-----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, NjJ3ptkmbIGoObVcf+OUxp/HiuBGQQP4P8+ZEGXuMr6vH1hEHLbYxg5kQYaHL5FA KxKRXuE2grcnX1re0cDlfw== 0001144204-04-006066.txt : 20040507 0001144204-04-006066.hdr.sgml : 20040507 20040507074119 ACCESSION NUMBER: 0001144204-04-006066 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARKERVISION INC CENTRAL INDEX KEY: 0000914139 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 592971472 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22904 FILM NUMBER: 04786847 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-Q 1 v03107_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ________to____________ Commission file number 0-22904 ------- PARKERVISION, INC. (Exact name of registrant as specified in its charter) Florida 59-2971472 (State or other jurisdiction of I.R.S. Employer ID No. incorporation or organization) 8493 Baymeadows Way Jacksonville, Florida 32256 (904) 737-1367 (Address of principal executive offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No __. Indicate by check mark whether the registrant is an accelerated filer (as defined by rule 12b-2 of the Exchange Act). Yes _X_ No __. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ___ No ___. APPLICABLE ONLY TO CORPORATE ISSUERS As of May 5, 2004, 17,959,504 shares of the Issuer's Common Stock, $.01 par value, were outstanding. PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, 2004 December 31, ASSETS (unaudited) 2003 ------ ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $13,788,062 $17,467,875 Short-term investments 2,694,007 3,008,427 Accounts receivable, net of allowance for doubtful accounts of $68,330 at March 31, 2004 and $64,159 at December 31, 2003, respectively 1,132,587 988,849 Inventories, net 2,982,596 2,476,985 Prepaid expenses and other 2,214,643 2,366,792 ----------- ----------- Total current assets 22,811,895 26,308,928 PROPERTY AND EQUIPMENT, net 4,581,135 4,860,261 OTHER ASSETS, net 11,191,891 11,313,621 ----------- ----------- Total assets $38,584,921 $42,482,810 =========== ===========
The accompanying notes are an integral part of these financial statements. 2 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, 2004 December 31, LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) 2003 ------------------------------------ ------------- ------------- CURRENT LIABILITIES: Accounts payable $ 2,170,531 $ 693,820 Accrued expenses: Salaries and wages 669,360 592,369 Warranty reserves 207,114 199,084 Professional fees 329,689 143,893 Other accrued expenses 146,691 228,057 Deferred revenue 1,026,173 1,226,929 ------------- ------------- Total current liabilities 4,549,558 3,084,152 COMMITMENTS AND CONTINGENCIES (Notes 2, 7 and 8) ------------- ------------- Total liabilities 4,549,558 3,084,152 ------------- ------------- SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 100,000,000 shares authorized, 17,959,504 issued and outstanding at March 31, 2004 and December 31, 2003, respectively 179,595 179,595 Warrants outstanding 16,807,505 16,807,505 Additional paid-in capital 118,048,964 118,048,964 Accumulated other comprehensive income 30,712 31,746 Accumulated deficit (101,031,413) (95,669,152) ------------- ------------- Total shareholders' equity 34,035,363 39,398,658 ------------- ------------- Total liabilities and shareholders' equity $ 38,584,921 $ 42,482,810 ============= =============
The accompanying notes are an integral part of these financial statements. 3 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, March 31, 2004 2003 ----------- ----------- Product revenue $ 1,003,479 $ 1,455,516 Royalty revenue 250,000 0 Support and other services revenue 222,685 304,654 ----------- ----------- Net revenues 1,476,164 1,760,170 ----------- ----------- Cost of goods sold - products 650,152 921,538 Cost of goods sold - support and other services 260,093 272,716 ----------- ----------- Total cost of goods sold 910,245 1,194,254 ----------- ----------- ----------- ----------- Gross margin 565,919 565,916 ----------- ----------- Research and development expenses 3,375,406 4,259,750 Marketing and selling expenses 760,988 871,990 General and administrative expenses 1,844,429 1,173,671 Other expense 635 0 ----------- ----------- Total operating expenses, net 5,981,458 6,305,411 ----------- ----------- Loss from operations $(5,415,539) $(5,739,495) Interest and other income 53,278 181,402 ----------- ----------- Net loss $(5,362,261) $(5,558,093) =========== =========== Basic and diluted net loss per common share $ (0.30) $ (0.39) =========== =========== The accompanying notes are an integral part of these financial statements. 4 PARKERVISION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ------------------------------ 2004 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (5,362,261) $ (5,558,093) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and patent amortization 796,117 743,365 Amortization of premium on investments 13,386 44,838 Provision for obsolete inventories 75,000 75,000 Stock compensation 0 393,096 Gain on sale of investments 0 (105,523) Loss on disposal of equipment 635 0 Changes in certain operating assets and liabilities: Accounts receivable, net (143,738) 523,623 Inventories (580,611) 164,115 Prepaid, interest receivable and other assets 131,891 120,589 Accounts payable and accrued expenses 1,666,162 879,091 Deferred revenue (200,756) (71,500) ------------ ------------ Total adjustments 1,758,086 2,766,694 ------------ ------------ Net cash used in operating activities (3,604,175) (2,791,399) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments available for sale 0 (3,023,065) Proceeds from maturity/sale of investments 300,000 7,779,984 Purchases of property and equipment (223,417) (341,897) Payments for patent costs (152,221) (232,927) ------------ ------------ Net cash (used in) provided by investing activities (75,638) 4,182,095 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 0 5,064,915 ------------ ------------ Net cash provided by financing activities 0 5,064,915 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,679,813) 6,455,611 CASH AND CASH EQUIVALENTS, beginning of period 17,467,875 1,087,033 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 13,788,062 $ 7,542,644 ============ ============
The accompanying notes are an integral part of these financial statements. 5 PARKERVISION, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ACCOUNTING POLICIES ------------------- The accompanying unaudited consolidated financial statements of ParkerVision, Inc. and subsidiary (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. All normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operations have been included. Operating results for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. These interim consolidated financial statements should be read in conjunction with the Company's latest Annual Report on Form 10-K for the year ended December 31, 2003. There have been no changes in accounting policies from those stated in the Annual Report on Form 10-K for the year ended December 31, 2003. COMPREHENSIVE INCOME. The Company's other comprehensive income is comprised of net unrealized gains (losses) on investments available-for-sale which are included in accumulated other comprehensive income in the consolidated balance sheets. The Company's other comprehensive loss for the three-month periods ended March 31, 2004 and 2003 was $(1,034) and $(118,503), respectively. The Company's total comprehensive loss for the three-month periods ended March 31, 2004 and 2003 was $(5,363,295) and $(5,676,596), respectively. CONSOLIDATED STATEMENTS OF CASH FLOWS. The Company paid no cash for income taxes or interest for the three-month periods ended March 31, 2004 and 2003. For the three-month period ended March 31, 2003, the Company issued restricted stock as compensation to employees with an aggregate fair value of $130,000. ROYALTY REVENUE. In the first quarter of 2004, the Company's wireless division recognized a one-time previously deferred royalty payment upon termination of a licensing agreement in the amount of $250,000. WARRANTY COSTS For wireless products, camera products and related accessories, the Company warrants against defects in workmanship and materials for approximately one year. For PVTV systems, the Company warrants against software bugs and defects in workmanship and material for a period of ninety days from the site commissioning date. Estimated costs related to warranties are accrued at the time of revenue recognition and are included in cost of sales. A reconciliation of the changes in the aggregate product warranty liability for the three months ended March 31, 2004 and the year ended December 31, 2003 is as follows: 6
Warranty Reserve Debit (Credit) ------------------------ December 31, March 31, 2003 2004 (unaudited) --------- --------- Balance at the beginning of the period $(199,084) $(248,230) Accruals for warranties issued during the period (10,291) (55,729) Accruals related to pre-existing warranties (including changes in estimates) 0 0 Settlements made (in cash or in kind) during the period 2,261 104,875 --------- --------- Balance at the end of the period $(207,114) $(199,084) ========= =========
The Company offers extended service and support contracts on its PVTV automated production systems. A reconciliation of the changes in the aggregate deferred revenue from extended service contracts for the three months ended March 31, 2004 and for the year ended December 31, 2003 is as follows:
Deferred Revenue from Extended Service Contracts Debit (Credit) ------------------------------ December 31, March 31, 2003 2004 (unaudited) --------- --------- Balance at the beginning of the year $(561,584) $(383,704) Accruals for contracts issued during the year (113,300) (737,617) Revenue recognized during the year 143,452 559,737 --------- --------- Balance at the end of the year $(531,432) $(561,584) ========= =========
The remaining deferred revenue in the Consolidated Balance Sheets relates to deposits received from customers for orders of PVTV systems and related training and installation services pertaining to those systems. ACCOUNTING FOR STOCK BASED COMPENSATION. At March 31, 2004, the Company has two stock-based employee compensation plans, which are accounted for under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. For employee stock option grants, no stock-based employee compensation cost is reflected in the Consolidated Statements of Operations, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on the net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", as amended by FASB Statement No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", to stock-based employee compensation. 7 Three months ended --------------------------- March 31, March 31, 2004 2003 ----------- ----------- Net Loss, as reported $(5,362,261) $(5,558,093) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (2,885,245) (3,606,019) ----------- ----------- Pro Forma net loss (8,247,506) (9,164,112) =========== =========== Basic Net Loss Per Share: As Reported $ (.30) $ (.39) =========== =========== Pro Forma $ (.46) $ (.65) =========== =========== 2. PENDING SALE OF THE VIDEO BUSINESS UNIT ASSETS ---------------------------------------------- On February 25, 2004, the Company entered into an asset purchase agreement ("Asset Agreement") and various ancillary agreements with Thomson Broadcast & Media Solutions, Inc. ("Thomson") and Thomson Licensing, SA ("Thomson Licensing" and, together with Thomson, the "Purchasers") for the sale of all of the assets of the Company's video division, with certain limited exceptions. The transaction is expected to close in the second quarter of 2004, assuming the required approval of the Company's stockholders is obtained and other required closing conditions are satisfied. Under the Asset Agreement and the various ancillary agreements, the Company will sell to the Purchasers the business and related assets of its video division, excluding certain contracts, accounts receivable and other assets. The assets to be sold are those used in connection with and relating to the PVTV and CameraMan products and services, including patents, patent applications, tradenames, trademarks and other intellectual property, inventory, specified design, development and manufacturing equipment, and outstanding contracts for products and services. The Company is retaining its accounts receivable and certain other specified contracts and other assets. The purchase price of the assets is $12,500,000, subject to adjustment upon verification of the actual value of the certain tangible or current assets that will be transferred, minus certain liabilities (warranty reserves, deferred income and amounts required to satisfy certain assumed or other contractual liabilities). The upward adjustment to the purchase price, if any, cannot exceed $2,750,000. The Company currently believes that the upward adjustment to the purchase price will be approximately $1,500,000. The actual amount of the adjustment will be determined within 45 days after the closing and will be paid when the final valuation is agreed upon. A portion of the purchase price equal to $1,250,000 will be held by the Purchasers until the first anniversary of the closing as security against the Company's obligations to indemnify the Purchasers. This amount will earn interest until paid. The Company expects to realize an approximate gain of $11.8 million on the sale of the assets of the video division. The video division operating results, which represent substantially all of the Company's revenues and margins to date, will be reported as discontinued operations in the period in which the required shareholder approval of the sale is obtained, currently anticipated to be the second quarter of 2004. The operations of the video division are disclosed in Note 6; however these results may not be directly indicative of the amounts to be reported as future discontinued operations as there are certain allocated costs included in these divisional results of operations which will be continue to be incurred by the Company subsequent to the sale of the video division. 8 3. LOSS PER SHARE -------------- Basic loss per share is determined based on the weighted average number of common shares outstanding during each period. Diluted loss per share is the same as basic loss per share as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive. The weighted average number of common shares outstanding for the three-month periods ended March 31, 2004 and 2003 is 17,959,504 and 14,076,966 respectively. The total number of options and warrants to purchase 7,078,727 and 6,715,095 shares of common stock that were outstanding at March 31, 2004 and 2003, respectively, were excluded from the computation of diluted earnings per share as the effect of these options and warrants would have been anti-dilutive. 4. INVENTORIES: ------------ Inventories consist of the following: December 31, March 31, 2003 2004 (audited) ----------- ----------- Purchased materials $ 2,094,030 $ 1,869,542 Work in process 388,096 185,041 Finished goods 474,088 404,765 Spare parts and demonstration inventory 1,175,141 1,207,097 ----------- ----------- 4,131,355 3,666,445 Less allowance for inventory obsolescence (1,148,759) (1,189,460) ----------- ----------- $ 2,982,596 $ 2,476,985 =========== =========== 5. OTHER ASSETS: ------------- Other assets consists of the following: March 31, 2004 ---------------------------------------------- Gross Carrying Accumulated Amount Amortization Net Value ------------ ------------ ------------ Patents and copyrights $ 10,940,048 $ (2,799,904) $ 8,140,144 Prepaid services 1,600,000 (800,000) 800,000 Prepaid licensing fees 2,255,000 (548,500) 1,706,500 Deposits and other 545,247 0 545,247 ------------ ------------ ------------ $ 15,340,295 $ (4,148,404) $ 11,191,891 ============ ============ ============ December 31, 2003 (audited) ---------------------------------------------- Gross Carrying Accumulated Amount Amortization Net Value ------------ ------------ ------------ Patents and copyrights $ 10,787,826 $ (2,638,862) $ 8,148,964 Prepaid services 1,600,000 (600,000) 1,000,000 Prepaid licensing fees 2,030,000 (415,333) 1,614,667 Other intangible assets 364,830 (364,830) 0 Deposits and other 549,990 0 549,990 ------------ ------------ ------------ $ 15,332,646 $ (4,019,025) $ 11,313,621 ============ ============ ============ 9 6. BUSINESS SEGMENT INFORMATION ---------------------------- The Company's segments include the Video Division and the Wireless Division. Certain reclassifications have been made to the 2003 segment results in order to conform with the 2004 presentation. Segment results are as follows (in thousands): Three months ended ---------------------- March 31, March 31, 2004 2003 -------- -------- NET REVENUES: Video Division $ 1,158 $ 1,760 Wireless Division 318 0 -------- -------- Total net sales $ 1,476 $ 1,760 ======== ======== LOSS FROM OPERATIONS: Video Division $ (1,389) $ (825) Wireless Division (3,299) (4,235) Corporate (728) (679) -------- -------- Total loss from operations $ (5,416) $ (5,739) ======== ======== DEPRECIATION: Video Division $ 95 $ 114 Wireless Division 373 339 Corporate 34 46 -------- -------- Total depreciation $ 502 $ 499 ======== ======== AMORTIZATION OF IDENTIFIABLE INTANGIBLES AND OTHER ASSETS: Video Division $ 43 $ 33 Wireless Division 251 211 -------- -------- Total amortization $ 294 $ 244 ======== ======== CAPITAL EXPENDITURES: Video Division $ 43 $ 58 Wireless Division 180 284 Corporate 0 0 -------- -------- Total capital expenditures $ 223 $ 342 ======== ======== December 31, March 31, 2003 2004 (unaudited) -------- ----------- ASSETS: Video Division $ 4,989 $ 4,662 Wireless Division 13,650 13,469 Corporate 19,946 24,352 -------- -------- Total assets $ 38,585 $ 42,483 ======== ======== 10 Corporate assets consist of the following: December 31, March 31, 2003 2004 (unaudited) -------- ----------- Cash and investments $16,482 $20,476 Prepaid expenses and other 1,597 1,775 Property and equipment, net 561 595 Other assets 1,306 1,506 ------- ------- Total assets $19,946 $24,352 ======= ======= 7. STOCK OPTIONS ------------- For the three-month period ended March 31, 2004, the Company granted stock options under the 2000 Performance Equity Plan (the "2000 Plan") to its non-employee directors to purchase an aggregate of 45,000 shares of its common stock at an exercise price of $9.06 per share. These share options are immediately vested and expire ten years from the date of the grant. The Company grants stock options to employees in connection with hiring and retention of employees. For the three-month period ended March 31, 2004, the Company granted share options to an employee to purchase 7,500 shares of its common stock at an exercise price of $7.15 per share. The options vest ratably over five years and expire five years from the date vested. As of March 31, 2004, options to purchase 1,545,090 shares of common stock were available for future grants under the 2000 Plan. 8. LEGAL PROCEEDINGS ----------------- The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position, results of operations or liquidity. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements - -------------------------- When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, the words or phrases "will likely result", "management expects" or "Company expects", "will continue", "is anticipated", "estimated" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including the timely development and acceptance of new products, sources of supply and concentration of customers. The Company has no obligation to publicly release the results of any revisions, which may be made to any forward-looking statements to reflect, anticipated events or circumstances occurring after the date of such statements. Results of Operations for Each of the Three-Month Periods Ended March 31, 2004 - ------------------------------------------------------------------------------ and 2003 - -------- The Company has entered into an agreement to sell the video division, which is expected to close in the second quarter of 2004. The discussion below reflects the historical performance of the division and, to some extent, its continued 11 operations until the sale is completed, but does not reflect the Company's operations as affected by the consummation of the sale. Revenues - -------- Revenues for the three months ended March 31, 2004 were $1,476,000, as compared to revenues of $1,760,000 for the same period in 2003. The decrease of approximately $284,000 was due to a decrease in video division revenues of approximately $602,000, offset by $318,000 of wireless division revenues. Essentially all of the Company's revenues to date have been generated by is video division. In the first quarter of 2004, the Company's wireless division recognized initial sales of its wireless end-user products, and a one-time previously deferred royalty payment upon termination of a licensing agreement. Video Division - -------------- Video division revenues by major product lines, including service and support related to those products, as a percentage of total video division revenues for the three-month periods ended March 31, 2004 and 2003 were as follows: Three Months Ended ------------------------------------ March 31, 2004 March 31, 2003 -------------- -------------- PVTV systems 63% 62% Camera systems 18% 21% Support and other services 19% 17% The number of PVTV and stand-alone CameraMan systems sold and the average selling price per system for the three-month periods were as follows: Average Selling Price Number of Systems Sold per System ---------------------- ----------------------- March 31, March 31, March 31, March 31, 2004 2003 2004 2003 --------- --------- --------- --------- PVTV Systems 2 4 $216,000 $271,000 Camera Systems 15 21 $ 13,900 $ 17,800 In addition to the system sales, the Company sold approximately $295,000 in PVTV add-on cameras, components and backup modules to existing installations during the three months ended March 31, 2004. The $602,000 decrease in video division revenues was due to a decrease in both product and support revenues. PVTV product revenues decreased approximately $356,000 due to a decrease in the volume of units sold and a decline in the average selling price per system. The decline in the number of PVTV systems sold is believed to be the result of uncertainty among the broadcasters as to the Company's pending sale of the video division assets to Thomson as discussed in Note 2 to the Consolidated Financial Statements. The decline in average selling price was due to the mix of product sold as well as an overall price reduction on certain PVTV products initiated in the second quarter of 2003. Camera revenues declined by approximately $164,000 due to a decline in the number of units sold, and a decrease in the average selling price per system. The decrease in the average selling price per system was due to the introduction of a new lower priced three-chip camera system in late 2003. For the three month period ended March 31, 2004, the Company's service and support revenue decreased by approximately $82,000 as compared to the same period in 2003. This decrease was due to the timing of training and other services in relation to PVTV system deliveries. The Company's recurring support revenue from PVTV support contracts remained relatively stable during the three-month periods ended March 31, 2004 and 2003. 12 Wireless Division - ----------------- In the fourth quarter of 2003, the Company's wireless division began selling its first D2D-based products, wireless local area networking cards for use in laptop computers and wireless USB adaptors for both laptop and desktop computers. The Company added wireless four-port routers to its initial product line during the first quarter of 2004. For the three month period ended March 31, 2004, revenues of approximately $68,200 were recognized from sales of wireless products. These sales were generated through the Company's website and through TigerDirect.com, an Internet-based retailer specializing in high tech electronic merchandise. The average selling price of both the wireless local area networking card and the USB adaptor is approximately $76 and the average selling price of the wireless four-port router is approximately $200. For sales through TigerDirect.com, the Company recognizes revenue on a sell-through basis, that is, when the product is sold through to the end-user. This is determined based on information received from TigerDirect.com. In addition, the Company currently offers a 30-day money back guarantee on its wireless products. Since the Company does not have sufficient history with sales of this nature to establish an estimate of expected returns, it has deferred 100% of wireless product sales to the end-user until expiration of the 30-day guarantee period. At March 31, 2004, the Company had deferred revenue from sales of wireless products of approximately $36,900. The Company has entered into outside public relations and manufacturer representative arrangements for introduction of the Company's products to retail storefronts. The Company is exploring additional channels of marketing and commercial product distribution including value-added reseller relationships. For the three-month period ended March 31, 2004, the Company recognized a one-time royalty revenue of $250,000 from the termination of a 1999 licensing agreement with Symbol Technologies, Inc. This amount, which represents prepaid royalties under the agreement, was previously included in deferred revenue. 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, and the ability of the Company to build brand recognition and distribution. 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 three-month periods ended March 31, 2004 and 2003, gross margins based on aggregate revenues as a percentage of sales were 38.3% and 32.2%, respectively. The gross margins for products and services by division for the three-month periods were as follows: Video Division - -------------- March 31, 2004 March 31, 2003 -------------------- ------------------- $ % $ % --------- ------ --------- ------ Products $ 333,200 35.6% $ 534,000 36.7% Services (37,400) (16.8)% 31,900 10.5% --------- ------ --------- ------ Total $ 295,800 25.5% $ 565,900 32.2% ========= ====== ========= ====== 13 The decrease in video product margin from period to period was primarily due to the mix of products sold and the absorption of inventory obsolescence reserves and fixed overhead over a lower production volume in the first quarter of 2004. The decline in service margins was primarily a result of a decline in training and other service revenue due to the decrease in new PVTV product sales late in 2003 and in the first quarter of 2004. The costs related to this service revenue are relatively fixed over the short term due to the time and cost required to recruit and train PVTV support personnel. Wireless Division - ----------------- March 31, 2004 March 31, 2003 ------------------- ----------------- $ % $ % -------- ------- ------- ------- Products $ 20,100 29.5% N/A N/A Royalties 250,000 100.0% N/A N/A -------- ------- ------- ------- Total $270,100 84.9% N/A N/A ======== ======= ======= ======= The Company initiated sales of its wireless products in the fourth quarter of 2003. Management anticipates margins from wireless product sales will improve as production volumes increase. The margin recognized on royalty revenues was due to the recognition of a one-time, previously deferred prepaid royalty in connection with the termination of a licensing agreement. The Company strives to improve its gross margin through product pricing, labor efficiencies, and product design. There can be no assurance, however that gross margins in 2004 will improve over, or remain stable with, the gross margins attained in the first quarter of 2004. Gross margins for the remainder of 2004 may be negatively impacted by many factors, including fluctuating component costs, overhead absorption, and one-time production costs associated with new product introductions in the wireless division. Research and Development Expenses - --------------------------------- The Company's research and development expenses for the three-month period ended March 31, 2004 were $3,375,400 as compared to $4,259,800 for the same period in 2003. The decrease of approximately $884,400 was primarily due to the Company's ability to obtain access to certain critical prototype components which were previously being developed by the Company. The elimination of this development program resulted in a reduction in wireless engineering staff late in the third quarter of 2003, as well as a reduction in certain third-party development fees. In addition, the Company's wireless prototype foundry expenses decreased from the first quarter of 2003 to the same period in 2004, largely due to timing of prototype foundry runs and related foundry costs. Marketing and Selling Expenses - ------------------------------ Marketing and selling expenses for the three-month period ended March 31, 2004 were $761,000 as compared to $872,000 for the same period in 2003. The decrease of approximately $111,000 was primarily due to a reduction in video division sales personnel in late 2003 and decreases in sales commissions, trade show and travel expenses in the first quarter of 2004 in the video division. These decreases were somewhat offset by increases in advertising expenses and outside consulting fees in the wireless division to promote the sales of its wireless products. General and Administrative Expenses - ----------------------------------- For the three-month period ended March 31, 2004, general and administrative expenses were $1,844,400 compared to $1,173,700 for the same period in 2003. The increase of approximately $670,700 was primarily due to professional fees incurred in connection with the pending sale of the video division assets as well as increases in corporate outside professional fees, offset somewhat by decreases in corporate insurance costs. 14 Interest and Other Income - ------------------------- Interest and other income consists of interest earned on the Company's investments, and net gains recognized on the sale of investments. Interest and other income for the three-month period ended March 31, 2004 was $53,300 as compared to $181,400 for the same period in 2003. The decrease of approximately $128,100 was primarily due to the continued use of cash and investments to fund operations and a decline in interest rates due to a change in the mix of the Company's investment portfolio. Loss and Loss per Share - ----------------------- The Company's net loss decreased from approximately $5,558,000 or $0.39 per common share for the three month period ended March 31, 2003 to approximately $5,362,300 or $0.30 per common share for the same period in 2004, representing a net loss decrease of approximately $195,800 or $0.09 per common share. The net losses by reportable segment are as follows (in thousands): Three months ended ------------------------------ March 31, 2004 March 31, 2003 -------------- -------------- Wireless division operating loss $(3,299) $(4,235) Video division operating loss (1,389) (825) Corporate expense (727) (679) Interest income 53 181 ------- ------- Total net loss $(5,362) $(5,558) ======= ======= The $936,000 decrease in the wireless division's operating losses for the three month period ended March 31, 2004 compared to the same period in 2003 was due to decreases in research and development expenses, offset by margins generated from the sale of wireless products and the recognition of wireless royalty revenue in the first quarter of 2004. The $564,000 increase in the video division's operating losses for three month period ended March 31, 2004 compared to the same period in 2003 was primarily due to a reduction in revenues and an increase in general and administrative expenses related to the sale of the video division assets, offset by reductions in sales and marketing expenses. The $48,000 increase in corporate expenses was due to an increase in outside professional fees offset somewhat by reductions in insurance costs. Backlog - ------- At March 31, 2004, the Company had a backlog of approximately $1,202,000 which primarily represents PVTV products and related services. As a result of the pending sale of the video division assets, which is expected to close during the second quarter of 2004, the Company does not anticipate recognizing substantial revenues from its video backlog in the second quarter of 2004. Liquidity and Capital Resources - ------------------------------- At March 31, 2004, the Company had working capital of approximately $18.3 million including approximately $16.5 million in cash, cash equivalents and short-term investments. This represents a decrease of approximately $4.9 million from working capital of $23.2 million at December 31, 2003. This decrease is due to the continued use of cash and cash equivalents and investments to fund operations. The increase in accounts payable from December 31, 2003 to March 31, 2004 was due to timing differences pertaining to receipt and payment of various invoices. No specific vendor was responsible for the increase in accounts payable. 15 The Company's future business plans call for continued investment in sales, marketing and product development principally related to its wireless division. The Company's ability to increase wireless product revenues will largely depend upon the rate at which the Company is able to secure additional distribution channels, increase brand recognition and customer demand for its products and increase production volumes sufficiently to meet such demand. Although management expects increases in revenues from sales of its wireless products during 2004, the Company does not anticipate that overall revenues for 2004 will be sufficient to offset the expenses of its continued operations. Therefore, management expects operating losses and negative cash flows from operations to continue in 2004 and possibly beyond. The Company intends to utilize its working capital to fund its future business plans. The Company believes it currently has sufficient capital to fund its business plan for 2004. The Company's principal source of liquidity at March 31, 2004 consisted of approximately $16.5 million in cash, cash equivalents and short-term investments. The Company anticipates that its working capital will be augmented by the net proceeds from the sale of the video division assets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. ITEM 4. CONTROLS AND PROCEDURES. An evaluation of the effectiveness of the Company's disclosure controls and procedures as of March 31, 2004 was made under the supervision and with the participation of the Company's management, including the chief executive officer and chief accounting officer. Based on that evaluation, they concluded that the Company's disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. As of the end of the period covered by this report, there has been no significant change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position, results of operations or liquidity. 16 ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES. Sales of Unregistered Securities - --------------------------------
Consideration received and Exemption If option, warrant or description of underwriting or from convertible security, Date of Title of Number other discounts to market price registration terms of exercise or sale security sold afforded to purchasers claimed conversion - ------------------------------------------------------------------------------------------------------------------ 1/15/04 Options to 45,000 Options granted - no 4(2) Options are fully vested purchase consideration received by at an exercise price of common stock Company until exercise $9.06 per share and to three expire ten years from directors the date of the grant pursuant to the 2000 Plan 2/17/04 Options to 7,500 Options granted - no 4(2) Expire five years from purchase consideration received by the date vested, options common stock Company until exercise vest ratably over five granted to years at an exercise an employee price of $7.15 per share
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 31.1 Section 302 Certification of Jeffrey L. Parker 31.2 Section 302 Certification of Cynthia L. Poehlman 32.1 Section 906 Certification (b) REPORTS ON FORM 8-K. 1. Form 8-K, dated February 25, 2004. Item 5 - Other events. Report of ParkerVision, Inc. entering into an asset purchase agreement and various ancillary agreements with Thomson Broadcast & Media Solutions, Inc. and Thomson Licensing, SA for the sale of certain designated assets of the Company's video division. 2. Form 8-K, dated March 11, 2004. Item 5 - Other events. Report of earnings release for the 2003 fourth quarter and year-end results. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ParkerVision, Inc. Registrant May 7, 2004 By: /s/Jeffrey L. Parker -------------------------- Jeffrey L. Parker Chairman and Chief Executive Officer May 7, 2004 By: /s/Cynthia L. Poehlman -------------------------- Cynthia L. Poehlman Chief Accounting Officer 18 EX-31.1 2 v03107_ex31-1.txt EXHIBIT 31.1 SECTION 302 CERTIFICATION I, Jeffrey L. Parker, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of ParkerVision, Inc.; 2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, The registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 7, 2004 Name: /s/ Jeffrey L. Parker ----------- ------------------------------ Title: Chief Executive Officer ----------------------------- EX-31.2 3 v03107_ex31-2.txt EXHIBIT 31.2 SECTION 302 CERTIFICATION I, Cynthia Poehlman certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of ParkerVision, Inc.; 2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 7, 2004 Name: /s/ Cynthia Poehlman ------------- -------------------------- Title: Chief Accounting Officer ------------------------- EX-32.1 4 v03107_ex32-1.txt EXHIBIT 32.1 SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of ParkerVision, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: May 7, 2004 Name: /s/ Jeffrey L. Parker ----------- ------------------------- Title: Chief Executive Officer ------------------------ Dated: May 7, 2004 Name: /s/ Cynthia Poehlman ----------- ------------------------- Title: Chief Accounting Officer ------------------------ -----END PRIVACY-ENHANCED MESSAGE-----