warranty on its products covering defects in workmanship and materials and software bugs. During the warranty period the Company will replace parts and make repairs to system components at its expense. The Company records a reserve for future warranty costs at the time of sale. Extended support and service contracts are offered to the customer to cover software support and upgrades for the PVTV Studio systems. In addition, extended hardware maintenance contracts are offered on the Company's camera and studio products. The revenues from all extended support contracts are recognized ratably over the service period. 12 Wireless Division - ----------------- The Company plans to utilize semiconductor foundries for the production of RF IC's. Early in 2001, the Company entered into an agreement with TI for the production of its IC's using various TI semiconductor processes. The Company will be substantially dependent upon these foundries to satisfy performance and quality specifications and dedicate sufficient production capacity for IC's within scheduled delivery times. Failure or delay by the foundries in supplying IC's to the Company, or failure or delay by the foundries in meeting the performance or quality specifications would adversely affect the Company's ability to obtain and deliver such IC's on a timely and competitive basis. The Company endeavors to mitigate the potential adverse effect of supply interruptions by carefully qualifying foundries on the basis of quality and dependability. PATENTS AND TRADEMARKS - ---------------------- The Company currently holds fifteen United States utility patents, seven foreign utility patents, two pending United States utility patent applications, and six foreign utility patent applications covering certain tracking functions and methods for controlling the field of view in an automatic tracking camera system. The Company currently holds four United States utility patent applications and two United States provisional patent applications relating to its automated video production systems. The Company currently holds four United States utility patents, thirty-nine United States utility patent applications, nineteen United States provisional patent applications, twelve Patent Cooperation Treaty ("PCT") patent applications, five Japanese utility patent applications, and three Taiwanese utility patent applications relating to its wireless technology. The Company currently holds two United States utility patent applications, one United States provisional patent application, and one PCT patent application covering technology in other areas. The economic life of the Company's patents ranges from five to twenty years. The Company promotes its camera, video production and wireless technologies under the United States registered trademarks ParkerVision(R), CameraMan(R), and the Three Triangles Logo. The Company currently holds United States trademark and service mark applications for the marks D2D, DIRECT2DATA, and DIRECT CONVERSION WITHOUT THE COMPROMISES, and a United States trademark application for the mark HARDWAVE. The Company currently holds (European) Community trademark and service mark registrations for the marks D2D and DIRECT2DATA, and a Japanese trademark registration for the mark DIRECT2DATA. The Company currently holds Canadian trademark and service mark applications for the marks D2D and DIRECT2DATA, and a Japanese trademark application for the mark D2D. The Company further promotes its products and services under other marks. GOVERNMENT REGULATION - --------------------- The Company utilizes wireless communications in its CameraMan(R) camera and PVTV(TM) systems and in its D2D(TM) technology. These wireless communications utilize infrared and radio frequency technology that is subject to regulation by the Federal Communications Commission ("FCC") in the United States and other government agencies in foreign countries. The Company has obtained, is in the process of obtaining, or will attempt to obtain all licenses and approvals necessary for the operation of its products and technologies in those counties that it sells products. There can be no assurance that, in the future, the Company will be able to obtain required licenses or that the FCC or other foreign 13 government agency will not require the Company to comply with more stringent licensing requirements. Failure or delay in obtaining required licenses would have a material adverse effect on the Company. In addition, expansion of the Company's operations into certain foreign markets may require the Company to obtain additional licenses for its products. Amendments to existing statutes and regulations, adoption of new statutes and regulations and the Company's expansion into foreign jurisdictions, could require the Company to alter methods of operations at costs that could be substantial, which could have an adverse effect on the Company. There can be no assurance that the Company will be able, for financial or other reasons, to comply with applicable laws and regulations and licensing requirements. RESEARCH AND DEVELOPMENT - ------------------------ For the years ended December 31, 2000, 1999 and 1998, the Company expended approximately $12,601,000, $6,203,000 and $3,825,000, respectively, on research and development. For the past three years, the Company's principal research and development efforts have been devoted to the development of the PVTV(TM) product line in the Video Division and the D2D(TM) technology in the Wireless Division. The significant growth in research and development spending is primarily attributable to aggressive development efforts related to the D2D(TM) technology and the addition of design centers in California, Utah and Orlando, Florida. Refer to Item 1 - Business - Wireless Division. EMPLOYEES - --------- As of December 31, 2000, the Company had 131 full-time employees and 1 part-time employee, of which twenty-two are employed in manufacturing, sixty-seven in engineering research and development, fourteen in sales and marketing, eleven in product training and support, and eighteen in finance and administration. None of the Company's employees are represented by a labor union. The Company considers its employee relations satisfactory. ITEM 2. PROPERTIES The Company's executive offices and Video Division manufacturing, sales and distribution operations are located in approximately 33,000 square feet of leased space on three acres of land in Jacksonville, Florida, pursuant to a lease agreement with Jeffrey Parker, Chairman of the Board, Chief Executive Officer and President of the Company, and Barbara Parker, a related party. The initial lease term expired in February 1997, and the Company exercised its first of three five-year renewal options. The lease is on a triple net basis and currently provides for a monthly base rental payment of approximately $24,300 through February 2002. The Company believes that its manufacturing facility is adequate for its current and reasonably foreseeable future needs. The Company believes that additional physical capacity at its current facility will accommodate expansion, if required. The Company leases approximately 5,300 square feet of office space in Jacksonville, Florida for its Wireless Division engineering and business development staff. The initial lease expired in May 2000 and the Company exercised a one-year renewal option. The lease provides for a monthly rental payment of approximately $9,300 through May 2001. 14 The Company also leases approximately 8,700 square feet of office space in Lake Mary, Florida for the Wireless Division's Orlando engineering personnel. The lease term commenced in September 2000 and provides for a monthly rental payment of approximately $14,400 through September 2005. The Company amended this lease agreement to add an additional 3,200 square feet commencing January 2001 for an additional monthly rental payment of approximately $5,100 through December 31, 2005. The Company leases approximately 3,700 square feet of office space in the same Lake Mary, Florida facility for the Wireless Division's Orlando business development personnel. The lease term commenced in November 2000 and provides for a monthly rental payment of approximately $6,500 through November 2005. The Company leases approximately 5,600 square feet of office space in Pleasanton, California for the Wireless Division's West Coast engineering and business development personnel. The lease term commenced in March 2000 and provides for a monthly rental payment of approximately $13,700 through March 2005. The Company leases approximately 1,200 square feet in Los Angeles, California as a demonstration and training facility for the Company's video products. The lease provides for a monthly rental payment of approximately $1,600 per month through May 2002. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION - ------------------ The Company's common stock is traded under the symbol (PRKR) on the Nasdaq National Market ("Nasdaq"), which is the principal market for the common stock. Listed below is the range of the high and low bid prices of the common stock for the last three fiscal years, as reported by Nasdaq. The amounts represent inter-dealer quotations without adjustment for retail markups, markdowns or commissions and do not necessarily represent the prices of actual transactions. 2000 1999 1998 ------------------ ------------------ ------------------ High Low High Low High Low ------- ------- ------- ------- ------- ------- 1st Quarter $36.500 $25.250 $31.500 $22.063 $24.000 $12.188 2nd Quarter 52.875 21.000 37.313 25.938 27.250 19.250 3rd Quarter 52.000 36.250 39.063 21.875 23.500 10.813 4th Quarter 56.438 36.500 32.000 18.500 24.750 11.375 15 HOLDERS - ------- As of March 23, 2001, there were 118 holders of record. The Company believes there are approximately 2,100 beneficial holders of the Company's common stock. DIVIDENDS - --------- To date, the Company has not paid any dividends on its common stock. The payment of dividends in the future is at the discretion of the board of directors and will depend upon the Company's ability to generate earnings, its capital requirements and financial condition, and other relevant factors. The Company does not presently intend to declare any dividends in the foreseeable future, but instead it intends to retain all earnings, if any, for use in the Company's business. SALES OF UNREGISTERED SECURITIES - --------------------------------
If option, warrant or Consideration received and Exemption convertible security, description of underwriting or from terms Date of Number other discounts to market price registration of exercise or sale Title of security sold afforded to purchasers claimed conversion - ---------------------------------------------------------------------------------------------------------------------------------- 12/4//00 Options to 135,000 Options granted - no 4(2) Exercisable for five purchase consideration received by years from the date the common stock Company until exercise options first become granted to vested, options vest employees over five years at an pursuant to the exercise price of 2000 Plan $41.50 per share
ITEM 6. SELECTED FINANCIAL DATA The following table sets forth consolidated financial data for the Company as of the dates and for the periods indicated. The data has been derived from the audited financial statements of the Company included in Item 8. The selected financial data should be read in conjunction with the consolidated financial statements of the Company and "Management's Discussion and Analysis of Financial Condition and Results of Operations". 16
For the years ended December 31, -------------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (in thousands, except per share amounts) STATEMENT OF OPERATIONS DATA: Revenues, net $ 15,965 $ 10,549 $ 9,892 $ 10,799 $ 9,196 Gross margin 7,474 3,609 3,461 4,290 3,209 Operating expenses 22,445 14,647 9,644 8,243 5,421 Interest income 1,949 1,297 1,477 1,019 614 Interest expense 0 0 0 0 76 Net loss (13,022) (9,741) (4,706) (2,934) (1,674) Basic and diluted net loss per Common share (1.03) (0.83) (0.41) (0.28) (0.17) BALANCE SHEET DATA: Total assets 63,608 32,771 40,250 38,685 18,162 Long term liabilities 140 30 18 5 3 Shareholders' equity 60,020 30,136 38,982 37,527 17,277 Working capital 45,600 22,733 25,290 24,424 8,214
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS - -------------------------- When used in the Form 10-K and in future filings by the Company with the Securities and Exchange Commission, the words or phrases "expects" or "the 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 any 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. These risks include, but are not limited to, the continuing losses of the Company which may result in the need for additional capital in the future or a change in current operations, the need for substantial capital and use of current working capital to develop new products and for research and development, uncertainty of product development, technological obsolescence, market acceptance of its products and dependence on third party suppliers and distributors. The Company may also have to expend substantial employee time and financial resources to meet governmental regulation requirements and for the protection of its intellectual property rights. The Company has no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. 17 GENERAL - ------- The Company has made significant investments in developing the technology and manufacturing capability for its products, the returns on which are dependent upon the generation of future revenues for realization. The Company has not yet generated revenues sufficient to offset its operating expenses. To date the Company has used the proceeds from the sale of its equity securities to fund its operations. The Company anticipates increases in revenues in 2001. These increases are subject to the Company continuing to expand its product lines and attracting additional means of distribution and customers, among other things. The Company intends to continue to use its working capital to build its infrastructure to support future marketing and sales and research and development activities for its products. No assurance can be given that such expenditures will result in increased sales, new products, or technological advances. RESULTS OF OPERATIONS FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2000, 1999 - -------------------------------------------------------------------------------- AND 1998 - -------- Revenues - -------- Revenues for the years ended December 31, 2000, 1999 and 1998 were $15,964,587, $10,549,081 and $9,891,543, respectively. The Company's revenues to date consist of sales of its CameraMan(R) automated video camera control systems, automated production systems and various accessories and services that complement those systems. Revenues generated by the Company's major product lines as a percentage of total revenues for the years ended December 31, 2000, 1999 and 1998 are as follows: 2000 1999 1998 -------- -------- -------- CameraMan systems 60% 89% 97% PVTV Studio systems 40% 11% 3% The number of CameraMan(TM) and PVTV Studio(TM) systems sold and the average selling price per system for the years ended December 31, 2000 1999 and 1998 are as follows: Camera Systems Studio Systems ------------------------------ ------------------------------ # Avg. Selling # Avg. Selling Systems Price Per Systems Price Per Sold System Sold System ----------- ---------------- ----------- ---------------- 2000 1,431 $6,600 15 $398,000 1999 1,415 $6,600 5 $240,000 1998 1,413 $6,800 2 $150,000 The increase in revenues from 1999 to 2000 was primarily due to increased revenues from PVTV Studio(TM) systems and related support services. The increase in revenue from PVTV Studio(TM) systems is due to an increase in the number of systems sold as well as an increase in the average selling price per system. The increase in the number of PVTV Studio(TM) systems sold is due to the Company's direct selling efforts and marketing of this new product line. The increase in the average selling price is due to higher discounts offered on 1999 system sales as they represented "pilot sites", as well as 18 increased sales of digital systems and dual systems in 2000 which have a higher selling price. PVTV Studio(TM) revenues included approximately $430,000 of training and other service related revenue in 2000. The increase in revenues from 1998 to 1999 was primarily due to increased PVTV Studio(TM) system sales, offset somewhat by a decrease in the average selling price of camera systems. The change in average selling price of camera systems was due to the mix of products sold as well as discounts offered on slightly used camera systems to reduce the Company's inventory of finished products used for demonstrations and tradeshows. The Company anticipates further increases in revenue in 2001, primarily from sales of its PVTV Studio(TM) systems and related services and support. These PVTV Studio(TM) systems have list prices ranging from approximately $175,000 to over $450,000 per system, with additional revenue ranging from approximately $5,000 to $26,000 for training and other services per installed site. The Company also anticipates increased support revenue related to annual support contracts for its PVTV Studio(TM) installed sites. The Company is also attempting to commercialize its D2D(TM) RF technology. The Company's various commercialization efforts could result in initial product or licensing revenues in 2001. While the Company strives for consistent revenue growth, there can be no assurance that consistent revenue growth or profitability can be achieved. The Company's ability to achieve revenue growth is dependent upon many factors, including market acceptance of new products and technologies, ability of vendors to supply key components, development of new products in a timely manner, relationships with significant customers and resellers, and changes in capital spending by customers. There can be no assurance that the Company will be able to increase or even maintain its current level of revenues on a quarterly or annual basis in the future. Gross Margin - ------------ For the years ended December 31, 2000, 1999 and 1998, gross margins as a percentage of sales were 47%, 34% and 35%, respectively. The increase in margin from 1999 to 2000 is primarily due to the increased revenues from PVTV Studio(TM) systems which have a higher gross margin percentage per system sale than the historical camera sales as well as increased production efficiencies recognized during the second half of 2000. The margin increase is offset somewhat by increases in the Company's inventory reserves due to a shift in market demand from analog to digital PVTV Studio(TM) systems. Fluctuations in margin are in part due to changes in the product mix and discounts offered on used systems to reduce the Company's inventory of finished products used for demonstrations and tradeshows. In addition, in 1999, the Company's manufacturing labor costs increased due to an increased usage of contract labor, increased indirect labor required for production of initial PVTV systems and increased resources dedicated to replacing obsolete parts related to the Company's camera systems. In addition, one of the automated production systems sold in 1999 was a beta system with related third party equipment, which was deeply discounted. 19 While the Company continuously works to improve its gross margin through product pricing, labor efficiencies, reduction of overhead, and product design, there can be no assurance that gross margins will improve significantly over, or remain stable with, the gross margins attained in 2000 due to the highly competitive nature of the industry, the introduction of new products, and fluctuations in the cost of component parts. Research and Development Expenses - --------------------------------- The Company's research and development expenses increased by approximately $6,399,000 or 103% from 1999 to 2000 and increased by approximately $2,378,000 or 62% from 1998 to 1999. Research and development expenses as a percentage of revenues were 79%, 59% and 39% in 2000, 1999 and 1998, respectively. From 1999 to 2000, the increase in research and development expenses was primarily due to the opening of design centers in California and Orlando during 2000 for wireless development. The opening of these design centers resulted in the addition of approximately forty engineers, increased capital spending for the setup and support of the development efforts and increased overhead related to the new facilities. These increases in the Wireless Division were somewhat offset by decreases in the use of third-party application engineering services. In addition, the Company's Video Division increased outside development fees related to certain aspects of its PVTV Studio product line and also incurred a non-recurring charge of $625,000 related to the write-off of a deposit for licensing rights for certain camera technology. From 1998 to 1999, the increase in research and development expenses was primarily related to the Company's development of the D2D(TM) RF technology. The increased expenses related to D2D(TM) included fees for third-party application engineering services, increased depreciation due to capital expenditures for test and development equipment, and increased prototype expenses. The markets for the Company's products and technologies are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. The Company's ability to successfully develop and introduce, on a timely basis, new and enhanced products and technologies will be a significant factor in the Company's ability to grow and remain competitive. Although the percentage of revenues invested by the Company may vary from period to period, the Company is committed to investing in its research and development programs. The Company anticipates it will use a substantial portion of its working capital for research and development activities in 2001. Marketing and Selling Expenses - ------------------------------ Marketing and selling expenses increased by approximately $891,000 or 22% from 1999 to 2000 and increased by approximately $660,000, or 20% from 1998 to 1999. Marketing and selling expenses as a percentage of revenues were 31%, 38% and 34% for the years ended December 31, 2000, 1999 and 1998, respectively. The increases in marketing and selling expenses from 1999 to 2000 were due to increases in the wireless business development expenses, primarily personnel, focused on initial commercialization of 20 the D2D(TM) technology. The increases in marketing and selling expenses in the Wireless Division were offset somewhat by decreases in sales and marketing expenses for the Company's Video Division. Although the Video Division experienced increases in sales commissions, due to increased revenues, this increase was offset by reductions in personnel and reduced advertising, trade show and other promotional expenses during the second half of 2000. The increases in marketing and selling expenses from 1998 to 1999 were due to increases in marketing expenses and support personnel for the Company's video division as well as increases in the wireless business development expenses during the second half of 1999. The Video Division increased its promotional expenses during the last half of 1999 in order to promote the Company's PVTV Learning systems. The Company's wireless division added several business development personnel during the second half of 1999 to focus on the commercialization of the D2D technology. The Company is committed to continuing its investment in marketing and selling efforts in order to continue to increase market awareness and penetration of its products, and anticipates further increases in sales and marketing expenses in 2001 in order to support the Company's commercialization of its D2D(TM) technology and increases sales of its PVTV Studio products. General and Administrative Expenses - ----------------------------------- The Company's general and administrative expenses increased by approximately $577,000, or 13% from 1999 to 2000 and by approximately $1,894,000, or 76% from 1998 to 1999. General and administrative expenses consist primarily of executive and administrative personnel compensation, insurance costs and costs incurred for outside professional services. The increases in general and administrative expenses from 1999 to 2000 are primarily a result of increases in administrative and accounting personnel to support the Company's growing operations as well as an increase in compensation expense for the Company's Chief Executive Officer. The increase in general and administrative expenses from 1998 to 1999 was primarily due to outside professional fees for negotiation of wireless contracts and increased use of investment bankers and other outside professionals during 1999. As a percentage of revenues, general and administrative expenses were 31%, 42% and 25% in 2000, 1999, and 1998, respectively. The Company does anticipate further increases in general and administrative expenses, primarily the addition of executive personnel, in order to support the commercialization of its D2D(TM) technology and the continued growth of its Video Division. Other Expense - ------------- Other expense consists of losses on the disposal of fixed assets no longer in service. These assets consist primarily of obsolete computer equipment and trade show materials. 21 Interest Income - --------------- Interest income increased by approximately $652,000 from 1999 to 2000 and decreased by approximately $181,000 from 1998 to 1999. Interest income primarily represents interest earned on the Company's investment of the proceeds from its initial public offering in 1993 and its subsequent sales of securities during 1997, 1998, 1999 and 2000. The increase in interest income from 1999 to 2000 is due to the investment of funds by the Company's sale of equity securities in May 2000, offset by funds used to support operations. The decrease in interest income from 1998 to 1999 is due to the use of proceeds from maturing investments to fund increased operating expenses. Loss and Loss per Share - ----------------------- The Company's net loss increased from approximately $9,741,000, or $0.83 per share in 1999 to approximately $13,022,000, or $1.03 per share in 2000, representing an increase of approximately $3,281,000 or $0.20 per common share. The increase in net loss is primarily due to a $7.3 million increase in operating expenses attributable to the Company's Wireless Division, primarily for research and development activities, offset by an increase in gross margin of approximately $3.9 million due to increased revenues generated by the Company's Video Division. The Company's net loss increased from approximately $4,706,000, or $0.41 per share in 1998 to $9,741,000, or $0.83 per share in 1999, representing an increase of approximately $5,035,000, or $0.42 per common share. This increase in net loss was also primarily due to a $4.4 million increase in operating expenses attributable to the Wireless Division, primarily for research and development and business development activities. Backlog - ------- As of December 31, 2000, 1999, and 1998, the Company had a camera backlog of approximately $281,000, $390,000, and $31,000, respectively. Backlog consists of camera system orders received from customers, which generally have a specified delivery schedule within one to four weeks of receipt. In addition, at December 31, 2000 and 1999, the Company had a backlog of PVTV Studio sales and services of approximately $350,000 and $560,000, respectively. Liquidity and Capital Resources - ------------------------------- At December 31, 2000, the Company had working capital of approximately $45,600,000, including approximately $39,319,000 in cash, cash equivalents and short-term investments. The Company used cash for operating activities of approximately $10,297,000, $7,556,000, and $3,819,000, for the years ended December 31, 2000, 1999, and 1998, respectively. The increases in cash used for operating activities are primarily the result of increases in the net losses generated by the Company due to increased expenditures related to its wireless technology. The Company generated cash from investing activities of approximately $2,587,000 and $6,739,000 for the years ended December 31, 2000 and 1998, respectively, and used cash for investing activities of 22 approximately $1,815,000 for the year ended December 31, 1999. The cash provided by and used for investing activities is primarily a result of the purchase and maturity of investments in government backed securities, the payment for intangible assets, and capital expenditures. The Company incurred approximately $2,298,000, $1,655,000, and $1,799,000 in connection with patent costs primarily related to the Company's wireless technology in 2000, 1999 and 1998, respectively. The Company incurred approximately $5,116,000, $1,489,000, and $962,000 for capital expenditures in 2000, 1999, and 1998, respectively. These capital expenditures primarily represent the purchase of certain research and development software and test equipment, marketing and sales demonstration equipment and computer and office equipment to support additional personnel. The increase in capital expenditures during 2000 is primarily due to the setup of new wireless design centers in California and Orlando, the purchase of design software for wireless chip development, and the acquisition of a fractional share in an aircraft. At December 31, 2000, the Company was not subject to any significant commitments to make additional capital expenditures. The Company generated cash from financing activities of approximately $36,954,000, $930,000, and $5,516,000 for the years ended December 31, 2000, 1999 and 1998, respectively. The cash generated from financing activities represents proceeds from the issuance of common stock to institutional investors in transactions exempt from registration under the Securities Act of 1933 and the exercise of employee stock options and warrants issued in connection with previous financing transactions and outside consulting agreements. The Company's future business plans call for continued increases in research, development and marketing costs related to its wireless technology. The Company intends to utilize its working capital to fund these increases. The Company believes it has sufficient capital to fund its business plan for 2001 and on a longer term basis without additional capital. The Company's principal source of liquidity at December 31, 2000 consisted of $39.3 million in cash, cash equivalents and investments resulting from its initial public offering and subsequent offerings. Until the Company generates sufficient revenues from system and other sales, it will be required to continue to utilize its cash and investments to cover the continuing expense of product development, marketing and general administration. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. None. 23 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 25 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets - December 31, 2000 and 1999 26-27 Consolidated Statements of Operations - for the years ended December 31, 2000, 1999 and 1998 28 Consolidated Statements of Shareholders' Equity - for the years ended December 31, 2000, 1999 and 1998 29-30 Consolidated Statements of Cash Flows - for the years ended December 31, 2000, 1999 and 1998 31 Notes to Consolidated Financial Statements - December 31, 2000, 1999 and 1998 32-48 FINANCIAL STATEMENT SCHEDULE: Schedule II - Valuation and Qualifying Accounts 54 Schedules other than those listed have been omitted since they are either not required, not applicable or the information is otherwise included. 24 Report of Independent Certified Public Accountants To the Board of Directors and Shareholders of ParkerVision, Inc. and Subsidiary: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ParkerVision, Inc. and its subsidiary at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Jacksonville, Florida March 14, 2001 25 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 2000 1999 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $31,371,904 $ 2,128,742 Short-term investments 7,947,120 17,530,436 Accounts receivable, net of allowance for doubtful accounts of $103,199 and $37,308 at December 31, 2000 and 1999, respectively 2,343,916 876,632 Inventories, net 3,993,009 3,922,916 Prepaid expenses and other 3,391,595 878,784 ----------- ----------- Total current assets 49,047,544 25,337,510 PROPERTY AND EQUIPMENT, net 7,522,645 3,284,755 OTHER ASSETS, net 7,037,705 4,149,153 ----------- ----------- Total assets $63,607,894 $32,771,418 =========== =========== The accompanying notes are an integral part of these balance sheets. 26 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999
2000 1999 ------------ ------------ CURRENT LIABILITIES: Accounts payable $ 893,406 $ 704,467 Accrued expenses: Salaries and wages 697,675 353,736 Warranty reserves 198,140 139,326 Sales tax payable 110,720 34,288 Other accrued expenses 564,735 537,146 Deferred revenue 983,044 835,988 ------------ ------------ Total current liabilities 3,447,720 2,604,951 DEFERRED INCOME TAXES 139,769 30,144 COMMITMENTS AND CONTINGENCIES (Notes 10 and 14) ------------ ------------ Total liabilities 3,587,489 2,635,095 ------------ ------------ SHAREHOLDERS' EQUITY: Convertible preferred stock, $1 par value, 5,000,000 shares authorized, 114,019 shares issued and outstanding at December 31, 2000 114,019 0 Common stock, $.01 par value, 100,000,000 shares authorized, 13,445,675 and 11,790,048 shares issued and outstanding at December 31, 2000 and 1999, respectively 134,457 117,900 Warrants outstanding 15,659,035 3,232,025 Additional paid-in capital 83,937,839 53,723,742 Accumulated other comprehensive loss (52,880) (187,052) Accumulated deficit (39,772,065) (26,750,292) ------------ ------------ Total shareholders' equity 60,020,405 30,136,323 ------------ ------------ Total liabilities and shareholders' equity $ 63,607,894 $ 32,771,418 ============ ============
The accompanying notes are an integral part of these balance sheets. 27 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998 ------------ ------------ ------------ Revenues, net $ 15,964,587 $ 10,549,081 $ 9,891,543 Cost of goods sold 8,489,877 6,940,440 6,430,517 ------------ ------------ ------------ Gross margin 7,474,710 3,608,641 3,461,026 ------------ ------------ ------------ Research and development expenses 12,601,496 6,202,937 3,825,414 Marketing and selling expenses 4,879,626 3,988,189 3,327,786 General and administrative expenses 4,961,082 4,383,785 2,489,959 Other expense 2,889 71,573 1,664 ------------ ------------ ------------ Total operating expenses 22,445,093 14,646,484 9,644,823 ------------ ------------ ------------ Loss from operations (14,970,383) (11,037,843) (6,183,797) Interest income 1,948,610 1,296,451 1,477,399 ------------ ------------ ------------ Net loss $(13,021,773) $ (9,741,392) $ (4,706,398) ============ ============ ============ Basic and diluted loss per common share $ (1.03) $ (0.83) $ (0.41) ============ ============ ============
The accompanying notes are an integral part of these statements. 28 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998 -------------------------------------------- CONVERTIBLE PREFERRED SHARES - BEGINNING OF YEAR 0 0 0 Issuance of preferred stock for purchase of STI assets 79,868 0 0 Issuance of preferred stock as employee compensation 34,151 0 0 -------------------------------------------- CONVERTIBLE PREFERRED SHARES - END OF YEAR 114,019 0 0 ============================================ PAR VALUE OF CONVERTIBLE PREFERRED SHARES - BEGINNING OF YEAR $ 0 $ 0 $ 0 Issuance of preferred stock for purchase of STI assets 79,868 0 0 Issuance of preferred stock as employee compensation 34,151 0 0 -------------------------------------------- PAR VALUE OF CONVERTIBLE PREFERRED SHARES - END OF YEAR $ 114,019 $ 0 $ 0 ============================================ COMMON SHARES - BEGINNING OF YEAR 11,790,048 11,718,678 11,337,707 Issuance of common stock upon exercise of options and warrants 504,565 71,370 142,875 Issuance of restricted common stock as employee compensation 92,112 0 0 Issuance of common stock in private offering 1,058,950 0 238,096 -------------------------------------------- COMMON SHARES - END OF YEAR 13,445,675 11,790,048 11,718,678 ============================================ PAR VALUE OF COMMON STOCK - BEGINNING OF YEAR $ 117,900 $ 117,187 $ 113,377 Issuance of common stock upon exercise of options and warrants 5,046 713 1,429 Issuance of restricted common stock as employee compensation 921 0 0 Issuance of common stock in private offering 10,590 0 2,381 -------------------------------------------- PAR VALUE OF COMMON STOCK - END OF YEAR $ 134,457 $ 117,900 $ 117,187 ============================================ WARRANTS OUTSTANDING - BEGINNING OF YEAR $ 3,232,025 $ 3,257,625 $ 3,385,758 Exercise of warrants (738,385) (25,600) (128,133) Issuance of warrants in connection with private offering 13,165,395 0 0 -------------------------------------------- WARRANTS OUTSTANDING - END OF YEAR $ 15,659,035 $ 3,232,025 $ 3,257,625 ============================================
The accompanying notes are an integral part of these statements. 29 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998 -------------------------------------------- ADDITIONAL PAID-IN CAPITAL - BEGINNING OF YEAR $ 53,723,742 $ 52,543,817 $ 46,330,279 Issuance of common stock upon exercise of options and warrants 7,723,866 954,676 659,184 Issuance of restricted common stock as employee compensation 2,853,139 0 0 Issuance of common stock in private offering 16,787,015 0 4,981,319 Issuance of preferred stock for purchase of STI assets 1,916,832 0 0 Issuance of preferred stock as employee compensation 819,624 0 0 Issuance of options for business consulting services 0 0 573,035 Amortization of deferred compensation 113,621 225,249 0 -------------------------------------------- ADDITIONAL PAID-IN CAPITAL - END OF YEAR $ 83,937,839 $ 53,723,742 $ 52,543,817 ============================================ ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - BEGINNING OF YEAR $ (187,052) $ 72,241 $ 0 Change in unrealized gain (loss) on investments 134,172 (259,293) 72,241 -------------------------------------------- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - END OF YEAR $ (52,880) $ (187,052) $ 72,241 ============================================ ACCUMULATED DEFICIT - BEGINNING OF YEAR $(26,750,292) $(17,008,900) $(12,302,502) Net loss (13,021,773) (9,741,392) (4,706,398) -------------------------------------------- ACCUMULATED DEFICIT - END OF YEAR $(39,772,065) $(26,750,292) $(17,008,900) ============================================ TOTAL SHAREHOLDERS' EQUITY - BEGINNING OF YEAR $ 30,136,323 $ 38,981,970 $ 37,526,912 Issuance of common stock upon exercise of options and warrants 6,990,526 929,789 532,480 Issuance of restricted common stock as employee compensation 2,854,060 0 0 Issuance of common stock in private offering 29,963,001 0 4,983,700 Issuance of preferred stock for purchase of STI assets 1,996,700 0 0 Issuance of preferred stock as employee compensation 853,775 0 0 Issuance of options for business consulting services 0 0 573,035 Amortization of deferred compensation 113,621 225,249 0 Comprehensive loss (12,887,601) (10,000,685) (4,634,157) -------------------------------------------- TOTAL SHAREHOLDERS' EQUITY - END OF YEAR $ 60,020,405 $ 30,136,323 $ 38,981,970 ============================================
The accompanying notes are an integral part of these statements. 30 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(13,021,773) $ (9,741,392) $ (4,706,398) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,002,896 1,573,932 1,064,572 Amortization of discounts on investments (282,512) (41,961) (194,792) Provision for obsolete inventories 320,000 240,000 210,000 Stock compensation 1,299,101 0 0 Loss on sale of equipment 2,889 71,416 0 Changes in operating assets and liabilities: Accounts receivable, net (1,467,284) (70,752) (144,933) Inventories (390,093) (925,349) (477,480) Prepaid and other expenses (163,545) (16,705) 333,374 Accounts payable and accrued expenses 1,256,055 552,418 84,076 Deferred revenue 147,056 802,584 12,431 ------------ ------------ ------------ Total adjustments 2,724,563 2,185,583 887,248 ------------ ------------ ------------ Net cash used in operating activities (10,297,210) (7,555,809) (3,819,150) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments available for sale 0 (5,740,892) 0 Purchase of investments held to maturity 0 (3,929,482) (8,000,000) Proceeds from maturity of investments 10,000,000 11,000,000 17,500,000 Purchase of property and equipment (5,115,619) (1,489,267) (962,003) Payment for patent costs (2,297,536) (1,655,032) (1,798,785) ------------ ------------ ------------ Net cash provided by (used in) investing activities 2,586,845 (1,814,673) 6,739,212 ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 36,953,527 929,789 5,516,180 ------------ ------------ ------------ Net cash provided by financing activities 36,953,527 929,789 5,516,180 ------------ ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 29,243,162 (8,440,693) 8,436,242 CASH AND CASH EQUIVALENTS, beginning of year 2,128,742 10,569,435 2,133,193 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, end of year $ 31,371,904 $ 2,128,742 $ 10,569,435 ============ ============ ============
The accompanying notes are an integral part of these statements. 31 PARKERVISION, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000, 1999 AND 1998 1. THE COMPANY AND NATURE OF BUSINESS: ----------------------------------- ParkerVision, Inc. (the "Company") was incorporated under the laws of the state of Florida on August 22, 1989. The Company's operations are categorized into two operating segments -- the Video Products Division ("Video Division") and the Wireless Technology Division ("Wireless Division"). The Company operates in highly competitive industries with rapidly changing and evolving technologies and an increasing number of market entrants. The Company's potential competitors have substantially greater financial, technical and other resources than those of the Company. The Company has made significant investments in developing the technology and manufacturing capability for its products, the returns on which are dependent upon the generation of future revenues for realization. The Company has not yet generated sufficient revenues to offset its expenses and, thus, has utilized proceeds from the sale of equity securities to fund its operations. In the opinion of management, the Company has adequate funds to meet its liquidity needs for 2001. The Company also believes it will be able to generate increased revenues and additional capital, if necessary, to sustain its operations on a longer-term basis. The Company has no current arrangement with respect to additional financing. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------- BASIS OF CONSOLIDATION. Effective October 2, 2000, the Company formed a wholly owned subsidiary, D2D, LLC. The consolidated financial statements include the accounts of ParkerVision, Inc. and its subsidiary, after elimination of all intercompany transactions and accounts. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The more significant estimates made by management include the allowance for doubtful accounts receivable, inventory reserves for potential excess or obsolete inventory, the amortization period for intangible assets, and warranty reserves. Actual results could differ from the estimates made. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. 32 CASH AND CASH EQUIVALENTS For purposes of reporting cash flows, the Company considers cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and U.S. Treasury money market investments with original maturities when purchased of three months or less. INVESTMENTS Investments consist of funds invested in U.S. Treasury notes, U.S. Treasury bills and mortgage- backed securities guaranteed by the U.S. government. The Company accounts for investment securities under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investments and mortgage-backed securities are classified in the following categories: Held to maturity - Securities that management has the intent and the Company has the ability at the time of purchase to hold until maturity are classified as securities held to maturity. Securities in this category are carried at amortized cost adjusted for accretion of discounts and amortization of premiums using the effective interest method over the estimated life of the securities. If a security has a decline in fair value below its amortized cost that is other than temporary, then the security will be written down to its new cost basis by recording a loss in the statement of income. Available for sale - Securities to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale. Securities available for sale are recorded at fair value. Both unrealized holding gains and losses on securities available for sale, net of deferred income taxes, are included as a separate component of shareholder's equity in the consolidated balance sheet until these gains or losses are realized. If a security has a decline in fair value that is other than temporary, then the security will be written down to its fair value by recording a loss in the consolidated statement of income. INVENTORIES Inventories are stated at the lower of cost (as determined under the first-in, first-out method) or market (net realizable value). Cost includes the acquisition of purchased materials, labor and overhead. Purchased materials inventory consists principally of components and subassemblies. The Company's investment in inventory is maintained to meet anticipated future demand for its product and the buildup of safety stock on single-source or long lead-time components. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the following estimated useful lives: Manufacturing and office equipment 5-7 years Tools and dies 5-7 years Leasehold improvements 7-10 years Aircraft 20 years Vehicles 5 years Furniture and fixtures 7 years 33 The cost and accumulated depreciation of assets sold or retired are removed from their respective accounts, and any resulting gain or loss is recognized in the accompanying consolidated statements of operations. OTHER ASSETS Included in other assets are patent costs, prepaid compensation, prepaid licensing fees, deposits and prepaid noncompete and other intangible assets. The Company has pursued an aggressive schedule for filing and acquiring patents related to its wireless technology. Patent costs represent legal and filing costs incurred to obtain patents and trademarks for product concepts and methodologies developed by the Company. The Company currently holds nineteen United States patents and seven foreign patents and has submitted multiple patent applications that are currently pending. Capitalized patent costs are being amortized over the estimated lives of the related patents, ranging from five to twenty years. Prepaid compensation represents compensation under employment agreements in connection with the acquisition of STI assets in 2000. This prepaid compensation is being amortized to expense over the term of the related employment agreements, or approximately three years. Prepaid licensing fees represent costs incurred to obtain licenses for use of certain technologies in future products. Prepaid licensing fees are being amortized over the estimated terms of the licensing agreements. Prepaid noncompete and other intangible assets represent intangible assets in connection with the acquisition of STI assets in 2000. These assets are being amortized over their estimated lives of two to three years. REVENUE RECOGNITION Product revenues, recorded net of discounts, are recognized at the time a product is shipped or services are performed and the Company has no significant further obligations to the customer. Customer prepayments are deferred until product shipment has occurred or services have been rendered and there are no significant further obligations to the customer. Revenue from multi-element support contracts is recognized ratably over the life of the agreement, generally one year. WARRANTY COSTS The Company generally warrants against defects in workmanship and material for one year. Estimated costs related to warranty are accrued at the time of revenue recognition and are included cost of sales. The Company offers extended service and support contacts on its camera and automated production systems. Service and support contract revenue is recognized ratably over the life of the agreement, generally one year. LOSS PER COMMON SHARE Basic loss per common share is determined based on the weighted-average number of common shares assumed to be outstanding during each year. Diluted loss per common share is the same as basic loss per common 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 years ended December 31, 2000, 1999, and 1998, was 12,688,275, 11,763,380 and 11,413,555, respectively. IMPAIRMENT OF LONG-LIVED ASSETS SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," requires that long-lived assets, including intangibles of an entity, be reviewed for impairment. If circumstances suggest that their values may be impaired, an assessment of 34 recoverability is performed prior to any write-down of the asset. In performing the review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment write-down to fair value (representing the carrying amount that exceeds the discounted expected future cash flows) would be recorded as a period expense. As of December 31, 2000, the Company does not believe any such assets are impaired. COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive income and its components. The Company's other comprehensive income (loss) is comprised of unrealized gains (losses) on investments available-for-sale which are included in accumulated other comprehensive income in the consolidated statements of shareholders' equity. STATEMENTS OF CASH FLOWS The Company paid no interest during 1998, 1999 or 2000. In March 2000, the Company issued Preferred Stock for the acquisition of substantially all of the assets of STI, valued at $1,996,700 (see Note 15). In addition, the Company issued Preferred Stock and restricted common stock under its 1993 Stock Plan ("1993 Plan") as signing bonuses and prepaid compensation totaling approximately $3,600,000. In 1999, the Company amortized deferred compensation related to options issued in 1998 by approximately $225,000. In 1998, the Company issued an aggregate of 90,000 options, valued at approximately $901,000 for professional services and recorded the forfeiture of 40,000 options valued at approximately $328,000. RECLASSIFICATIONS Certain reclassifications have been made to the 1999 and 1998 consolidated financial statements in order to conform to the 2000 presentation. 3. INVESTMENTS: ------------ At December 31, 2000 and 1999, short-term investments included investments with maturity dates of less than one year classified as held-to-maturity reported at their amortized cost of $0 and $3,976,596, respectively. At December 31, 2000 and 1999, short-term investments included investments with maturity dates from one to two years classified as available-for-sale reported at their fair value based on quoted market prices of $7,947,120 and $13,553,840, respectively. For the years ended December 31, 2000, 1999 and 1998, unrealized gains (losses) of $134,172, $(259,293), and $72,241 were recognized. 35 4. INVENTORIES: ------------ Inventories consist of the following at December 31, 2000 and 1999: 2000 1999 ----------- ----------- Purchased materials $ 2,970,724 $ 2,328,805 Work in process 161,447 95,253 Finished goods 486,525 1,105,209 Demonstration inventory 1,142,598 897,461 ----------- ----------- 4,761,294 4,426,728 Less allowance for inventory obsolescence (768,285) (503,812) ----------- ----------- $ 3,993,009 $ 3,922,916 =========== =========== 5. PREPAID EXPENSES AND OTHER -------------------------- Prepaid expenses and other consist of the following at December 31, 2000 and 1999: 2000 1999 ---------- ---------- Prepaid insurance $ 922,174 $ 393,947 Prepaid compensation 1,333,074 0 Prepaid rent 150,059 8,802 Other prepaid expenses 815,282 434,761 Current deferred tax asset 139,769 30,144 Interest and other receivables 31,237 11,130 ---------- ---------- $3,391,595 $ 878,784 ========== ========== 6. PROPERTY AND EQUIPMENT, NET: ---------------------------- Property and equipment, at cost, consist of the following at December 31, 2000 and 1999: 2000 1999 ------------ ------------ Manufacturing and office equipment $ 9,693,835 $ 5,820,656 Tools and dies 809,432 792,688 Leasehold improvements 651,075 473,301 Aircraft and vehicles 818,684 0 Furniture and fixtures 486,493 213,441 ------------ ------------ 12,459,519 7,300,086 Less accumulated depreciation (4,936,874) (4,015,331) ------------ ------------ $ 7,522,645 $ 3,284,755 ============ ============ 36 Depreciation expense related to property and equipment was $1,364,801, $893,431 and $742,791, in 2000, 1999 and 1998, respectively. 7. OTHER ASSETS ------------ Other assets consist of the following at December 31, 2000 and 1999: 2000 1999 ----------- ----------- Patents and copyrights $ 5,803,185 $ 3,777,749 Prepaid compensation 2,327,677 0 Noncompete agreement 300,000 0 Other intangible assets 364,830 0 Prepaid licensing fees 0 700,000 Deposits and other 248,661 9,598 ----------- ----------- 9,044,353 4,487,347 Less accumulated amortization (2,006,648) (338,194) ----------- ----------- $ 7,037,705 $ 4,149,153 =========== =========== Amortization of patents and copyrights, noncompete and other intangibles was $638,095, $164,959, and $49,194 in 2000, 1999 and 1998, respectively. Prepaid license fees totaling $673,661 were written off in 2000. 8. INCOME TAXES AND TAX STATUS: ---------------------------- The Company accounts for income taxes in accordance with SFAS No.109, "Accounting for Income Taxes." A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 34% for the years ended December 31, 2000, 1999 and 1998 is as follows: 2000 1999 1998 ----------- ----------- ----------- Tax benefit at statutory rate $(4,427,403) $(3,312,073) $(1,600,175) State tax benefit (472,690) (353,613) (235,320) Increase in valuation allowance 5,640,588 3,942,379 2,522,765 Research and development credit (784,970) (386,877) (681,798) Other 44,475 110,184 (5,472) ----------- ----------- ----------- $ 0 $ 0 $ 0 =========== =========== =========== The Company's deferred tax assets and liabilities relate to the following sources and differences between financial accounting and the tax bases of the Company's assets and liabilities at December 31, 2000 and 1999: 37
2000 1999 ------------ ------------ Current deferred taxes: Current gross deferred tax assets: Deferred revenue $ 291,821 $ 259,575 Inventory obsolescence reserve 288,107 188,930 Inventory capitalization 96,588 121,648 Warranty reserve 74,302 52,247 Vacation accrual 101,763 55,202 Allowance for doubtful accounts 38,700 13,991 ------------ ------------ 891,281 691,593 Less valuation allowance (751,512) (661,449) ------------ ------------ Current net deferred tax assets $ 139,769 $ 30,144 ============ ============ Noncurrent deferred taxes: Noncurrent gross deferred tax assets: Net operating loss carryforward $ 17,353,311 $ 9,872,395 Research and development credit carryforward 2,787,636 1,526,066 Patent amortization and other 213,968 464,005 ------------ ------------ 20,354,915 11,862,466 Less valuation allowance (18,481,475) (11,421,062) ------------ ------------ Noncurrent net deferred tax assets 1,873,440 441,404 ------------ ------------ Noncurrent gross deferred tax liabilities: Warrant exercise (1,418,016) (294,146) Depreciation and other (595,193) (177,402) ------------ ------------ Noncurrent deferred tax liabilities (2,013,209) (471,548) ------------ ------------ Noncurrent net deferred tax liabilities $ (139,769) $ (30,144) ============ ============
The Company has recorded a valuation allowance to state its deferred tax assets at estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income. The valuation allowance for deferred tax assets as of December 31, 2000 and 1999 was $19,232,987 and $12,082,511, respectively. At December 31, 2000, the Company had net operating loss and research and development carryforwards for income tax purposes of approximately $45,275,000 and $2,788,000, respectively, which expire beginning in 2008. The Company's ability to benefit from the net operating loss and research and development carryforwards could be limited under certain provisions of the Internal Revenue Code if ownership of the Company changes by more than 50%, as defined. 38 9. WARRANTY COSTS -------------- For the years ended December 31, 2000, 1999 and 1998, warranty expenses were approximately $147,000, $110,000 and $95,000, respectively 10. COMMITMENTS AND CONTINGENCIES ----------------------------- LEASE COMMITMENTS The Company's executive offices and Video Division operations are located in Jacksonville, Florida, pursuant to a noncancelable lease agreement (see Note 11). The initial lease term expired in February 1997, and the Company exercised its first of three five-year renewal options. The lease is on a triple net basis and currently provides for a monthly base rental payment of $24,288 through February 2002. In November 1999, the Company entered into a lease arrangement for additional office space in Jacksonville, Florida under a noncancelable lease agreement. The initial lease term expired in May 2000 and the Company exercised its one-year renewal option. The lease currently provides for a monthly base rental payment of approximately $9,300 through May 2001. In 2000, the Company entered into a lease agreement for office space in Lake Mary, Florida for the Wireless Division's Orlando engineering personnel. The lease term commenced in September 2000 and currently provides for a monthly base rental payment of approximately $19,500 through December 2005. The Company entered into a lease agreement for additional office space in the same facility in November 2000 for the Wireless Division's Orlando business development personnel. The lease term provides for a monthly base rental payment of approximately $6,500 through November 2005. Also in 2000, the Company entered into a lease agreement for office space in Pleasanton, California for the Wireless Division's West Coast engineering and business development personnel. The lease term commenced in March 2000 and provides for a monthly base rental payment of approximately $13,700 through March 2005. The Company leases a demonstration and training facility in Los Angeles, California pursuant to a noncancelable lease agreement. The lease provides for a monthly rental payment of approximately $1,600 per month through May 2002. In addition to sales tax payable on base rental amounts, certain leases obligate the Company to pay property taxes, maintenance and repair costs. Rent expense for the years ended December 31, 2000, 1999 and 1998 was $663,293, $342,973 and $325,218, respectively. Future minimum lease payments under all noncancelable operating leases as of December 31, 2000 were as follows: 2001 $ 846,000 2002 528,000 2003 475,000 2004 475,000 2005 268,000 ---------- $2,592,000 ========== 39 PURCHASE COMMITMENTS At December 31, 2000, the Company has commitments to purchase materials aggregating approximately $579,000 through 2001 from seven suppliers. One of these suppliers is a single-source supplier of the Company's camera modules and accounted for approximately 20%, 26% and 18% of the Company's component purchases for the years ended December 31, 2000, 1999 and 1998, respectively. No other supplier accounted for more than 10% of the Company's component purchases in 2000, 1999 or 1998. 11. RELATED-PARTY TRANSACTIONS: --------------------------- The Company leases its manufacturing and headquarters office facilities from the Chairman and Chief Executive Officer of the Company and his mother. The lease's current terms obligate the Company through February 28, 2002 at a monthly base rental payment of $24,288. 12. CONCENTRATIONS OF CREDIT RISK ----------------------------- Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents and trade receivables. At December 31, 2000, the Company had cash balances on deposit with banks that exceeded the balance insured by the F.D.I.C. The Company maintains its cash investments with what management believes to be quality financial institutions and limits the amount of credit exposure to any one institution. One customer, Vtel Corporation ("VTEL") accounted for approximately 16%, 29% and 35% of the Company's total revenues in 2000, 1999 and 1998, respectively. The Ackerley Group, a broadcast ownership group, accounted for approximately 30% of the Company's revenues in 2000. No other customer accounted for more that 10% of the Company's revenues in 2000, 1999 or 1998. The Ackerley Group accounted for approximately 56% of accounts receivable at December 31, 2000. The Company closely monitors extensions of credit and has never experienced significant credit losses. 13. BUSINESS SEGMENT INFORMATION ---------------------------- The Company operates in two reportable segments, each of which is a strategic business that is managed separately because each business develops and commercializes distinct products and technologies. The segments are the Video Division and Wireless Division. The Video Division is engaged in the design, development and marketing of CameraMan(R) automated video camera control systems and PVTV Studio(R) automated production systems. The Company sells its video products and education-based automated production systems primarily through audiovisual dealers and other equipment manufacturers throughout the United States as well as in Canada, Latin America and Asia. The Company also engages in direct selling of its high-end automated production systems. The Company's Wireless Division is engaged in the development and initial commercialization of its 40 Direct2Data(TM), or D2D(TM), technology. This technology is a wireless radio frequency ("RF") technology that the Company believes will reduce cost, size, and power consumption while improving performance of wireless devices such as cellular telephones and wireless local area networks ("WLAN"), among others. The Company's Wireless Division is in the early stages of commercialization and has not generated any revenues to date. Management primarily evaluates the operating performance of its segments based on net sales and income from operations. The accounting policies of the segments are substantially the same as those described in the summary of significant accounting polices discussed in Note 2. Prior to 1999, the Company 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 redefined its reportable segments effective July 1, 1999. Segment information for 1998 is restated to reflect the revised segments. Segment results are as follows (in thousands): 2000 1999 1998 -------- -------- -------- NET SALES: Video Division $ 15,965 $ 10,549 $ 9,892 Wireless Division 0 0 0 -------- -------- -------- Total net sales $ 15,965 $ 10,549 $ 9,892 ======== ======== ======== LOSS FROM OPERATIONS: Video Division $ 99 $ (3,384) $ (2,941) Wireless Division (15,047) (7,653) (3,242) Other (a) 1,926 1,296 1,477 -------- -------- -------- Total net loss $(13,022) $ (9,741) $ (4,706) ======== ======== ======== DEPRECIATION: Video Division $ 545 $ 539 $ 510 Wireless Division 820 354 233 -------- -------- -------- Total depreciation $ 1,365 $ 893 $ 743 ======== ======== ======== AMORTIZATION OF INTANGIBLES AND OTHER ASSETS: Video Division $ 70 $ 183 $ 85 Wireless Division 568 498 133 -------- -------- -------- Total amortization $ 638 $ 681 $ 218 ======== ======== ======== CAPITAL EXPENDITURES: Video Division $ 309 $ 616 $ 422 Wireless Division 4,621 695 380 Other (b) 186 178 160 -------- -------- -------- Total capital expenditures $ 5,116 $ 1,489 $ 962 ======== ======== ======== 41 ASSETS: 2000 1999 1998 -------- -------- -------- Video Division $ 8,208 $ 7,345 $ 6,385 Wireless Division 14,302 4,610 2,753 Other (c) 41,074 20,816 31,112 -------- -------- -------- Total assets $ 63,584 $ 32,771 $ 40,250 ======== ======== ======== (a) Other primarily represents interest income from investments. (b) Other represents corporate improvements, furniture and equipment. (c) Other includes the following corporate assets (in thousands): December 31, December 31, 2000 1999 ------------ ------------ Cash and investments $39,319 $19,659 Interest and other receivables 20 11 Prepaid expenses 1,023 466 Property and equipment, net 680 670 Other assets 32 10 ------------ ------------ Total $41,074 $20,816 ============ ============ 14. STOCK OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION PLANS: ----------------------------------------------------------- 1993 STOCK PLAN The Company adopted a stock plan in September 1993 (the "1993 Plan"). The 1993 Plan, as amended, provides for the grant of options and other Company stock awards to employees, directors and consultants, not to exceed 3,500,000 shares of common stock. The plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, bargain purchases of common stock, bonuses of common stock and various stock benefits or cash. Options granted to employees and consultants under the 1993 Plan generally vest for periods up to ten years and are exercisable for a period of five years from the date the options become vested. Options granted to directors under the 1993 Plan are generally exercisable immediately and expire ten years from the date of grant. Options to purchase 139,768 shares of common stock were available for future grants under the 1993 Plan at December 31, 2000. 2000 PERFORMANCE EQUITY PLAN The Company adopted a performance equity plan in July 2000 (the "2000 Plan"). The 2000 Plan provides for the grant of options and other Company stock awards to employees, directors and consultants, not to exceed 5,000,000 shares of common stock. The plan provides for benefits in the form of incentive stock options, nonqualified stock options, and stock appreciation rights, restricted share awards, stock bonuses and various stock benefits or cash. Options granted to employees and consultants under the 2000 Plan generally vest for periods up to five years and are exercisable for a period of five years from the date the options become vested. Options granted to directors under the 42 2000 Plan are generally exercisable immediately and expire ten years from the date of grant. Options to purchase 3,921,600 shares of common stock were available for future grants under the 2000 Plan at December 31, 2000. The following table summarizes option activity in aggregate under the 1993 and 2000 Plans for each of the years ended December 31:
2000 1999 1998 ------------------- ------------------- ------------------- Wtd. Wtd. Wtd. Avg. Ex. Avg. Ex. Avg. Ex. Shares Price Shares Price Shares Price ------------------- ------------------- ------------------- Outstanding at beginning of year 2,284,030 $17.41 1,937,530 $16.06 1,187,200 $13.46 Granted 2,447,900 35.49 414,100 23.25 902,640 19.31 Exercised (206,065) 19.17 (61,370) 13.52 (8,350) 6.26 Forfeited (512,430) 25.83 (6,230) 21.55 (143,960) 15.63 ------------------- ------------------- ------------------- Outstanding at end of year 4,013,435 $27.28 2,284,030 $17.41 1,937,530 $16.06 =================== =================== =================== Exercisable at end of year 1,450,958 $24.42 812,020 $14.99 668,460 $14.11 =================== =================== =================== Weighted average fair value of options granted $24.01 $14.51 $12.37 ======= ======= =======
The options outstanding at December 31, 2000 under the 1993 and 2000 Plans have exercise price ranges and weighted average contractual lives as follows:
Options Outstanding Options Exercisable ---------------------------------------------------- -------------------------------- Number Wtd.Avg. Number Range of Outstanding at Remaining Wtd. Avg. Exercisable Wtd. Avg. Exercise December Contractual Exercise at December Exercise Prices 31, 2000 Life Price 31, 2000 Price - --------------- ---------------- --------------- ------------- --------------- ------------- $5.00-$6.625 24,900 3.5 years $ 5.97 24,900 $ 5.97 $7.875-$10.50 100,000 3 years $ 7.88 100,000 $ 7.88 $11.875-$15.625 910,500 8 years $14.21 473,600 $15.57 $18.75-$28.125 1,428,195 9 years $22.93 364,438 $20.71 $28.25-$41.875 1,178,340 9 years $36.51 458,020 $40.71 $44.00-$61.50 371,500 11.5 years $53.41 30,000 $61.50 --------- --------- 4,013,435 1,450,958 ========= =========
43 Included in option grants under the 1993 Plan are 50,000 option shares granted in 1998 to outside patent counsel for patent and other legal services. These options were granted at an exercise price of $18.75 per share and vest ratably over three years. The estimated fair value of these options at the date of grant was approximately $10.62 per share or $532,000 based on a Black-Scholes option-pricing model. In November 1999, the Company accelerated vesting for these options and all remaining options are fully exercisable. The estimated fair value of these options was measured as of the date of acceleration using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 4.50%, no expected dividend yield, expected life of four years and expected volatility of 60%. This measurement date resulted in an increase in the fair value estimate of approximately $145,000. The estimated fair value of these options was amortized to expense in 1998 and 1999. Also included in options granted under the 1993 Plan are 50,000 options granted in 1997 to outside counsel under a five year consulting agreement. These options were granted at an exercise price of $15.125 per share and vested ratably over five years. In 1998, the consulting agreement was cancelled, and 40,000 unvested options were forfeited. The estimated fair value of the vested portion of the option is approximately $8.20 per share or $82,000, which was amortized to expense in 1998. The fair value of this option was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 6.63%, no expected dividend yield, expected life of 7 years and expected volatility of 40%. NON-PLAN OPTIONS/WARRANTS The Company has granted options and warrants outside the 1993 and 2000 Plans for employment inducements, non-employee consulting services, and for underwriting and other services in connection with stock offerings. Non-plan options and warrants are generally granted with exercise prices equal to fair market value at the date of grant. The following table summarizes activity related to non-plan options and warrants for each of the years ended December 31:
2000 1999 1998 ------------------- ------------------- ------------------- Wtd. Wtd. Wtd. Avg. Ex. Avg. Ex. Avg. Ex. Shares Price Shares Price Shares Price ------------------- ------------------- ------------------- Outstanding at beginning of year 1,761,625 $21.03 1,146,625 $16.78 680,000 $12.94 Granted 1,058,950 45.23 625,000 28.65 516,625 21.17 Exercised (298,500) 10.44 (10,000) 10.00 (50,000) 10.00 Forfeited (400,000) 30.00 0 0 ------------------- -------------------- ------------------- Outstanding end of year 2,122,075 $32.91 1,761,625 $21.03 1,146,625 $12.94 =================== ==================== =================== Exercisable at end of year 677,547 $13.97 750,650 $14.575 665,325 $12.94 =================== ==================== =================== Weighted average fair value of options granted $12.43 $20.20 $14.11 ======= ======= =======
44 The non-plan options and warrants outstanding at December 31, 2000 have exercise price ranges and weighted-average contractual lives as follows:
Options/Warrants Outstanding Options/Warrants Exercisable ---------------------------------------------------- -------------------------------- Number Wtd.Avg. Number Range of Outstanding at Remaining Wtd. Avg. Exercisable Wtd. Avg. Exercise December Contractual Exercise at December Exercise Prices 31, 2000 Life Price 31, 2000 Price - --------------- ---------------- --------------- ------------- --------------- ------------- $5.00 50,000 3 years $ 5.00 50,000 $ 5.00 $10.00 101,500 0.5 years $10.00 101,500 $10.00 $15.125-$22.50 696,625 5.5 years $21.51 401,047 $21.62 $23.25-$30.00 391,492 8 years $27.26 125,000 $28.65 $35.41-$37.68 352,983 11.5 years $36.55 0 $56.66 529,475 11.5 years $56.66 0 --------- ------- 2,122,075 677,547 ========= =======
Included in non-plan options and warrants are 1,058,950 warrants issued in connection with the May 2000 sale of equity securities to Tyco International and Leucadia National (see Note 16). These warrants vest from November 2001 to May 2002 at exercise prices ranging from $28.33 to $56.66 per share and expire ten years from the date they first become vested. The warrants have an estimated fair market value of $12.43 per share, or $13,165,395. The fair value was estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 6.5%, no expected dividend yield, expected lives of four to five years and expected volatility of 60%. Also included in non-plan options and warrants are 25,000 option shares granted in 1998 to outside patent counsel for patent and other legal services. These options were granted at an exercise price of $18.75 per share and vest ratably over three years. The estimated fair value of these options at the date of grant was approximately $10.62 per share or $265,000 based on a Black-Scholes option-pricing model. In November 1999, the Company accelerated vesting for these options and all remaining options are fully exercisable. The estimated fair value of these options was measured as of the date of acceleration using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 4.50%, no expected dividend yield, expected life of four years and expected volatility of 60%. This measurement date resulted in an increase in the fair value estimate of approximately $72,000. The estimated fair value of these options was amortized to expense in 1998 and 1999. Also included in non-plan options and warrants is an option to purchase 15,000 shares of the Company's common stock granted in November 1998 to an outside consultant in exchange for administrative services rendered. This option has an exercise price of $18.75 per share, is fully exercisable and expires five years from the date of grant. The estimated fair value of this option is approximately $6.95 per share or approximately $104,250, which has been expensed in the accompanying consolidated statement of operations in 1998. The fair value is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 4.70%, no expected dividend yield, expected life of two years and expected volatility of 62%. 45 Also included in non-plan options and warrants are 200,000 warrants granted in 1996 to Whale Securities Co., L.P. ("Whale") and its designees under a five year financial consulting and advisory agreement. These warrants were granted with an exercise price of $10.00 per share, are fully exercisable and expire five years from the date of grant. The estimated fair value of the warrants at the date of grant was $2.56 per share, or $512,000. The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 6.34%, no expected dividend yield, expected life of two years and expected volatility of 40%. The fair value of these warrants was included in other assets and amortized to expense over the term of the consulting agreement. In 1999, the Company ceased utilizing services under the agreement, and expensed the remaining unamortized portion of the fair value related to these warrants in the accompanying consolidated statement of operations. COMPENSATION COSTS The Company's employee stock options are accounted for under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for this plan been determined consistent with SFAS No.123, the Company's net loss and net loss per share would have been increased to the following pro forma amounts:
2000 1999 1998 ------------- ------------ ------------ Net Loss: As Reported $(13,021,773) $(9,741,392) $(4,706,398) Pro Forma (37,326,143) (13,772,578) (9,010,611) Basic Net Loss Per Share: As Reported $(1.03) $(0.83) $(0.41) Pro Forma (2.94) (1.17) (0.79)
The fair value of each employee option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2000, 1999 and 1998: 2000 1999 1998 ------------- ------------- -------------- Expected volatility 59%-69% 57%-60% 62% Risk free interest rate 5.56%-6.78% 5.31%-6.08% 4.70% to 5.98% Expected life 1-15 years 4-11 years 2-11 years Dividend yield -- -- -- 15. ACQUISITION ----------- On March 10, 2000, the Company completed the acquisition of substantially all the assets of Signal Technologies, Inc. ("STI"), a Florida subchapter S corporation specializing in radio-frequency design services. The purchase price of approximately $1,997,000 was fully paid in the Company's newly issued Series D Preferred Stock (see note 16). The acquisition was accounted for as a purchase under 46 Accounting Principles Board Opinion No. 16 (APB 16). In accordance with APB 16, a portion of the purchase price has been allocated to assets acquired based on the fair value at the date of the acquisition, while the balance of approximately $365,000 was recorded as goodwill and is being amortized over five years on a straight line basis. The operating results of the acquired business have been included in the Consolidated Statement of Operations from the date of acquisition. Unaudited pro forma consolidated results of operations have not been presented as if the acquisition of STI had been made at the beginning of the periods presented. The effect of the acquisition on the consolidated financial statements for 2000 and 1999 is not significant and would not have been materially different from the reported amounts for 2000 and 1999. 16. STOCK AUTHORIZATION AND ISSUANCE: --------------------------------- PREFERRED STOCK In March 2000, the Company issued 78,868 shares of Series D Preferred Stock, $1 par value, $25 stated value, for the acquisition of substantially all of the assets of Signal Technologies, Inc. ("STI"). The Company also issued an aggregate of 34,151 shares of Series A, B, and C Preferred Stock, $1 par value, $25 stated value as signing bonuses and compensation under employment contracts for certain employees of STI. The Series D Preferred Stock is convertible at the holder's option at any time on or after March 10, 2001 and shall automatically convert on March 10, 2002. The Series A, B and C Preferred Stock is automatically converted to common stock as follows: # of Preferred Shares Conversion Date --------------------------------------- Series A 6,795 March 10, 2001 Series B 13,678 March 10, 2002 Series C 13,678 March 10, 2003 The Series A, B, and C Preferred Stock is cancelable prior to the conversion date if the employment of the holder of the preferred shares is terminated for cause or due to death, or in the event that a minimum number of defined key employees are no longer employed by the Company. The conversion rate for Series A, B, C and D Preferred Stock is determined by dividing the stated value of the preferred stock by the market value of the common stock determined based on the average closing bid price of the common stock for five consecutive trading days immediately prior to the conversion date. Holders of the convertible preferred stock are not entitled to dividends and have no voting rights, except as required by applicable law. The convertible preferred stock is senior to the common stock with respect to liquidation events. 47 COMMON STOCK In May 2000, the Company issued an aggregate of 1,058,950 shares of its common stock to Tyco International, Inc. and Leucadia National in a private placement transaction. The shares, which constituted approximately 8% of the Company's outstanding common stock on an after-issued basis, were sold at a price of $28.33 per share, for net proceeds of approximately $30,000,000. On December 1, 1998, the Company issued 238,096 shares of its common stock to Questar InfoComm, Inc. in a private placement transaction. The shares, which constituted approximately 2% of the Company's outstanding common stock on an after-issued basis, were sold at a price of $21.00 per share, for net proceeds of approximately $5,000,000. 17. SUBSEQUENT EVENT ---------------- On March 8, 2001, the Company issued an aggregate of 83,451 shares of its common stock to Texas Instruments, Inc. in a private placement transaction. The shares, which constituted less than 1% of the Company's outstanding common stock on an after-issued basis, were sold at a price of $29.96 per share, for net proceeds of approximately $2,500,000. In connection with this offering, the Company issued warrants for the purchase of 83,451 additional shares of its common stock at exercise prices ranging from $29.96 to $39.84 per share. 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On November 12, 1999, the Company selected PricewaterhouseCoopers LLP to replace Arthur Andersen LLP as its independent certified public accountants. The decision to change auditors was approved by the board of directors of the Company. Arthur Andersen LLP's report on the financial statements of the Company as of December 31, 1998 and for each of the two years in the period ended December 31, 1998 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the two years ended December 31, 1998, and the subsequent interim period, there were no disagreements with Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which disagreements, if not resolved to the satisfaction of Arthur Andersen LLP would have caused Arthur Andersen LLP to make reference to the subject matter of the disagreements in connection with their audit reports with respect to financial statements of the Company. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained under the captions "Election of Directors" in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, which will be filed with the Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, (the "2001 Proxy Statement"), is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information contained under the caption "Election of Directors - Executive Compensation" in the 2001 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained under the caption "Security Ownership of Certain Beneficial Owners" in the 2001 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the caption "Election of Directors - Certain Relationships and Related Transactions" in the 2001 Proxy Statement is incorporated herein by reference. 49 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit Number Description - -------- ---------------------------------------------------------------------- 3.1 Articles of Incorporation, as amended (incorporated by reference from Exhibit 3.1 of Registration Statement No. 33-70588-A) 3.2 Amendment to Amended Articles of Incorporation dated March 6, 2000 (incorporated by reference from Exhibit 3.2 of Annual Report on Form 10-K for the year ended December 31, 1999) 3.3 Bylaws, as amended (incorporated by reference from Exhibit 3.2 of Annual Report on Form 10-K for the year ended December 31, 1998) 3.4 Amendment to Certificate of Incorporation dated July 17, 2000 (incorporated by reference from Exhibit 3.1 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 4.1 Form of common stock certificate (incorporated by reference from Exhibit 4.1 of Registration Statement No. 33-70588-A) 4.2 Purchase option agreement dated September 5, 1997 between the Registrant and Financial Consultant (incorporated by reference from Exhibit 4.7 of Annual Report on Form 10-KSB for the period ended December 31, 1997) 4.3 Purchase Option between the Registrant and Tyco Sigma Ltd. dated May 22, 2000 (incorporated by reference from Exhibit 4.1 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 4.4 Purchase Option between the Registrant and Leucadia National Corporation dated May 22, 2000 (incorporated by reference from Exhibit 4.2 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 4.5 Purchase Option between the Registrant and David M. Cumming dated May 22, 2000 (incorporated by reference from Exhibit 4.3 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 4.6 Purchase Option between the Registrant and Peconic Fund Ltd. dated May 22, 2000 (incorporated by reference from Exhibit 4.4 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 50 4.7 Purchase Option between the Registrant and Texas Instruments, Inc.. dated March 8, 2001* 10.1 Lease dated March 1, 1992 between the Registrant and Jeffrey Parker and Barbara Parker for 8493 Baymeadows Way, Jacksonville, Florida (incorporated by reference from Exhibit 10.1 of Registration Statement No. 33-70588-A) 10.2 1993 Stock Plan, as amended (incorporated by reference from the Company's Proxy Statement dated October 1, 1996) 10.3 Stock option agreement dated October 11, 1993 between the Registrant and Jeffrey Parker (incorporated by reference from Exhibit 10.13 of Registration Statement No.33-70588-A) 10.4 Form of indemnification agreement between the Registrant and each of the directors and officers of the Registrant (incorporated by reference from Exhibit 10.15 of Registration Statement No.33-70588-A) 10.5 First amendment to lease dated March 1, 1992 between the Registrant and Jeffrey Parker and Barbara Parker for 8493 Baymeadows Way, Jacksonville, Florida (incorporated by reference from Exhibit 10.21 of Annual Report on Form 10-KSB for the year ended December 31, 1995) 10.6 Second amendment to lease dated March 1, 1992 between the Registrant and Jeffrey Parker and Barbara Parker for 8493 Baymeadows Way, Jacksonville, Florida (incorporated by reference from Exhibit 10.1 of Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 1996) 10.7 Third amendment to lease dated March 1, 1992 between the Registrant and Jeffrey Parker and Barbara Parker for 8493 Baymeadows Way, Jacksonville, Florida (incorporated by reference from Exhibit 10.19 of Annual Report on Form 10-KSB for the period ended December 31, 1996) 10.8 Employment agreement dated July 23, 1998 between the Registrant and Richard L. Sisisky (incorporated by reference from Exhibit 10.4 of Registration Statement No. 333- 62497) 10.9 Stock option agreement (vesting) dated July 23, 1998 between the Registrant and Richard L. Sisisky (incorporated by reference from Exhibit 10.4 of Registration Statement No. 333- 62497) 51 10.10 Stock option agreement (acceleration) dated July 23, 1998 between the Registrant and Richard L. Sisisky (incorporated by reference from Exhibit 10.4 of Registration Statement No. 333- 62497) 10.11 Asset Purchase Agreement dated March 2, 2000 between the Registrant and Signal Technologies, Inc., a Florida corporation (incorporated by reference from Exhibit 10.13 of Annual Report on Form 10-K for the period ended December 31, 1999) 10.12 License Agreement between the Registrant and Symbol Technologies, Inc., a Delaware corporation (incorporated by reference from Exhibit 10.19 of Annual Report on Form 10-K for the period ended December 31, 1999) 10.13 Subscription agreement between the Registrant and Tyco Sigma Ltd dated May 22, 2000 (incorporated by reference from Exhibit 10.1 of Quarterly Report on Form 10-Q for the period ended June 30, 2000) 10.14 Subscription agreement between the Registrant and Leucadia National Corporation dated May 22, 2000 (incorporated by reference from Exhibit 10.2 of Quarterly Report on Form 10-Q for the period ended June 30, 2000) 10.15 Transfer and registration rights agreement between the Registrant and Peconic Fund Ltd. dated May 22, 2000 (incorporated by reference from Exhibit 10.3 of Quarterly Report on Form 10-Q for the period ended June 30, 2000) 10.16 Subscription agreement between the Registrant and Texas Instruments, Inc.dated March 8, 2001* 22.1 Table of Subsidiaries* 23.1 Consent of PricewaterhouseCoopers LLP* 99.1 Risk Factors* * Filed herewith (b) REPORTS ON FORM 8-K None. 52 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PARKERVISION, INC. Date: March 30, 2001 By: /s/ Jeffrey L. Parker ---------------------- Jeffrey L. Parker Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date By: /s/ Jeffrey L. Parker Chief Executive Officer and Chairman March 30, 2001 ------------------------- of the Board (Principal Executive Officer) Jeffrey L. Parker By: /s/ Richard L. Sisisky President, Chief Operating Officer and March 30, 2001 ------------------------- Director Richard L. Sisisky By: /s/ David F. Sorrells Chief Technical Officer and Director March 30, 2001 ------------------------- David F. Sorrells By: /s/ Stacie Wilf Secretary, Treasurer and Director March 30, 2001 ------------------------- Stacie Wilf By: /s/ Cynthia L. Poehlman Chief Accounting Officer March 30, 2001 ------------------------- (Principal Accounting Officer) Cynthia L. Poehlman By: /s/ William A. Hightower Director March 30, 2001 ------------------------- William A. Hightower By: /s/ Richard Kashnow Director March 30, 2001 ------------------------- Richard Kashnow By: /s/ Amy L. Newmark Director March 30, 2001 ------------------------- Amy L. Newmark By: /s/ Todd Parker Director March 30, 2001 ------------------------- Todd Parker By: /s/ William L. Sammons Director March 30, 2001 ------------------------- William L. Sammons By: /s/ Oscar S. Schafer Director March 30, 2001 ------------------------- Oscar S. Schafer By: /s/ Robert G. Sterne Director March 30, 2001 ------------------------- Robert G. Sterne
53 PARKERVISION, INC. AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
Balance at Provision Balance at Valuation Allowance for Beginning Charged to End of Inventory Obsolescence of Period Expense Write-Offs Period - ------------------------------ ---------- --------- ---------- ---------- Year ended December 31, 1998 417,052 210,000 (219,706) 407,346 Year ended December 31, 1999 407,346 240,000 (143,534) 503,812 Year ended December 31, 2000 503,812 320,000 (55,527) 768,285 Balance at Balance at Valuation Allowance for Income Beginning End of Taxes of Period Provision Write-Offs Period - ------------------------------ ---------- --------- ---------- ---------- Year ended December 31, 1998 5,323,118 2,522,765 0 7,845,883 Year ended December 31, 1999 7,845,883 4,236,628 0 12,082,511 Year ended December 31, 2000 12,082,511 7,150,476 0 19,232,987
54 EXHIBIT INDEX 4.7 Purchase Option between the Registrant and Texas Instruments, Inc.. dated March 8, 2001 10.16 Subscription agreement between the Registrant and Texas Instruments, Inc. dated March 8, 2001 22.1 Table of Subsidiaries 23.1 Consent of PricewaterhouseCoopers LLP 99.1 Risk Factors 55
EX-4.7 2 ex47-301.txt PURCHASE OPTION 4.7 THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE OR JURISDICTION, OR, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT WITH RESPECT TO THE TRANSFER OF ALL THE SECURITIES REPRESENTED BY THIS PURCHASE OPTION TO AN AFFILIATE OF THE HOLDER WHERE THE BENEFICIAL OWNERSHIP OF SUCH SECURITIES BY THE HOLDER'S ULTIMATE PARENT HAS NOT CHANGED. THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED. PURCHASE OPTION FOR THE PURCHASE OF 83,451 SHARES OF COMMON STOCK OF PARKERVISION, INC. (A FLORIDA CORPORATION) 1. Purchase Option. --------------- THIS CERTIFIES THAT, in consideration of the purchase price paid by Texas Instruments Incorporated, a Delaware company ("Holder"), as registered owner of this Purchase Option, to ParkerVision, Inc. ("Company"), Holder is entitled, to purchase, in whole or in part, up to an aggregate of eighty three thousand four hundred fifty one (83,451) shares of Common Stock of the Company, $.01 par value ("Common Stock"), on the terms set forth herein. 2. Exercise. -------- 2.1 EXERCISE PERIOD AND EXERCISE PRICE. Pursuant to the terms of this Purchase Option, Holder will be entitled to purchase: 1 (i) up to 41,725 shares at a per share price of $29.96; (ii) up to 20,863 shares at a per share price of $37.45; and (iii) up to 20,863 shares at a per share price of $39.84. The right to purchase the shares of Common Stock under this Purchase Option shall commence on March 8, 2001 and shall expire on the 10th anniversary of such commencement date (the "Expiration Date"). If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Option may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. The per share exercise prices and the number of shares of Common Stock to be received upon such exercise, shall be adjusted as specified in Section 6 hereof, upon the occurrence of any of the events specified in such section. The term "Exercise Price" shall mean the initial exercise prices set forth in this Section 2.1 or the adjusted exercise prices, depending on the context, of a share of Common Stock. 2.2 EXERCISE FORM. In order to exercise this Purchase Option, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Option and payment of the Exercise Price in cash, by certified check or official bank check, or by wire for the Common Stock being purchased. If the subscription rights represented hereby shall not be exercised in whole or in part, at or before 5:00 p.m., Eastern time, on the Expiration Date this Purchase Option shall become and be void without further force or effect, and all rights represented hereby shall cease and expire as to the shares not purchased hereunder. 2.3 LEGEND. Each certificate for Common Stock purchased under this Purchase Option shall bear a legend as follows unless the sale by the Company to the Holder such Common Stock has been registered under the Securities Act of 1933, as amended ("Securities Act"): "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended ("Act") or applicable state law. The securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law." 3. Transfer. -------- 3.1 GENERAL RESTRICTIONS. The registered Holder of this Purchase Option, by its acceptance hereof, agrees that it will not sell, transfer or assign or hypothecate this Purchase Option, except in compliance with or exemptions from applicable securities laws and pursuant to the terms of this Purchase Option. In order to make any sale, transfer or assignment, the Holder must deliver to the Company (i) the assignment form attached hereto duly executed and completed, (ii) the Purchase Option, (iii) payment of all transfer taxes, if any, payable in connection therewith and (iv) unless the transfer of the Purchase Option is the subject of an effective registration statement that is current, an opinion of counsel for the Holder reasonably acceptable to the Company and its outside counsel that this Purchase Option may be transferred pursuant to an exemption from registration under the Act and applicable state law, the availability of which is established to the reasonable satisfaction of the Company and its independent counsel, except that an opinion of counsel shall not be required in respect of any 2 transfer of all the securities represented by this Purchase Option to an affiliate of the Holder where the beneficial ownership of such securities by the Holder's ultimate parent has not changed. After satisfaction of the requirements of this Section, the Company shall immediately transfer this Purchase Option on the books of the Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of shares of Common Stock purchasable hereunder or such portion of such number as shall be contemplated by any such assignment. 4. New Purchase Options to be Issued. --------------------------------- 4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax, the Company shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the aggregate number of shares of Common Stock purchasable hereunder as to which this Purchase Option has not been exercised or assigned. 4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory indemnification and bond, if required, the Company shall execute and deliver a new Purchase Option of like tenor and date. Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company. 5. Registration Rights. ------------------- 5.1 Registration Rights. ------------------- 5.1.1 REGISTRATION. The Company shall file a registration statement under the Securities Act ("Registration Statement") with the Securities and Exchange Commission registering for re-offer and re-sale the shares of Common Stock underlying this Purchase Option ("Registrable Securities"). The Registration Statement shall also register the shares sold by the Company on the date hereof to the original Holder of this Purchase Option. The Company agrees to have the Registration Statement declared effective by the last day of the sixth calendar month after the issuance of this Purchase Option ("Anniversary"). Once the Registration Statement is declared effective, the Company shall keep the Registration Statement effective and current until all the Registrable Securities registered thereunder are sold or may be sold freely in any 90 day period without registration under an appropriate exemption under the Securities Act. If the Registration Statement has not been declared effective by the Anniversary, or it is so declared effective but after the Anniversary becomes subject to a stop order or is not otherwise available for use by the Holder, then during such periods, the Holder may demand on no more than an aggregate of three separate occasions to have its Registrable Securities registered on a registration statement filed with the Securities and Exchange Commission or have such Registrable Securities included on any other applicable registration statement filed by the Company, which "demand" and "piggyback" registration rights will be subject to such reasonable terms as are ordinarily offered to investors purchasing similar securities to this Purchase Option acquired in a similar manner. The Holder agrees that it will not sell any of the Registrable Securities pursuant to the Registration Statement prior to the Anniversary, without the written consent of the Company, which consent may be withheld for any reason without explanation. 3 5.1.2 TERMS. The Company shall bear all of its fees and expenses attendant to registering the Registrable Securities, but the Holder shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holder to represent them in connection with the sale of the Registrable Securities. Promptly upon request, Company will provide to Holder such number of copies of the prospectus forming a part of the Registration Statement as are reasonably requested by the Holder, and all supplements to such prospectus. Company will promptly notify Holder at any time that the Registration Statement or the prospectus may not be used either due to the change of material information contained therein or the omission of material information therefrom or upon the receipt by the Company of a cease and desist or stop order of the Securities and Exchange Commission. The Company will use its commercially reasonable efforts to amend or supplement the Registration Statement to make it useable by the Holder under the terms of this Purchase Option. 5.2 General Terms. ------------- 5.2.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Holder(s), each director and officer of the Holder, and each person, if any, who controls the Holder(s) within the meaning of the Securities Act and/or the Securities Exchange Act of 1934, as amended ("Exchange Act"), against any losses, claims, damages or liabilities, joint or several, to which the Holder(s) or such person may become subject, under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any prospectus or registration statement for the Registrable Securities or (B) in any blue sky application or other document executed by the Company specifically for blue sky purposes or based upon any other written information furnished by the Company or on its behalf to any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information being hereinafter called a "Blue Sky Application"), or (ii) the omission or alleged omission by the Company to state in any prospectus or registration statement for the Registrable Securities or in any Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and will reimburse the Holder(s) and each such person for any legal or other expenses reasonably incurred by the Holder(s) or such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information regarding the Holder(s) which is furnished in writing to the Company by the Holder or its representatives for inclusion in any registration statement for the Registrable Securities or any such Blue Sky Application ("Non-Indemnity Events"). 5.2.2 INDEMNIFICATION BY THE HOLDER(S). The Holder(s) agrees to indemnify and hold harmless the Company, each officer and director of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act and/or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which the Company or such person may become subject, under the Securities Act, Exchange Act or otherwise insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any Non-Indemnity Event; and will reimburse the Company and such persons for any legal or other expenses reasonably incurred by the Company and such persons in connection with investigating or defending any such loss, claim, damage, liability or action provided that such loss, claim, damage or liability is found ultimately to arise out of or be based upon any Non-Indemnity Event; provided that the maximum amount of the indemnification payments by Holder(s) shall not exceed the net sale proceeds of any of the shares of Common Stock sold by the Holder(s) pursuant to the registration statement. 4 5.2.3 PROCEDURE. Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 5, notify in writing the indemnifying party of the commencement thereof; and the omission so to notify the indemnifying party will relieve the indemnifying party from any liability under this Section 5 as to the particular item for which indemnification is then being sought (if such failure materially prejudices the indemnifying party), but not from any other liability which it may have to any indemnified party. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may wish, jointly with any other indemnifying party, similarly notified, to assume the defense thereof, with counsel who shall be to the reasonable satisfaction of such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party, which consent shall not be unreasonably withheld. 5.2.4 CONTRIBUTION. If the indemnification provided for in this Section 5 is unavailable to any indemnified party in respect to any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, will contribute to the amount paid or payable by such indemnified party, as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand, and of the Holder(s) on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the Company on the one hand, and the Holder(s) on the other hand, will be determined with reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company, and its relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The payment obligations of Holder(s) hereunder shall be limited to the net sale proceeds of any of the shares of Common Stock sold by the Holder(s) pursuant to the registration statement. 5.2.5 EQUITABLE CONSIDERATIONS. The Company and the Holder(s) agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. 5.2.6 ATTORNEYS' FEES. The amount payable by a party under this Section 5 as a result of the losses, claims, damages, liabilities or expenses referred to above will be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim (including, without limitation, fees and disbursements of counsel incurred by an indemnified party in any action or proceeding between the indemnifying party and indemnified party or between the indemnified party and any third party or otherwise). 5.2.7 EXERCISE OF PURCHASE OPTIONS. Nothing contained in this Purchase Option shall be construed as requiring the Holder to exercise its Purchase Option. 5 5.2.8 DOCUMENTS TO BE DELIVERED BY HOLDER. Holder shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling securityholders. 6. Adjustments. ----------- 6.1 ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES. The Exercise Prices and the number of shares of Common Stock underlying the Purchase Option shall be subject to adjustment from time to time as hereinafter set forth: 6.1.1 STOCK DIVIDENDS - RECLASSIFICATION, SPLIT-UPS. If after the date hereof, and subject to the provisions of Section 6.2 below, the number of outstanding shares of Common Stock is increased by a stock dividend on the Common Stock payable in shares of Common Stock or by a split-up, or reclassification of shares of Common Stock applicable uniformly to all holders of Common Stock, then, on the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option shall be increased in proportion to such increase in outstanding shares. 6.1.2 AGGREGATION OF SHARES. If after the date hereof, and subject to the provisions of Section 6.2, the number of outstanding shares of Common Stock is decreased by a reverse stock split, consolidation, combination or reclassification of shares of Common Stock applicable uniformly to all holders of Common Stock, then, upon the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option shall be decreased in proportion to such decrease in outstanding shares. 6.1.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of shares of Common Stock purchasable upon the exercise of this Purchase Option is adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the applicable Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of this Purchase Option at such Exercise Price immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter at such Exercise Price. 6.1.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. Subject to Section 6.1.5, in case of any reclassification or reorganization of the outstanding shares of Common Stock other than a change covered by Section 6.1.1 hereof or which solely affects the par value of such shares of Common Stock, or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety the Holder of this Purchase Option shall have the right thereafter (until the Expiration Date) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or other transfer, by a holder of the number of shares of Common Stock of the Company obtainable upon exercise of this Purchase Option immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 6.1.1, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The provisions of this Section 6.1.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers. 6 6.1.5 Right of Acceleration. --------------------- (a) Notwithstanding anything in this Purchase Option to the contrary, if the Company or the shareholders of the Company enter into a bona fide agreement with a person other than the Holder, or any of the affiliates of the Holder for (i) the consolidation with or merger of the Company into any other corporation wherein (A) the Company is not the surviving corporation or (B) the Company is the surviving corporation but, as a result of the transaction, the other company (or any other third party), or their shareholders, acquire control of more than fifty percent (50%) of the voting securities of the Company, (ii) the sale or conveyance of all or substantially all of the Company's assets, or (iii) the sale or conveyance of all or substantially all of the Company's assets related to RF or other wireless communications technology (in each case, a "Transaction"), then the Company shall promptly give the Holder notice of such Transaction which shall be no later than twenty days prior to consummation of such Transaction. If (i) the value of the per-share consideration to be received in the Transaction is equal to or exceeds 175% of the Exercise Price then in effect and (ii) any securities to be issued in exchange for the Common Stock receivable upon exercise of this Purchase Option in the Transaction will be sellable by the Holder without restriction under any Federal securities laws, then the Company may require the Holder to exercise this Purchase Option in full immediately upon consummation of such Transaction, either for the then cash Exercise Price or on a "cashless" exercise basis as set forth below ("Conversion Right"), as the Holder elects in its sole discretion. If the Company requires such exercise as permitted by the preceding sentence and the Holder does not fully exercise this Purchase Option, then any unexercised portion of this Purchase Option shall expire immediately after the consummation of such Transaction. (b) Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any of the cash Exercise Price) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the "Value" (as defined below) of the portion of the Purchase Option being converted at the time the Conversion Right is exercised by (y) the Market Price. The "Value" of the portion of the Purchase Option being converted shall equal the remainder derived from subtracting (a) the Exercise Price multiplied by the number of shares of Common Stock being converted from (b) the Market Price of the Common Stock multiplied by the number of shares of Common Stock being converted. As used herein, the term "Market Price" at any date shall be deemed to be the higher of the per share value of the consideration being paid in a Transaction or the sum of the last reported sale prices of the Common Stock of the Company for the ten trading days, ending the trading day immediately prior to the date of the Transaction, divided by ten, in either case as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or if any such exchange on which the Common Stock is listed is not its principal trading market, the last reported sale price as furnished by the National Association of Securities Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap Market, or, if applicable, the OTC Bulletin Board. 6.1.6 CHANGES IN FORM OF PURCHASE OPTION. This form of Purchase Option need not be changed because of any change pursuant to this Section, and Purchase Options issued after such change may state the same Exercise Prices and the same number of shares of Common Stock as are stated in the Purchase Options initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any rights to a prior adjustment or the computation thereof. 6.2 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to issue certificates representing fractions of shares of Common Stock upon the exercise or of the Purchase Option upon its transfer, 7 nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of Purchase Options, shares of Common Stock or other securities, properties or rights. 6.3 NOTICE OF CHANGE IN EXERCISE PRICES. The Company shall, promptly after an event requiring a change in the Exercise Prices pursuant to Section 6 hereof, send notice to the Holder of such event and change ("Price Notice"). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company's President and Chief Financial Officer. 7. RESERVATION AND LISTING. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Purchase Option, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as any portion of the Purchase Option shall be outstanding, the Company shall use its best efforts to cause all the shares of Common Stock issuable upon exercise of the Purchase Option to be listed (subject to official notice of issuance) on all securities exchanges (or, if applicable on Nasdaq) on which the Common Stock of the Company is then listed and/or quoted. 8. Miscellaneous. ------------- 8.1 AMENDMENTS. The Company may from time to time supplement or amend this Purchase Option with the approval of the Holder which will be promptly given and not unreasonably withheld solely in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not adversely affect the interests of the Holder. All modifications or amendments shall require the written consent of the party against whom enforcement of the modification or amendment is sought. 8.2 HEADINGS. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Option. 8.3 ENTIRE AGREEMENT. This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. 8.4 BINDING EFFECT. This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Option or any provisions herein contained. 8 8.5 NOTICES. Unless otherwise specified in this Purchase Option, any notice or other document required or permitted to be given or delivered to the Holder of this Purchase Option shall be personally delivered or sent by facsimile or other form of electronic transmission (facsimile or other form of electronic transmission to be followed by a copy sent by first-class U.S. mail), to the Holder at his address indicated on the books and records of the Company or such other address as shall have been furnished to the Company by the Holder. Any notice or other document required or permitted to be given or delivered to the Company shall be personally delivered, or sent by facsimile or other form of electronic transmission (facsimile or other form of electronic transmission to be followed by a copy sent by first-class U.S. mail), to the principal office of the Company at 8493 Baymeadows Way, Jacksonville, Florida 32256, Attention Chief Executive Officer, Facsimile No. (904) 731-7125, or such other address as shall have been furnished by the Company to the Holder of record. Unless otherwise specified in this Purchase Option all notices and other documents given under this Purchase Option shall be deemed to have been duly given when delivered, if personally delivered, and when transmitted if sent by facsimile or other form of electronic transmission. 8.6 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Purchase Option shall be governed by and construed and enforced in accordance with the laws of the State of Florida, without giving effect to conflict of laws. The Company and Holder each hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall be brought and enforced in the courts of the State of Florida or of the United States of America for the Middle District of Florida, Jacksonville Division and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company and Holder each hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company or Holder may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth on the signature pages of the Subscription Agreement. Such mailing shall be deemed personal service and shall be legal and binding upon the Company or Holder in any action, proceeding or claim. The Company and Holder each agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys' fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. 8.7 WAIVER, ETC. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Option shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Option or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Option shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment. 9 IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly authorized officer as of the 8th day of March, 2001. PARKERVISION, INC. By:/s/ Jeffrey Parker ------------------ Name: Jeffrey Parker Title: Chief Executive Officer 10 Form to be used to exercise Purchase Option: ParkerVision, Inc. 8493 Baymeadows Way Jacksonville, Florida 32256 Date:_________________, 20__ The undersigned hereby elects irrevocably to exercise the within Purchase Option and to purchase ____ shares of Common Stock to purchase shares of Common Stock of ParkerVision, Inc. and hereby makes payment of $____________ (at the rate of $_________ per share of Common Stock) in payment of the Exercise Price pursuant thereto. Please issue the Common Stock as to which this Purchase Option is exercised in accordance with the instructions given below. ---------------------------------------- Signature Signature Guaranteed NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON A REGISTERED NATIONAL SECURITIES EXCHANGE. INSTRUCTIONS FOR REGISTRATION OF SECURITIES Name ------------------------------------------------------------------------- (Print in Block Letters) Address ------------------------------------------------------------------------- Form to be used to assign Purchase Option: 11 ASSIGNMENT (To be executed by the registered Holder to effect a transfer of the within Purchase Option): FOR VALUE RECEIVED,___________________________________________________ does hereby sell, assign and transfer unto____________________________ the right to purchase _______________________ shares of Common Stock to purchase _____________ shares of Common Stock of ParkerVision, Inc.("Company") evidenced by the within Purchase Option and does hereby authorize the Company to transfer such right on the books of the Company. Dated:___________________, 20__ ---------------------------------------- Signature NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. 12 EX-10.16 3 ex1016-301.txt SUBSCRIPTION AGREEMENT 10.16 SUBSCRIPTION AGREEMENT ---------------------- This Subscription Agreement is executed by ParkerVision, Inc., a Florida corporation, with an office at 8493 Baymeadows Way, Jacksonville, Florida 32256 (hereinafter referred to as the "ISSUER") and Texas Instruments Incorporated, a Delaware corporation, with an office at the address on the signature page hereof (hereinafter referred to as the ("SUBSCRIBER") in reliance upon the exemption contained in Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). This Subscription Agreement has been entered into for the sale of the number of shares of the Issuer's Common Stock, $.01 par value ("Common Stock"), determined by the formula set forth in Section 1.a (hereinafter referred to as the "Shares") and a common stock purchase option to purchase up to that number of shares of Common Stock equal to the number of Shares subscribed for under this Agreement as provided in the Purchase Option attached as Exhibit A hereto ("Purchase Option"). Each of the parties hereto hereby represents and warrants to, and agrees with, the other as follows: 1) AGREEMENT TO SUBSCRIBE; SUBSCRIPTION PRICE. a) SUBSCRIBER hereby subscribes for, and ISSUER agrees to sell, (i) that number of Shares (rounded up to the nearest whole number of shares) equal to two million five hundred thousand dollars ($2,500,000) divided by the quotient obtained by dividing (y) the sum of the last sale prices of the common stock of the ISSUER for the ten trading days ending the trading day immediately prior to the date hereof, as such prices are reported by The Nasdaq Stock Market, Inc., by (z) ten and (ii) the Purchase Option, for an aggregate purchase price of $2,500,000 ("Purchase Price"). b) FORM OF PAYMENT. On the Closing Date, as defined below, SUBSCRIBER shall pay the Purchase Price for the Shares and Purchase Option purchased hereunder by wire transfer of same day funds in United States Dollars to the depository designated by the ISSUER, payable to the order of ISSUER. ISSUER shall deliver one or more certificates representing the Shares and the definitive Purchase Option to the Subscriber promptly after the Closing Date. 2) SUBSCRIBER REPRESENTATIONS. a) TRANSACTIONAL REPRESENTATIONS. SUBSCRIBER represents and warrants to ISSUER as follows: (i) SUBSCRIBER is purchasing the Shares and Purchase Option (including the underlying Common Stock) for its own account for investment purposes and not with a view toward distribution. (ii) SUBSCRIBER understands that the Shares and Purchase Option (and the underlying Common Stock) have not been registered under the Securities Act and that such securities are "restricted securities" as defined in Rule 144 promulgated under the Securities Act. SUBSCRIBER further understands that the Shares and Purchase Option (and underlying Common Stock) may not be offered, resold, pledged or otherwise transferred by such SUBSCRIBER except: A) (1) pursuant to an effective registration statement under the Securities Act, or (2) pursuant to an available exemption from the registration requirements of the Securities Act; and B) in accordance with all applicable securities laws of the states of the United States and other jurisdictions; 1 (iii)SUBSCRIBER understands that the purchase of the Shares and Purchase Option (and underlying Common Stock) involves a high degree of risk and further acknowledges that it can bear the economic risk of the purchase of the securities, including the total loss of its investment; (iv) SUBSCRIBER understands that the Shares and Purchase Option (and underlying Common Stock) are being offered and sold to it in reliance on specific exemptions from the registration requirements of federal and state securities laws and that the ISSUER is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of SUBSCRIBER set forth herein in order to determine the applicability of such exemptions and the suitability of SUBSCRIBER to acquire the securities; (v) SUBSCRIBER is sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of its investment, and to make an informed decision relating thereto; and (vi) In evaluating its investment, SUBSCRIBER has consulted its own investment and/or legal and/or tax advisors. b) CURRENT PUBLIC INFORMATION. SUBSCRIBER acknowledges that SUBSCRIBER has been furnished with or has otherwise acquired copies of the ISSUER's Annual Report on Form 10-K for the year ended December 31, 1999, as amended by Form 10-K/A, and Form 10-Q for each of the quarters ended March 31, 2000, June 30, 2000 and September 30, 2000, all as filed with the Securities and Exchange Commission (the "SEC"). SUBSCRIBER further acknowledges that SUBSCRIBER has read and understands the Risk Factors set forth in Exhibit 99.1 to the ISSUER's Form 10-K for the year ended December 31, 1999. c) INDEPENDENT INVESTIGATION; ACCESS. SUBSCRIBER acknowledges that, in making its decision to purchase the Shares and Purchase Option subscribed for, it has relied on the publicly available information about the ISSUER and upon independent investigations made by it and its representatives, if any. SUBSCRIBER and such representatives, if any, prior to the sale to it of the securities offered hereby, have been given access to, and the opportunity to examine, all material books and records of the ISSUER (with materiality being determined by the ISSUER), all material contracts and documents relating to the ISSUER and this offering (with materiality being determined by the ISSUER) and an opportunity to ask questions of, and to receive answers from, executive officers of ISSUER concerning the ISSUER and the terms and conditions of this offering. SUBSCRIBER and its advisors, if any, acknowledge that they have received answers to any such inquiries and copies of documentary information requested. d) NO GOVERNMENT RECOMMENDATION OR APPROVAL. SUBSCRIBER understands that no federal or state agency has passed on or made any finding or determination relating to the fairness of an investment in the Shares and Purchase Option, or has passed or made, or will pass on or make, any recommendation or endorsement of the Shares and Purchase Option. 3) ISSUER REPRESENTATIONS. a) AUTHORITY; CORPORATE ACTION. ISSUER has all necessary corporate power and authority to enter into this Subscription Agreement and the Purchase Option and to consummate the transactions 2 contemplated hereby and thereby. All corporate action necessary to be taken by ISSUER to authorize the execution, delivery and performance of this Subscription Agreement and the Purchase Option, and all other agreements and instruments delivered by ISSUER in connection with the transactions contemplated hereby and thereby has been duly and validly taken and this Subscription Agreement and the Purchase Option have been duly executed and delivered by ISSUER. Subject to the terms and conditions of this Subscription Agreement and the Purchase Option, the Subscription Agreement constitutes, and when executed, the Purchase Option will constitute, the valid, binding and enforceable obligation of ISSUER, enforceable in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and (ii) the applicability of the federal and state securities laws and public policy as to the enforceability of the indemnification provisions of Section 7 hereof and Section 5 of the Purchase Option. The sale by the ISSUER of the Shares and the issuance of the Purchase Option does not conflict with the certificate of incorporation or by-laws of the ISSUER, or any material contract by which the ISSUER or its property is bound, or any federal or state laws or regulations or decree, ruling or judgment of any United States or state court applicable to the ISSUER or its property. b) PARKERVISION CAPITALIZATION. The ISSUER is authorized to issue 100,000,000 shares of Common Stock, and 15,000,000 shares of preferred stock, of which, as of September 30, 2000, there were 13,201,430 shares of Common Stock and 114,019 shares of preferred stock issued and outstanding. c) PARKERVISION SHARES. The shares of Common Stock issued to SUBSCRIBER pursuant to this Subscription Agreement and upon exercise of the Purchase Option in accordance with its terms will be duly authorized, validly issued, fully paid and non-assessable. d) RULE 144 REQUIREMENTS. ISSUER agrees to use commercially reasonable efforts: (i) to make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (ii) to file with the SEC in a timely manner all reports and other documents required of ISSUER under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (iii)to furnish to SUBSCRIBER upon request a written statement by ISSUER as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of ISSUER, and such other reports and documents of ISSUER as SUBSCRIBER may reasonably request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such securities without registration. e) SEC DOCUMENTS. ISSUER's Common Stock is registered pursuant to Section 12(g) of the Exchange Act. Since January 1, 1999, the ISSUER has timely filed with the SEC all reports, schedules, forms, statements and other documents required to be filed (such reports, schedules, forms, statements and other documents are hereinafter referred to as the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC Documents 3 as of such dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the ISSUER included in the SEC Documents (the "Financial Statements") comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except in the case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present, in all material respects, the financial position of the ISSUER as of the dates thereof and the results of operations and cash flows for the periods then ended (on the basis stated therein and subject, in the case of unaudited quarterly statements, to the absence of complete notes and to normal year-end audit adjustments). Since the date of the Financial Statements for the fiscal quarter ended September 30, 2000, there has been no material adverse change in the financial condition of the ISSUER. Since the date of the filing of the Form 10-Q on September 30, 2000, there have been no events relating to the business or financial condition of the ISSUER that requires the filing of a Report on Form 8-K by the ISSUER. f) GENERAL DOCUMENT REPRESENTATION. To the best of ISSUER's knowledge, the written materials of the ISSUER previously delivered to SUBSCRIBER in connection with this Subscription Agreement, at the time they were given to SUBSCRIBER, were true and accurate in all material respects. 4) REPRESENTATIONS AND WARRANTIES MADE AT CLOSING; INDEMNIFICATION. Each party making the representations and warranties contained in Sections 2 and 3 also represents and warrants that they shall be true and accurate as of the Closing Date. If either party has knowledge, prior to the Closing Date that any such representations and warranties made by it shall not be true and accurate in any respect, such party will give written notice of such fact to the other party specifying which representations and warranties are not true and accurate and the reasons therefor. Each party to this Subscription Agreement agrees to fully indemnify, defend and hold harmless the other party, its officers, directors, employees, agents and attorneys from and against any and all losses, claims, damages, liabilities and expenses, including reasonable attorneys' fees and expenses, which may result from a breach of such party's representations, warranties and covenants contained herein. 5) LEGEND. SUBSCRIBER understands that the ISSUER will instruct its transfer agent to place a stop transfer order with respect to the certificates representing the Shares and that such certificates will bear the following legend, as well as a legend describing the restriction referred to in the last sentence of Section 7(a) hereof: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). Transfer of these shares is prohibited except pursuant to registration under the Securities Act or pursuant to an available exemption from registration." 6) CLOSING DATE. The date of issuance and sale of the Shares and Purchase Option ("Closing Date") shall be on such date as may be mutually agreed to, but not later than March 15, 2001. 7) REGISTRATION RIGHT. a) REGISTRATION. The ISSUER shall file a registration statement under the Securities Act ("Registration Statement") with the Securities and Exchange Commission registering the Shares and the shares underlying the Purchase Option for re-offer and re-sale. The ISSUER agrees to have the Registration Statement declared effective by the last day of the sixth calendar month after the 4 Closing Date ("Anniversary"). Once the Registration Statement is declared effective, the ISSUER shall keep the Registration Statement effective and current until all the securities registered thereunder are sold or may be sold freely in any 90 day period without registration under an appropriate exemption under the Securities Act. If the Registration Statement has not been declared effective by the Anniversary or, if it is so declared effective but after the Anniversary becomes subject to a stop order or is not otherwise current for use by SUBSCRIBER, then during such periods, the SUBSCRIBER may demand on no more than an aggregate of three separate occasions to have its Shares and shares of Common Stock underlying the Purchase Option registered on a registration statement filed with the Securities and Exchange Commission or have such securities included on any other applicable registration statement filed by ISSUER, which "demand" and "piggyback" registration rights will be subject to such reasonable terms as are ordinarily offered to investors purchasing similar securities to those purchased under this Subscription Agreement. The SUBSCRIBER agrees that it will not sell any of the Shares or shares of Common Stock underlying the Purchase Option pursuant to the Registration Statement prior to the Anniversary, without the written consent of the ISSUER, which consent may be withheld for any reason without explanation. b) TERMS. The ISSUER shall bear all of its fees and expenses attendant to registering the Shares, but SUBSCRIBER shall pay any and all underwriting commissions and the expenses of any legal counsel selected by SUBSCRIBER to represent it in connection with the registration or sale of the Shares. Promptly upon request, ISSUER will provide to SUBSCRIBER such number of copies of the prospectus forming a part of the Registration Statement as are reasonably requested by the SUBSCRIBER, and all supplements to such prospectus. ISSUER will promptly notify SUBSCRIBER at any time that the Registration Statement or the prospectus may not be used either due to the change of material information contained therein or the omission of material information therefrom or upon the receipt by the ISSUER of a cease and desist or stop order of the Securities and Exchange Commission. The ISSUER will use its commercially reasonably efforts to amend or supplement the Registration Statement to permit its continued use by the SUBSCRIBER. 5 c) INDEMNIFICATION by the ISSUER. The ISSUER agrees to indemnify and hold harmless SUBSCRIBER, its directors and officers and each person, if any, who controls SUBSCRIBER within the meaning of the Securities Act and/or the Securities Exchange Act of 1934, as amended ("Exchange Act"), against any losses, claims, damages or liabilities, joint or several, to which SUBSCRIBER or such person may become subject, under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any prospectus or registration statement for the Shares or (B) in any blue sky application or other document executed by the ISSUER specifically for blue sky purposes or based upon any other written information furnished by the ISSUER or on its behalf to any state or other jurisdiction in order to qualify any or all of the Shares under the securities laws thereof (any such application, document or information being hereinafter called a "Blue Sky Application"), or (ii) the omission or alleged omission by the ISSUER to state in any prospectus or registration statement for the Shares or in any Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and will reimburse SUBSCRIBER and each such person for any legal or other expenses reasonably incurred by SUBSCRIBER or such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the ISSUER will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information regarding SUBSCRIBER which is furnished in writing to the ISSUER by SUBSCRIBER or its representatives for inclusion in any registration statement for the Shares or any such Blue Sky Application ("Non-Indemnity Events"). d) INDEMNIFICATION BY THE SUBSCRIBER. The SUBSCRIBER agrees to indemnify and hold harmless the ISSUER, each officer and director of the ISSUER, and each person, if any, who controls the ISSUER within the meaning of the Securities Act and/or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which the ISSUER or such person may become subject, under the Securities Act, Exchange Act or otherwise insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any Non-Indemnity Event; and will reimburse the ISSUER and such persons for any legal or other expenses reasonably incurred by the ISSUER in connection with investigating or defending any such loss, claim, damage, liability or action provided that such loss, claim, damage or liability is found ultimately to arise out of or be based upon any Non-Indemnity Event; provided that the maximum amount of the indemnification payments by SUBSCRIBER shall not exceed the net sale proceeds of any of the Shares or shares of Common Stock underlying the Purchase Option sold by the SUBSCRIBER pursuant to the registration statement. e) PROCEDURE. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, notify in writing the indemnifying party of the commencement thereof; and the omission so to notify the indemnifying party will relieve the indemnifying party from any liability under this Section 7 as to the particular item for which indemnification is then being sought (if such failure materially prejudices the indemnifying party), but not from any other liability which it may have to any indemnified party. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may wish, jointly with any other indemnifying party, similarly notified, to assume the defense thereof, with counsel who shall be to the reasonable satisfaction of such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this 6 Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party, which consent shall not be unreasonably withheld. f) CONTRIBUTION. If the indemnification provided for in this Section 7 is unavailable to any indemnified party in respect to any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, will contribute to the amount paid or payable by such indemnified party, as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the ISSUER on the one hand, and of the SUBSCRIBER on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the ISSUER on the one hand, and the SUBSCRIBER on the other hand, will be determined with reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the ISSUER, and its relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The payment obligations of SUBSCRIBER hereunder shall be limited to the net sale proceeds of any of the shares of Common Stock sold by the SUBSCRIBER pursuant to the registration statement. g) EQUITABLE CONSIDERATIONS. The ISSUER and the SUBSCRIBER agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. h) ATTORNEYS' FEES. The amount payable by a party under this Section 7 as a result of the losses, claims, damages, liabilities or expenses referred to above will be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim (including, without limitation, fees and disbursements of counsel incurred by an indemnified party in any action or proceeding between the indemnifying party and indemnified party or between the indemnified party and any third party or otherwise). i) DOCUMENTS TO BE DELIVERED BY SUBSCRIBER. SUBSCRIBER shall furnish to the ISSUER a completed and executed questionnaire provided by the ISSUER requesting information customarily sought of selling security holders. 8) PREEMPTIVE RIGHT. So long as SUBSCRIBER and its affiliates beneficially own at least 30% of the Shares and the common stock underlying the Purchase Option sold to SUBSCRIBER under this Subscription Agreement, if ISSUER elects to sell, for cash, New Securities (as hereinafter defined) at any time prior to the six year anniversary of the date of this Subscription Agreement, SUBSCRIBER will have the right to purchase from ISSUER on the same terms as the proposed sale, up to that number of securities being offered as will maintain its then percentage ownership of ISSUER's Common Stock calculated on a fully diluted basis, but based solely on the Shares purchased hereunder and underlying the Purchase Option and not including any additional shares of Common Stock which may be owned by SUBSCRIBER. ISSUER shall give notice to the SUBSCRIBER in writing ("ISSUER Notice") at least ten business days prior to the proposed closing date of such proposed sale. The ISSUER Notice shall describe in reasonable detail the proposed sale including, without limitation, the nature and number of securities to be sold, the nature of such sale, the consideration to be paid, and the name and address of the prospective purchasers ("Buyer"). Upon the giving of the ISSUER Notice, SUBSCRIBER shall have the right, but not the obligation, exercisable by written notice to the ISSUER within five business 7 days after receipt of the ISSUER Notice, to indicate to ISSUER its desire to purchase its permitted number of securities being sold in the proposed sale on the same terms and conditions as ISSUER is selling the securities in the proposed sale. The SUBSCRIBER will purchase the securities to be offered and purchased under this section at the same time as the closing of the proposed sale. For purposes of this Section 8, "New Securities" means any shares of capital stock of the ISSUER, including Common Stock and preferred stock, whether now authorized or not, and rights, options or warrants to purchase said shares of Common Stock or preferred stock of the ISSUER, and securities of any type whatsoever that are, or may become, convertible into said shares of Common Stock or preferred stock; provided, however, "New Securities" does not include (i) the shares of Common Stock issuable upon exercise of the Purchase Option, (ii) securities issuable upon exercise or conversion of securities outstanding on the date hereof, (iii) securities offered to the public generally pursuant to a registration statement under the Securities Act, (iv) securities issued to employees, officers or directors of, or consultants to, the ISSUER, or issued or issuable to banks or other institutional lenders or lessors in connection with capital asset leases or borrowings for the acquisition of capital assets, landlords, or other providers of goods and services to the ISSUER, in each case, if pursuant to any arrangement approved by the board of directors of the ISSUER (including securities issued upon exercise or conversion of any such securities), or (v) any issuance of capital stock of the ISSUER upon the exercise or conversion of derivative securities, the issuance of which triggered the pre-emptive rights set forth in this Section 8. 9) DISCLOSURE. Neither the ISSUER nor the SUBSCRIBER will disclose the terms of this Subscription Agreement without the written consent of the other party hereto, unless required by law or regulation or judicial action. The SUBSCRIBER agrees that the foregoing sentence does not prohibit ISSUER from issuing a press release in the form attached as Exhibit B hereto and from providing substantially similar disclosure about this transaction in its Exchange Act Reports and other documents filed with the Securities and Exchange Commission. 10) GOVERNING LAW. This Subscription Agreement shall be governed by and interpreted in accordance with the rulings of the laws of the State of Florida without regard to conflicts of law. The ISSUER and SUBSCRIBER each hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this agreement shall be brought and enforced in the courts of the State of Florida or of the United States of America for the Middle District of Florida, Jacksonville Division and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The ISSUER and SUBSCRIBER hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the ISSUER and SUBSCRIBER may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at its address set forth herein. Such mailing shall be deemed personal service and shall be legal and binding upon the ISSUER and SUBSCRIBER in any action, proceeding or claim. The ISSUER and SUBSCRIBER agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys' fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. 11) ENTIRE AGREEMENT. This Subscription Agreement and the Purchase Option constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warrants, agreements and understandings in connection therewith. This Subscription Agreement may be amended only by a writing executed by all parties hereto. 12) NOTICES. Any notice or other document required or permitted to be given or delivered to the parties to this Subscription Agreement shall be personally delivered or sent by facsimile or other form of electronic transmission (facsimile or other form of electronic transmission to be followed by a copy sent by first class U.S. Mail) to the party at the address or addresses or telecopier number on the signature page 8 hereto. Unless otherwise specified in this agreement, all notices and other documents given under this agreement shall be deemed to have been duly given when delivered, if personally delivered, and when transmitted if sent by facsimile or other form of electronic transmission. 9 IN WITNESS WHEREOF, this Subscription Agreement was duly executed on and is dated as of the date first written below. Dated this ________ day of the month of March, 2001. TEXAS INSTRUMENTS INCORPORATED PARKERVISION, INC. By:_____________________________ By:_____________________________ Name: William A. Aylesworth Name: Jeffrey L. Parker Title: Senior Vice President Title: Chief Executive Officer Treasurer & Chief Financial Officer Notice Addresses: Jeffrey L. Parker, CEO Mr. Charles D. Tobin, Manager, ParkerVision, Inc. Corporate Development 8493 Baymeadows Way Texas Instruments Incorporated Jacksonville, Florida 32256 7839 Churchill Way, MS 3995 Facsimile: (904) 731-7125 Dallas, Texas 75251 Facsimile: (972) 917-3804 with a copy to David Alan Miller, Esq. Graubard Mollen & Miller 600 Third Avenue New York, NY 10016 Facsimile (212) 818-8881 With a copy to Joseph F. Hubach General Counsel Texas Instruments Incorporated 12500 TI Boulevard, MS 8658 Dallas, Texas 75243 Facsimile: (214) 480-5061 10 EX-22.1 4 ex221-301.txt TABLE OF SUBSIDIARIES 22.1 TABLE OF SUBSIDIARIES NAME STATE OF INCORPORATION - ------------------------------------ ---------------------------------------- D2D, LLC Virginia EX-23.1 5 ex231-301.txt AUDITOR'S CONSENT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-17683) and the Registration Statements on Form S-8 (Nos. 33-93658, 333-62497 and 333-43452) of ParkerVision, Inc. and its subsidiary of our report dated March 14, 2001 relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K. /s/PricewaterhouseCoopers LLP - ----------------------------- PricewaterhouseCoopers LLP Jacksonville, Florida March 30, 2001 EX-99.1 6 ex991-301.txt RISK FACTORS 99.1 RISK FACTORS PARKERVISION HAS A HISTORY OF LOSSES AND OPERATING LOSSES ARE EXPECTED TO CONTINUE ON A COMPANY WIDE BASIS. ParkerVision has had losses in each year since its inception in 1989. There can be no assurance that revenues from the current CameraMan(TM) or PVTV(TM) products, D2D(TM) technology or products and technologies being developed will produce revenues that will cover operational expenses or result in net profits. PARKERVISION MAY REQUIRE ADDITIONAL CAPITAL TO FUND ITS OPERATIONS. Because ParkerVision has had net losses and positive cash flow has not been generated from operations, it has funded its operating activities to date from the sale of equity securities. In addition, the Company's business plan for 2001 and thereafter requires significant expenditures. Although ParkerVision had working capital of $45.6 million at December 31, 2000, it may require additional capital in the future for research and development and manufacturing. The financing, if any, may be in the form of loans or additional sales of equity securities. A loan may result in the imposition of operational limitations and will have payment obligations that may be burdensome to ParkerVision. The sale of equity securities will result in dilution to the current stockholders ownership of ParkerVision. ParkerVision does not have any plans or arrangements for additional public financing at this time. MICROELECTRONIC HARDWARE AND SOFTWARE IS SUBJECT TO RAPID TECHNOLOGICAL CHANGES THAT REQUIRE PARKERVISION TO DEVELOP AND MARKET ENHANCEMENTS TO CURRENT PRODUCTS AND DEVELOP NEW PRODUCTS. Because of the rapid technological development that regularly occurs in the microelectronics industry, ParkerVision must continually devote substantial resources to developing and improving its technology and introducing new product offerings and creating new products. This is necessary to establish and increase market share and grow revenues. If another company offers better products or ParkerVision development lags, the competitive position and revenues of ParkerVision may be adversely affected. PARKERVISION EXPENDS SIGNIFICANT RESOURCES FOR RESEARCH AND DEVELOPMENT OF NEW PRODUCTS AND TECHNOLOGY THAT ULTIMATELY MAY NOT BE COMMERCIALLY ACCEPTED. ParkerVision devotes substantial resources to research and development. There can be no assurance that the results of the research and the product development will produce commercially viable technologies and products. If new technologies and products are not commercially accepted, the funds expended will not be recoverable, and ParkerVision's competitive and financial position may be adversely affected. 1 PARKERVISION NEEDS TO ACHIEVE MARKET ACCEPTANCE OF ITS D2D TECHNOLOGY. The ParkerVision wireless technology represents a significant change in the architecture of wireless radio-frequency communications. To achieve market acceptance, the Company will need to demonstrate the benefits of its technology over more traditional solutions through the development of application solutions and aggressive marketing to wireless products companies. In many respects, because the D2D technology is such a radically different approach in its industry, it is very difficult for ParkerVision to predict the final economic benefits to users of the technology and the financial rewards that ParkerVision might expect. If the D2D technology is not established in the market place as an improvement over current, traditional solutions in wireless communications, our business and financial condition will be adversely affected. IF PARKERVISION'S PATENTS DO NOT PROVIDE THE ANTICIPATED MARKET PROTECTIONS, ITS COMPETITIVE POSITION WILL BE ADVERSELY AFFECTED. ParkerVision has a large number of patents and patent applications relating to its microelectronic technologies. ParkerVision relies on these to provide competitive advantage and protect it from theft of its intellectual property. ParkerVision believes that many of these patents are for entirely new technologies. If the patents are not issued or issued patents are later shown not to be as broad as currently believed or otherwise challenged such that some or all of the protection is lost, ParkerVision will suffer adverse effects from the loss of competitive advantage and its ability to offer unique products and technologies. Concomitantly, there would be an adverse impact on its financial condition and business prospects. PARKERVISION WIRELESS COMMUNICATIONS USE INFRARED AND RADIO FREQUENCY TECHNOLOGY SUBJECT TO REGULATION BY THE FEDERAL COMMUNICATIONS COMMISSION. ParkerVision must obtain licenses and approvals from the United States Federal Communications Commission for the operation of its products. ParkerVision may also have to obtain licenses and approvals from foreign governments where its products are sold overseas. The inability to obtain any required licenses and approvals, or a change in current regulation that impacts issued licenses and approvals, will have an adverse impact on the ability of ParkerVision to market its products. Therefore, there will be an adverse impact on the revenues and business prospects of ParkerVision. THE CAMERAMAN AND PVTV PRODUCTS COMPETE WITH OTHER PRODUCTS. The videoconferencing and studio production industries are highly competitive. There are many other companies that offer products that compete with those of ParkerVision. ParkerVision, however, believes that no one competing product offers the range of options and capabilities of the CameraMan and PVTV products in the tasks for which these products have been designed. The principal competitors include Sony Corporation, Panasonic Corporation and Grass Valley Group. Each of these companies are well established, have substantially greater financial and other resources and have established reputations or success in the development, sale and service of products. They also have significant advertising budgets that permit them to implement extensive advertising and promotional campaigns in response to competitors. If these or other companies improve or change their products or launch significant marketing efforts in the market segments in which ParkerVision operates, ParkerVision may lose market share. 2 PARKERVISION EXPECTS COMPETITION IN CONNECTION WITH ITS DIRECT2DATA TECHNOLOGY. Although the D2D technology of ParkerVision is believed to be a significant technological advancement, it will face competition from older technological solutions until the ParkerVision products are more widely acknowledged and utilized. This technology may also face competition from other technological advances which are under development and have not yet emerged. PARKERVISION OBTAINS CRITICAL COMPONENTS AND MANUFACTURING SERVICES FOR ITS PRODUCTS FROM VARIOUS SUPPLIERS WHICH PUTS PARKERVISION AT RISK IF THEY DO NOT FULFILL THE PARKERVISION NEEDS OR INCREASE PRICES THAT CANNOT BE PASSED ON. Both the video products and wireless divisions of ParkerVision obtain critical components from various suppliers and manufacturers. Some of these are single sources. Because ParkerVision depends on outside sources for supplies and manufacturing of various parts of its products, ParkerVision is at risk that it may no obtain these components on a timely basis, or at all due to lack of capacity, parts shortages in the overall marketplace and other fulfillment obligations of these sources, among other things. If ParkerVision is unable to obtain its components from the current sources, its business would be disrupted, and it would have to expend some of its resources to modify its products. In addition, ParkerVision is at risk for increases in prices imposed by these sources over which ParkerVision has no control. Any inability of ParkerVision to obtain components or price increases may have adverse effects on its own ability to fulfill orders and on its financial condition. IF PARKERVISION LOSES ITS SIGNIFICANT CUSTOMER FOR CAMERAMAN CAMERAS, ITS REVENUES WILL BE SIGNIFICANTLY AFFECTED. Vtel Corporation purchased approximately 38% of the CameraMan camera systems sold in 2000, which represented 16% of ParkerVision's revenues for 2000. Vtel Corporation was also a significant customer in each of 1998 and 1999. These CameraMan systems are used primarily in the distance education segment of the video conferencing market. The loss of this customer will severely impact revenues of ParkerVision and will diminish the ParkerVision presence in this particular market segment. PARKERVISION BELIEVES THAT IT WILL RELY IN THE NEAR FUTURE ON KEY BUSINESS RELATIONSHIPS FOR THE SUCCESSFUL COMMERCIALIZATION OF ITS D2D TECHNOLOGY, WHICH IF LOST, WILL HAVE AN ADVERSE IMPACT ON ACHIEVING MARKET AWARENESS AND ACCEPTANCE AND LOSS OF BUSINESS OPPORTUNITY. To achieve market awareness and acceptance of its D2D technology, as part of its business strategy, ParkerVision will enter into a variety of business relationships with other companies which will incorporate the D2D technology into their products. Therefore, ParkerVision's successful commercialization of the D2D technology will depend on its ability to meet its obligations under the contracts in respect of its D2D technology and related development requirements and the other parties using the D2D technology as agreed. The failure of the these business relationships will limit the commercialization of the ParkerVision D2D technology which will have an adverse impact on the business development of the company and its ability to generate revenues and recover development expenses. 3 PARKERVISION HAS LIMITED EXPERIENCE IN THE COMMERCIAL DESIGN AND MANUFACTURE OF ELECTRONIC CHIPS WHICH MAY RESULT IN PRODUCTION INADEQUACIES, DELAYS AND REJECTION. As ParkerVision begins to commercialize its D2D technology, it plans to manufacture some of the electronic chips that employ its proprietary designs for supply to end users. ParkerVision has limited experience in the commercial design and the manufacture of these kinds of electronic chips. If there are design flaws or manufacturing errors resulting from the inexperience, there may be resulting delays or loss of customer acceptance of the electronic chips. Either of these may be a breach of supply agreements or may cause a loss of customer willingness to use ParkerVision products. These may result in loss of commercialization opportunities as well as revenues and cause additional, unanticipated expenses with adverse financial effect. PARKERVISION IS HIGHLY DEPENDENT ON MR. JEFFERY PARKER AS ITS CHIEF EXECUTIVE OFFICER. Because of Mr. Parker's position in the company and the respect he has garnered in the industries in which ParkerVision operates and from the investment community, the loss of the services of Mr. Parker would be seen as an impediment to the execution of the ParkerVision business plan. If Mr. Parker were no longer available to the company, investors may experience an adverse impact on their investment. PARKERVISION IS DEPENDENT ON HIRING HIGHLY SKILLED EMPLOYEES. The business of ParkerVision is very specialized in the areas of automated video camera control systems and automated production systems and wireless direct conversion technology. Because these areas of business are extremely specialized, ParkerVision is dependent on having skilled and specialized employees to conduct its research and development activities, manufacturing, marketing and support. The inability to obtain these kinds of persons would have an adverse impact on its business development and may prevent ParkerVision successfully implementing its current plans. PARKERVISION FACES INTENSE COMPETITION IN ITS HIRING PROGRAM FOR THE KINDS OF EMPLOYEES IT REQUIRES. Because ParkerVision needs highly skilled employees and persons with very specialized experience, there tends to be relatively few persons available that meet its requirements. Generally, ParkerVision has experienced a small pool of persons in the labor markets in which it must seek its employees. Therefore, when hiring, ParkerVision encounters intense competition from other telecommunications, electronics and technically orientated companies. To meet this competition ParkerVision often is required to fashion superior compensation packages and to develop a working environment conducive to attracting the kinds of person the company needs. ParkerVision may experience an inability to obtain the services of required personnel and a high cost of labor in some areas. The former may prevent ParkerVision from implementing its business plan as intended and the latter may result in additional expense in its operations which may not be recoverable. One or the other or both may place ParkerVision at a overall disadvantage comparative to other companies. 4 THE OUTSTANDING OPTIONS AND WARRANTS MAY EFFECT THE MARKET PRICE AND LIQUIDITY OF THE COMMON STOCK. ParkerVision has outstanding options, warrants and purchase options to purchase 6,135,510 shares of its common stock at December 31, 2000. This represents about 31% of the common stock outstanding on a fully diluted basis. Approximately 60% of these securities have exercise prices at less than the current market price of the common stock. All of the underlying common stock of these securities is or will be registered for sale by ParkerVision to the option holder or for public sale by the security holder. The amount of common stock available for the sales may have an adverse impact on ParkerVision's ability to raise capital in the public market and may affect the price and liquidity of the common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on the current stockholders' ownership of ParkerVision. THE MARKET OF THE PARKERVISION COMMON STOCK HAS FLUCTUATED SIGNIFICANTLY, SOMETIMES IN A MANNER UNRELATED TO ITS PERFORMANCE. The market price of the common stock has varied in response to various factors and events. These include: o the number of shares of common stock being sold and purchased in the marketplace, o variations in operating results, o rumors of significant events which can circulate quickly in the marketplace, particularly over the internet, and o the difference between actual results and the results expected by investors and analysts. Since the common stock has been publicly traded, its market price has fluctuated over a wide range and ParkerVision expects it to continue to do so in the future. In addition, the stock market had experienced broad price and volume fluctuations in recent years that have often been unrelated to the operating performance of companies. These broad market fluctuations also may adversely affect the market price of the common stock. PROVISIONS IN THE CERTIFICATE OF THE INCORPORATION AND BY-LAWS COULD HAVE AFFECTS THAT CONFLICT WITH THE INTEREST OF STOCKHOLDERS. Some provisions in the certificate of incorporation and by-laws of ParkerVision could make it more difficult for a third party to acquire control. For example, the board of directors has the ability to issue preferred stock without stockholder approval and there are pre-notification provisions for director nominations and submissions of proposals from stockholders to a vote by all the stockholders under the by-laws. Florida law also has anti-takeover provisions. 5
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