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 JUNE 30, 2003
( ) 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 August 5, 2003, 15,496,782 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
June 30,
2003 December 31,
ASSETS (unaudited) 2002
------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,445,456 $ 1,087,033
Short-term investments 9,129,597 13,867,763
Accounts receivable, net of allowance for
doubtful accounts of $96,768 at June 30,
2003 and $105,984 at December 31, 2002 1,834,086 2,158,577
Inventories, net 2,156,682 3,090,884
Prepaid expenses and other 2,338,553 2,587,376
------------ ------------
Total current assets 17,904,374 22,791,633
PROPERTY AND EQUIPMENT, net 5,625,520 6,183,534
INTANGIBLE ASSETS AND OTHER, net 10,797,203 8,870,803
------------ ------------
Total assets $ 34,327,097 $ 37,845,970
============ ============
The accompanying notes are an integral part of these balance sheets.
2
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30,
2003 December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) 2002
------------------------------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 928,352 $ 759,242
Accrued expenses:
Salaries and wages 699,399 951,430
Warranty reserves 193,652 248,230
Lease obligation 271,636 357,417
Professional fees 102,231 271,225
Other accrued expenses 80,181 107,598
Deferred revenue 1,045,147 1,003,466
------------ ------------
Total current liabilities 3,320,598 3,698,608
DEFERRED INCOME TAXES 100,773 100,773
COMMITMENTS AND CONTINGENCIES
(Note 9)
------------ ------------
Total liabilities 3,421,371 3,799,381
------------ ------------
SHAREHOLDERS' EQUITY:
Convertible preferred stock, $1 par value,
5,000,000 shares authorized, 0 and
13,678 shares issued and
outstanding at June 30, 2003 and December 31,
2002, respectively 0 13,678
Common stock, $.01 par value, 100,000,000 shares
authorized, 15,496,782 and 13,989,329 shares
issued and outstanding at June 30, 2003 and
December 31, 2002, respectively 154,968 139,893
Warrants outstanding 16,807,505 16,807,505
Additional paid-in capital 98,057,198 90,428,998
Accumulated other comprehensive income 147,620 310,869
Accumulated deficit (84,261,565) (73,654,354)
------------ ------------
Total shareholders' equity 30,905,726 34,046,589
------------ ------------
Total liabilities and shareholders' equity $ 34,327,097 $ 37,845,970
============ ============
The accompanying notes are an integral part of these statements.
3
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended June 30, Six months ended June 30,
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Product revenue, net $ 2,141,897 $ 2,788,368 $ 3,597,413 $ 5,510,790
Support and other services revenue, net 248,340 235,740 552,994 539,325
------------ ------------ ------------ ------------
Total net revenues 2,390,237 3,024,108 4,150,407 6,050,115
------------ ------------ ------------ ------------
Cost of goods sold - products 1,250,918 1,606,119 2,172,456 3,049,154
Cost of goods sold - support and other services 314,132 288,100 586,848 597,598
------------ ------------ ------------ ------------
Total cost of goods sold 1,565,050 1,894,219 2,759,304 3,646,752
------------ ------------ ------------ ------------
Gross margin 825,187 1,129,889 1,391,103 2,403,363
------------ ------------ ------------ ------------
Research and development expenses 3,509,112 3,205,177 7,768,862 6,654,633
Marketing and selling expenses 1,102,184 1,109,159 1,974,174 1,821,455
General and administrative expenses 1,384,555 1,243,573 2,558,226 2,285,246
Loss on disposal of property and equipment 0 44,821 0 52,091
------------ ------------ ------------ ------------
Total operating expenses 5,995,851 5,602,730 12,301,262 10,813,425
------------ ------------ ------------ ------------
Loss from operations (5,170,664) (4,472,841) (10,910,159) (8,410,062)
Interest and other income 121,546 203,268 302,948 485,568
------------ ------------ ------------ ------------
Net loss $ (5,049,118) $ (4,269,573) $(10,607,211) $ (7,924,494)
============ ============ ============ ============
Basic and diluted net loss per common share $ (0.33) $ (0.31) $ (0.72) $ (0.57)
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
4
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,049,118) $ (4,269,573) $(10,607,211) $ (7,924,494)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 708,573 723,846 1,451,938 1,434,287
Amortization of discounts on investments 46,585 56,136 91,423 126,135
Provision for obsolete inventories 75,000 75,000 150,000 150,000
Stock compensation 200,000 290,816 593,096 693,759
Gain on sale of investments (64,083) (1,461) (169,606) (14,249)
Loss on disposal of property and equipment 0 44,821 0 52,091
Changes in operating assets and liabilities:
Accounts receivable, net (199,132) (48,128) 324,491 (978,452)
Inventories 620,087 332,678 784,202 (390,590)
Prepaid and other assets 386,530 581,730 507,119 312,451
Accounts payable and accrued expenses (1,298,782) (815,526) (419,691) (243,866)
Deferred revenue 113,181 224,163 41,681 (122,421)
------------ ------------ ------------ ------------
Total adjustments 587,959 1,464,075 3,354,653 1,019,145
------------ ------------ ------------ ------------
Net cash used in operating activities (4,461,159) (2,805,498) (7,252,558) (6,905,349)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments available for sale (1,787,338) (6,474,508) (4,810,403) (7,809,671)
Proceeds from sale and maturity of investments 1,683,520 13,893,048 9,463,504 17,659,822
Proceeds from sale of property and equipment 0 0 0 7,200
Purchases of property and equipment (96,519) (548,030) (438,416) (676,736)
Payments for patent costs (449,625) (471,681) (682,552) (778,088)
------------ ------------ ------------ ------------
Net cash (used in) provided by investing activities (649,962) 6,398,829 3,532,133 8,402,527
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 13,933 383,225 5,078,848 383,225
------------ ------------ ------------ ------------
Net cash provided by financing activities 13,933 383,225 5,078,848 383,225
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (5,097,188) 3,976,556 1,358,423 1,880,403
CASH AND CASH EQUIVALENTS, beginning of period 7,542,644 2,467,382 1,087,033 4,563,535
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 2,445,456 $ 6,443,938 $ 2,445,456 $ 6,443,938
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
5
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 six-month period ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2003.
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, 2002. 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, 2002.
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) income for the
three-month periods ended June 30, 2003 and 2002 was $(44,746) and
$275,152, respectively. The Company's total comprehensive loss for the
six-month periods ended June 30, 2003 and 2002 was $(5,093,864) and
$(3,994,421), respectively. The Company's other comprehensive (loss) income
for the six-month periods ended June 30, 2003 and 2002 was $(163,249) and
$41,443, respectively. The Company's total comprehensive loss for the
six-month periods ended June 30, 2003 and 2002 was $(10,770,460) and
$(7,883,051), respectively.
CONSOLIDATED STATEMENTS OF CASH FLOWS. The Company paid no cash for income
taxes or interest for the three or six-month periods ended June 30, 2003
and 2002. On April 28, 2003 the Company issued restricted common stock,
valued at approximately $2,400,000, under the terms of the 2000 Performance
Equity Plan as consideration for professional services (see note 8).
WARRANTY COSTS
For 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. The
Company offers extended service and support contracts on its PVTV automated
production systems. A reconciliation of the changes in the aggregate
product warranty liability for the six month period ended June 30, 2003 is
as follows:
6
Warranty Reserve
Debit/(Credit)
----------
Balance at the beginning of the period $ (248,230)
Accruals for warranties issued during the period (36,098)
Accruals related to pre-existing warranties
(including changes in estimates) 0
Settlements made (in cash or in kind)
during the year 90,676
----------
Balance at the end of the period $ (193,652)
==========
A reconciliation of the changes in the aggregate deferred revenue from extended
service contracts for the six-month period ended June 30, 2003 is as follows:
Deferred Revenue
from Extended
Service Contracts
Debit/(Credit)
---------
Balance at the beginning of the period $(383,704)
Accruals for contracts issued during the period (305,125)
Revenue recognized during the period 259,632
---------
Balance at the end of the period $(429,197)
=========
ACCOUNTING FOR STOCK BASED COMPENSATION. At June 30, 2003, 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. No
stock-based employee compensation cost is reflected in net income, 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.
Six months ended
-----------------------------
June 30, June 30,
2003 2002
------------ ------------
Net loss, as reported $(10,607,211) $ (7,924,494)
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects (4,038,929) (5,678,696)
------------ ------------
Pro forma net loss $(14,646,140) $(13,603,190)
============ ============
Basic net loss per share: As reported $ (.72) $ (.57)
============ ============
Pro forma $ (.95) $ (.97)
============ ============
7
RECENT ACCOUNTING PRONOUNCEMENTS. In January 2003, the Financial Accounting
Standards Board issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities." This interpretation of ARB No. 51
"Consolidated Financial Statements" discusses the consolidation by business
enterprises of variable interest entities. FIN 46 requires that the holder
of a variable interest evaluate whether or not a variable interest entity
should be consolidated. The consolidation provisions apply immediately for
a variable interest entity created after January 31, 2003 and after June
15, 2003 for a variable interest entity created before February 1, 2003.
The adoption of this standard had no impact on the Company's financial
statements.
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
addresses the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. It
requires that certain financial instruments within its scope be classified
as a liability if the instrument embodies an obligation of the issuer. This
Statement is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company does not
expect the implementation of this standard to have any impact on its
financial statements.
2. LIQUIDITY
---------
The Company has made substantial investment in developing the technologies
for its products, the returns on which are dependent upon the generation
and realization of future revenues. The Company has incurred losses from
operations and negative cash flows in every year since inception and has
utilized the proceeds from the sale of its equity securities to fund
operations. For the six-month period ended June 30, 2003, the Company
incurred a net loss of approximately $10.6 million and negative cash flows
from operations of approximately $7.3 million. At June 30, 2003, the
Company had an accumulated deficit of approximately $84.3 million and
working capital of approximately $14.6 million. Although management expects
to generate revenues from initial sales of its wireless products in 2003,
these revenues will not be sufficient to offset the expenses from continued
investment in its video and wireless product development and marketing
activities. Therefore, operating losses and negative cash flows will
continue through 2003 and possibly beyond. As more fully discussed in Note
8, the Company obtained equity financing that it believes, along with
existing financial resources, will allow for sufficient liquidity to fund
operations through at least the next nine months.
The long-term continuation of the Company's business plans is dependent
upon generation of sufficient revenues from its products to offset expenses
and additional financing. In the event that the Company does not generate
sufficient revenues, it will be required to obtain additional funding
through public or private financing, commercial borrowings or other
financings and/or reduce certain discretionary spending. Management
believes certain operating costs could be reduced if working capital
decreases significantly and additional funding is not available. In
addition, the Company currently has no outstanding long-term debt
obligations. Failure to generate sufficient revenues, raise additional
capital and/or reduce certain discretionary spending could have a material
adverse effect on the Company's ability to achieve its intended long-term
business objectives.
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 June 30, 2003 and 2002 is 15,418,752 and 13,955,667, respectively.
The weighted average number of common shares outstanding for the six-month
periods ended June 30, 2003 and 2002 is 14,751,571 and 13,925,183,
respectively. The total number of options and warrants to purchase
6,763,845 and 6,234,899 shares of common stock that were outstanding at
June 30, 2003 and 2002, 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:
June 30, December 31,
2003 2002
------------ ------------
Purchased materials $ 1,505,674 $ 2,010,578
Work in process 87,744 74,707
Finished goods 316,707 672,356
Spare parts and demonstration inventory 1,185,404 1,165,545
------------ ------------
3,095,529 3,923,186
Less allowance for inventory obsolescence (938,847) (832,302)
------------ ------------
$ 2,156,682 $ 3,090,884
============ ============
5. OTHER ASSETS:
------------
Other assets consists of the following:
June 30, 2003
----------------------------------------------
Gross
Carrying Accumulated
Amount Amortization Net Value
------------ ------------ ------------
Patents and copyrights $ 10,294,382 $ (2,303,188) $ 7,991,194
Prepaid services 1,600,000 (200,000) 1,400,000
Prepaid licensing fees 1,080,000 (228,167) 851,833
Other intangible assets 364,830 (364,830) 0
Deposits and other 554,176 0 554,176
------------ ------------ ------------
$ 13,893,388 $ (3,096,185) $ 10,797,203
============ ============ ============
December 31, 2002
----------------------------------------------
Gross
Carrying Accumulated
Amount Amortization Net Value
------------ ------------ ------------
Patents and copyrights $ 9,611,828 $ (1,981,020) $ 7,630,808
Prepaid licensing fees 1,080,000 (120,167) 959,833
Other intangible assets 364,830 (339,489) 25,341
Deposits and other 254,821 0 254,821
------------ ------------ ------------
$ 11,311,479 $ (2,440,676) $ 8,870,803
============ ============ ============
9
6. BUSINESS SEGMENT INFORMATION
----------------------------
The Company's segments include the Video Products Division ("Video
Division") and the Wireless Technology Division ("Wireless Division").
Segment results are as follows (in thousands):
Three months ended Six months ended
--------------------- ---------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
NET SALES:
Video Division $ 2,390 $ 3,024 $ 4,150 $ 6,050
Wireless Division 0 0 0 0
-------- -------- -------- --------
Total net sales $ 2,390 $ 3,024 $ 4,150 $ 6,050
======== ======== ======== ========
LOSS FROM OPERATIONS:
Video Division $ (985) $ (816) $ (2,025) $ (991)
Wireless Division (4,186) (3,657) (8,885) (7,419)
-------- -------- -------- --------
Total loss from operations $ (5,171) $ (4,473) $(10,910) $ (8,410)
======== ======== ======== ========
DEPRECIATION:
Video Division $ 124 $ 131 $ 252 $ 267
Wireless Division 374 362 745 719
-------- -------- -------- --------
Total depreciation $ 498 $ 493 $ 997 $ 986
======== ======== ======== ========
AMORTIZATION OF
IDENTIFIABLE INTANGIBLES
AND OTHER ASSETS:
Video Division $ 45 $ 32 $ 78 $ 61
Wireless Division 166 199 377 387
-------- -------- -------- --------
Total amortization $ 211 $ 231 $ 455 $ 448
======== ======== ======== ========
CAPITAL EXPENDITURES:
Video Division $ 28 $ 183 $ 86 $ 236
Wireless Division 69 365 353 435
Corporate 0 0 0 6
-------- -------- -------- --------
Total capital expenditures $ 97 $ 548 $ 439 $ 677
======== ======== ======== ========
June 30, December 31,
2003 2002
---------- ----------
ASSETS:
Video Division $ 5,695 $ 7,052
Wireless Division 15,370 13,758
Corporate 13,262 17,036
---------- ----------
Total assets $ 34,327 $ 37,846
========== ==========
10
Corporate assets consist of the following:
June 30, December 31,
2003 2002
---------- ----------
Cash and investments $ 11,575 $ 14,955
Prepaid & other 828 1,454
Property and equipment, net 360 427
Other assets 499 200
---------- ----------
Total assets $ 13,262 $ 17,036
========== ==========
7. STOCK OPTIONS
-------------
For the three month period ended June 30, 2003, the Company granted stock
options under the 1993 Stock Plan (the "1993 Plan") to purchase an
aggregate of 48,000 shares of its common stock at exercise prices ranging
from $5.42 to $8.78 per share in connection with hiring and retention of
employees. These options vest ratably over five years and expire five years
from the date they become vested.
The Company also granted stock options under the 2000 Performance Equity
Plan (the "2000 Plan") in connection with hiring an employee to purchase an
aggregate of 3,000 shares of its common stock at an exercise price of $6.50
per share. These options vest ratably over five years and expire five years
from the date they become vested.
As of June 30, 2003 options to purchase 2,528,540 and 185,491 shares of
common stock were available for future grants under the 2000 and 1993
Plans, respectively. As of September 10, 2003 the Company will no longer be
able to issue grants under the 1993 Plan.
8. STOCK AUTHORIZATION AND ISSUANCE
--------------------------------
COMMON STOCK
On March 26, 2003, the Company received $5,078,200 from the sale of an
aggregate of 1,154,437 shares of its common stock in private placement
transactions pursuant to Section 4(2) of the Securities Act of 1933, as
amended. These shares constitute approximately 7.6% of the Company's
outstanding common stock on an after-issued basis. Leucadia National
Corporation and another third party purchased 659,387 shares of common
stock at a price of $3.91 per share. The Parker family, including CEO
Jeffrey Parker, purchased 495,050 shares of common stock at the market
price of $5.05 per share.
On April 28, 2003, the Company entered into an agreement with a corporate
third party to conceive and develop new business opportunities for the
Company. In consideration of the services to be rendered over a three-year
term, the Company issued 250,000 shares of restricted common stock, under
the terms of the 2000 Performance Equity Plan with an aggregate value of
approximately $2,400,000, or $9.60 per share. The shares are fully vested
and non-forfeitable, and they are subject to a sales limitation of a
maximum of 83,334 shares per year. The $2,400,000 was capitalized and is
being amortized to expense over the three-year term of the related
agreement.
11
9. 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 and Six-Month Periods Ended June 30,
- --------------------------------------------------------------------------------
2003 and 2002
- -------------
Revenues
- --------
Revenues for the three months ended June 30, 2003 decreased $633,871 as compared
to the same period in 2002 and revenues for the six-month period ended June 30,
2003 decreased by $1,899,708. This decrease in revenues was due to a decrease in
camera revenue of approximately $593,000 and $732,000 for the three and six
month periods, respectively, and a decrease in PVTV(TM) revenue of approximately
$53,000 and $1,182,000 for the three and six month periods respectively. The
number of camera and PVTV(TM) systems sold and the average selling price per
system for the three and six month periods are as follows:
Average Selling
Number of Systems Sold Price per System
--------------------- ---------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
PVTV(TM) SYSTEMS
Three month period 5 5 $324,000 $334,000
Six month period 9 10 $300,000 $388,000
CAMERA SYSTEMS
Three month period 37 147 $ 14,500 $ 7,600
Six month period 58 226 $ 15,400 $ 7,200
The decrease in PVTV(TM) revenue for the three and six month periods was
primarily due to the mix of products sold, resulting in a lower average selling
price per system. For the three and six months periods ended June 2002, the
systems sold were primarily dual configuration systems for higher broadcast
12
markets. In comparison, for the three and six month periods ended June 2003, the
majority of systems sold were single configuration systems which have a
substantially lower selling price per system.
Camera revenues declined due to a notable decrease in the number of units sold,
only partially offset by an increase in the average selling price per system.
The decline in unit sales is due to the discontinuation of the Company's single
chip product line in late 2002, offset somewhat by an increase in sales of the
Company's higher-end three chip camera systems. The increase in average selling
price per system is reflective of the shift in sales to the higher priced three
chip systems.
Gross Margin
- ------------
For the three-month periods ended June 30, 2003 and 2002, gross margins based on
aggregate revenues, as a percentage of sales were 34.5% and 37.4%, respectively.
For the six-month periods ended June 30, 2003 and 2002, gross margins as a
percentage of sales were 33.5% and 39.7%, respectively. The decreases in margins
are primarily due to the mix of products sold and the absorption of relatively
fixed overhead costs over a lower production volume in the first half of 2003.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses for the three and six month
periods ended June 30, 2003 increased $303,935 and $1,114,229 as compared to the
same periods in 2002. The increase on a quarterly basis is primarily due to
increased third party development fees and prototype chip development expenses.
The year to date increase is the result of increased wireless prototype chip
development expenses including foundry costs, increased personnel costs and
increased third party development fees.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses decreased $6,975 for the three-month period and
increased $152,719 for the six-month period ended June 30, 2003 as compared to
the same periods in 2002. The decrease for the three-month period ended June 30,
2003 is primarily due to decreases in trade show and travel expenses in the
video division offset somewhat by an increase in personnel in the wireless
division in late 2002 and early 2003. The year to date increase is primarily due
to an increase in personnel in the wireless division in late 2002 and early
2003.
General and Administrative Expenses
- -----------------------------------
For the three and six month period ended June 30, 2003, general and
administrative expenses increased $140,982 and $272,980 over the same periods in
2002. These increases are largely due to increased insurance premiums and
professional fees.
Interest and Other Income
- -------------------------
Interest and other income consist of interest earned on the Company's
investments, as well as net gains on the sale of investments. Interest and other
income for the three and six month period ended June 30, 2003 decreased $81,722
and $182,620 from the same periods in 2002. This decrease is the result of
declining interest rates and continued use of cash and investments to fund
operations.
Loss and Loss per Share
- -----------------------
The Company's net loss increased by $779,545 or two cents per common share from
the three-month period ended June 30, 2003 to the same period in 2002. This
increase in net loss is largely due to the decreased revenues and gross margin,
and increases in research and development and general and administrative
expenses. On a year to date basis, the Company's net loss increased by
$2,682,717 or $0.15 per common share. This increase in net loss is primarily due
to decreased revenues from the video
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division, increased expenses in wireless research and development, and marketing
and selling expenses and increases in general and administrative expenses for
both divisions.
Backlog
- -------
At June 30, 2003, the Company had a backlog of approximately $490,000 which
consists primarily of PVTV systems and related services with expected delivery
dates during the third quarter of 2003. The backlog at June 30, 2003 is not
necessarily indicative of future quarters performance.
Liquidity and Capital Resources
- -------------------------------
At June 30, 2003, the Company had working capital of $14.6 million, a decrease
of $4.5 million from $19.1 million at December 31, 2002. The decrease is due to
the continued use of cash and cash equivalents and short-term investments to
fund operations. The Company's principal source of liquidity at June 30, 2003
consisted of approximately $11.6 million in cash, cash equivalents and
short-term investments.
On March 27, 2003, the Company received $5,078,200 from the sale of an aggregate
of 1,154,437 shares of its common stock in private placement transactions which
increased working capital for the first quarter. These shares constitute
approximately 7.6% of the Company's outstanding common stock on an after-issued
basis. Leucadia National Corporation and another third party purchased 659,387
shares of common stock at a price of $3.91 per share. The Parker family,
including CEO Jeffrey Parker, purchased 495,050 shares of common stock at the
market price of $5.05 per share.
The Company's future business plans call for continued investment in research
and development and sales and marketing costs related to its video and wireless
technologies. The Company intends to utilize its working capital to fund its
future business plans. Although management expects to generate revenues from
initial sales of its wireless products in 2003, these revenues together with the
video related revenues will not be sufficient to offset the expenses from the
continued investment in its video and wireless product development and sales and
marketing activities. Therefore, operating losses and negative cash flows will
continue through 2003 and possibly beyond.
The Company believes that its current capital resources together with the
proceeds of the March 2003 equity financing are currently sufficient to support
the Company's liquidity requirements at least through the next nine months. The
long-term continuation of the Company's business plans is dependent upon
generation of sufficient revenues from its products to offset expenses. In the
event that the Company does not generate sufficient revenues, it will be
required to obtain additional funding through public or private sales of
securities, commercial borrowings and/or other financing techniques. In
addition, the Company currently has no outstanding long-term debt obligations.
Management believes certain discretionary spending and operating costs could be
reduced if working capital decreases significantly from the current level and
additional funding is not available. The effect of any cost cutting measures,
however, may not be immediately reflected in the financial condition of the
Company, and may have an adverse impact on the current business and near-term
plans of the Company. Failure to generate sufficient revenues, raise additional
capital and/or reduce spending could have a material adverse effect on the
Company's ability to achieve its intended long-term business objectives.
ITEM 4. CONTROLS AND PROCEDURES.
An evaluation of the effectiveness of the Company's disclosure controls and
procedures as of June 30, 2003 was made under the supervision and with the
participation of the Company's management, including the chief executive officer
and chief financial officer. Based on that evaluation, they
14
concluded that the Company's disclosure controls and procedures are effective 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. During the most recently
completed fiscal quarter, 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.
ITEM 2. CHANGES IN SECURITIES.
Sales of Unregistered Securities
- --------------------------------
Consideration received and Exemption If option, warrant or
description of underwriting or from convertible security,
Date of Title of Number other discounts to market price registration terms of exercise or
sale security sold afforded to purchasers claimed conversion
- -------------------------------------------------------------------------------------------------------------------
4/03 - Options to 51,000 Option granted - no 4(2) Expire five years from
6/03 purchase consideration received by date vested, options
common stock Company until exercise vest ratably over five
granted to years at exercise prices
employees ranging from $5.42 to
$8.78 per share
4/28/03 Common Stock 250,000 $9.60 per share 4(2) N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting on June 26, 2003. The shareholders elected
Messrs. Jeffrey Parker, Todd Parker, David Sorrells, William Hightower, Richard
Kashnow, William Sammons, and Papken Der Torossian as directors. The following
is a tabulation of votes cast for and against and abstentions for each item
submitted for approval:
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Votes Cast
---------------------------------
Name For Against Withheld
---------------------------------------------------------------------------
Jeffrey Parker 11,732,261 44,784 447,860
Todd Parker 11,732,261 44,784 447,860
David Sorrells 11,732,261 44,784 447,860
William Hightower 11,732,261 44,784 447,860
Richard Kashnow 11,732,261 44,784 447,860
William Sammons 11,732,261 44,784 447,860
Papken Der Torossian 11,732,261 44,784 447,860
ITEM 5. OTHER INFORMATION. Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
31.1 Section 302 Certification of Jeffery L. Parker
31.2 Section 302 Certification of Cynthia Poehlman
32.1 Section 906 Certification
(b) REPORTS ON FORM 8-K. Not applicable
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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
August 14, 2003 By: /s/ Jeffrey L. Parker
---------------------
Jeffrey L. Parker
Chairman and Chief Executive Officer
August 14, 2003 By: /s/ Cynthia L. Poehlman
-----------------------
Cynthia L. Poehlman
Chief Accounting Officer
17