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, 2003
( ) 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 (X).
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes /X/ No /_/
As of June 30, 2003, the aggregate market value of the Issuer's Common Stock,
$.01 par value, held by non-affiliates of the Issuer was approximately
$70,732,472 (based upon $6.49 per share closing price on that date, as reported
by The Nasdaq National Market).
As of March 10, 2004, 17,959,504 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 2004 Annual Meeting are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
ParkerVision, Inc. (the "Company") was incorporated under the laws of the state
of Florida on August 22, 1989. The Company is organized in two distinct business
segments - the Wireless Division and the Video Division. Refer to Footnote 12 to
the Consolidated Financial Statements included in Item 8 for financial
information regarding the Company's business segments.
Recent Developments
- -------------------
On February 25, 2004, the Company entered 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. The transaction is expected to close in the second quarter of
2004, subject to the approval of the Company's stockholders and other customary
closing conditions. The assets to be sold are those used in connection with and
relating to the video division , including the PVTV and CameraMan products and
services, and further including patents, patent applications, tradenames,
trademarks and other intellectual property, inventory, specified design,
development and manufacturing equipment, and obligations under outstanding
contracts for products and services and other assets. Certain specified assets
related to the video division, such as accounts receivable and certain
contracts, were excluded from the transaction. The purchase price of the assets
is $12,500,000, subject to adjustment upon verification of the actual value of
certain tangible and current assets that will be transferred, minus certain
liabilities. The Company currently believes that the adjustment will result in
approximately $1,500,000 of additional purchase price.
Upon completion of the sale of the video division assets, the Company's
operations will consist of a single segment, its current wireless division. To
date, this division has not generated any significant revenues. The ability for
wireless revenues to offset costs is subject to the Company continuing to expand
its product line and attracting additional means of distribution, among other
things. The sale of the video division will enable the Company to focus all of
its resources and efforts on the wireless division and provide the Company with
additional working capital. The Company believes its proprietary wireless
technologies embody significant industry advances that can be commercialized in
the near term. After careful consideration, the Company believes the sale of the
video division is the best business strategy for the Company, its current
customers and the development of the wireless division.
For more detail about the terms of the sale of the video division, persons are
referred to the Company's Form 8-K Current Report filed February 26, 2004.
WIRELESS DIVISION
The Company's wireless division is engaged in the design, development and
marketing of products based on its proprietary Direct2Data(TM) or D2D(TM)
technology. The D2D technology is a wireless direct conversion radio frequency
technology which may be applied to all areas of wireless communications.
The Company has designed and produced D2D-based transceivers with a proprietary
electronic circuit configuration which enables the creation of practical, high
performance transceivers that
2
reduce or eliminate transmission and receiving problems when compared to other
commercially available designs. Wireless products employing D2D technology, when
compared to products utilizing traditional electronic circuit designs, have the
ability to function at farther distances, with increased connection reliability,
may be manufactured less expensively, and consume less power.
The Company has targeted wireless local area networking ("WLAN") for its initial
products. The Company completed its first transceiver chips for the WLAN market
in 2002, and in 2003 began marketing its chips to other equipment manufacturers
and other design manufacturers who manufacture and sell WLAN products or
application modules that embed WLAN capabilities. At the same time, the Company
began pursuing a business strategy of developing its own D2D-based WLAN products
for marketing to end users. The Company's initial revenues from its wireless
division, although not significant, were recognized in the fourth quarter of
2003 from the sales of its first end-user products.
Products
- --------
In the fourth quarter of 2003, the Company introduced its first D2D-based WLAN
end-user products. The Company's current WLAN products are for wireless Internet
data networking applications. These products include a wireless local area
networking card, designed for use with laptop computers, and a wireless
universal serial bus adaptor for use with desktop computers. In addition, the
Company introduced a wireless four-port router for networking applications, with
shipments expected to begin in the first quarter of 2004. These initial products
are targeted for the small office, home office segment of the WLAN market. The
Company's wireless local area networking card and USB adaptor are sold at a list
price of approximately $90. The Company's wireless four-port router is sold at a
list price of approximately $200.
The Company's product development plans over the next twelve to eighteen months
include expanding its WLAN applications to products that incorporate audio,
video and voice, through wireless networking. In addition, the Company is
currently researching the use of its D2D technology for cordless phone
applications.
Marketing and Sales
- -------------------
The Company currently promotes and sells its WLAN end-user products in the US
through its own website and through an internet-based retail relationship with
TigerDirect.com. The Company's products offer professional telephone support at
no charge and currently include a 30-day money-back guarantee to allow the
consumer a "risk-free" test of the Company's product performance claims. In
addition, the Company warrants its wireless products for one year. The Company
typically ships product within one to three days of receipt of order, however
new product introductions may have scheduled deliveries two to eight weeks from
receipt of order. Due to the relatively short period of time from order to
delivery, the Company currently has no material order backlog for these
products.
The Company is currently exploring additional channels of commercial product
distribution in the US, including retail storefront outlets and value-added
reseller relationships. The Company also plans to explore distribution in Canada
in 2004.
Competition
- -----------
The wireless division operates in a highly competitive industry. The Company's
WLAN products compete with product offerings from a number of companies with
established brand recognition and
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distribution channels. Some of these competitors offer their products at prices
similar to or lower than that of the Company's products. The Company believes
Linksys, Netgear and D-Link collectively account for over 50% of the North
American market for consumer wireless networking products and Cisco, Symbol
Technologies and Proxim/Orinoco dominate the enterprise market for wireless
networking products in North America. The markets are growing and changing
rapidly, however, and market share can shift dramatically from one quarter to
the next.
The Company believes it can compete in this industry based on the product
performance enabled by its D2D technology. The Company's ability to compete is
highly dependent upon its ability to build brand recognition and distribution.
The Company also seeks competitive advantage by offering a 30-day money-back
guarantee which allows the consumer to test its performance claims first hand.
The Company offers telephone support and warrants its products for one year,
both of which are customary practices for this market segment.
With regard to OEM sales of its transceiver chips or chipsets, the Company also
faces competition from well-established companies in the industry. Some of these
competing companies offer complete chipsets while others offer transceiver chips
or baseband/mac processing chips. In this market, the Company also plans to
compete based on product performance.
Many of the Company's competitors in the wireless communications industry 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. In addition, certain of these competitors have the financial
resources necessary to enable them to withstand substantial price competition.
Production and Supply
- ---------------------
The Company manufactures certain of its wireless products and subassemblies at
its Jacksonville, Florida facility. The Company's operations involve inspection
of components, assembly of the system's electronic circuitry and other
components, a series of quality specification measurements, and various other
computer, visual and physical tests to certify final performance specifications,
and packaging. The Company has sufficient production capacity to satisfy
increased demand for the foreseeable future. In addition, the Company believes
the production processes for its wireless products could be assumed by
third-party manufacturers, if necessary, to satisfy additional capacity
requirements.
For its wireless router products, the Company currently manufactures a D2D chip
subassembly and then provides this subassembly to an offshore manufacturer for
incorporation into a complete wireless router product utilizing the
manufacturer's router and networking technology. The Company believes there are
a number of alternative router products and technologies available that could be
integrated with the D2D technology to achieve similar wireless router products,
however the Company would likely experience some time delays for design
integration and manufacturing start up with these alternative companies. As the
Company expands its product line, it may enter into similar product
manufacturing arrangements with others. The Company depends on its third-party
manufacturers to satisfy performance and quality specifications and to dedicate
sufficient capacity for production of products within scheduled delivery times.
Failure or delay by these manufacturers in supplying products, within
specifications, to the Company would adversely affect the Company's ability to
obtain and deliver products on a timely and competitive basis.
4
The components utilized in the Company's wireless division manufacturing
operations include D2D transceiver chips and other third-party chips and
components. The Company's D2D-based transceiver chips are currently produced
under a foundry relationship with Texas Instruments. The Company depends on
Texas Instruments to satisfy performance and quality specifications and dedicate
sufficient capacity for production of chips within scheduled delivery times. The
Company endeavors to mitigate the potential adverse effect of supply
interruptions by maintaining an adequate supply of its chips and by developing
relationships with additional foundries. Failure or delay by a foundry to supply
chips to the Company, failure or delay by a foundry in meeting the performance
or quality specifications, or changes to the foundry process specifications
would adversely affect the Company's ability to obtain and deliver chips on a
timely and competitive basis.
The other component parts of the Company's products are obtained from
third-party manufacturers and/or distributors. The Company depends upon these
third party suppliers for various critical components to its products, including
baseband/mac WLAN chips and antennas, among others. The Company mitigates the
potential adverse effect of supply interruptions by maintaining sufficient
on-hand quantities of long lead-time components. In addition, where applicable,
the Company attempts to enter into licensing or other arrangements whereby the
Company secures access to the underlying component technologies. This strategy
not only secures supply of current components, it also allows the Company the
ability to enhance existing technologies for use in its future products. To
date, the Company has entered into such licensing arrangements for baseband/mac
WLAN chips and antennas.
At December 31, 2003, the wireless division maintained an inventory of system
components of approximately $299,000. To the extent the Company experiences an
increase in sales volume beyond current projections and capacities, it is
possible the Company will experience product delivery delays due to component
supply issues.
VIDEO DIVISION
The video division is engaged in the design, development and marketing of
automated live television production systems, marketed under the tradename
PVTV(TM), and automated video camera control systems, marketed under the
tradename CameraMan(R). Within this division, the Company also provides
training, support and other services related to these products.
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 included below
reflects the historical performance of the division and, to some extent, its
continued operations until the sale is completed, but does not reflect the
Company's operations as affected by the disposition or development after
consummation of the sale.
Products and Services
- ---------------------
The Company's video division revenue percentages by product and/or service lines
are as follows:
Product/Service 2003 2002 2001
- --------------- ---- ---- ----
PVTV systems 61% 64% 24%
CameraMan systems (stand-alone) 22% 26% 66%
Training and other services 8% 4% 3%
Recurring & other support 9% 6% 7%
5
The Company's PVTV systems are fully-integrated PC-based production control room
systems designed specifically to meet the needs of studio production markets.
The PVTV system integrates video, audio, teleprompter, machine control and
camera control functions into a one or two-operator station. PVTV systems also
typically incorporate two or more of the Company's three chip camera systems.
The PVTV proprietary automation 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 from a single or multi-user interface. The
system is designed to allow organizations to economize resources by maximizing
their production capabilities.
The PVTV product line is currently available in three application-specific
packages: PVTV NEWS targeted for broadcast and cable production markets, PVTV
PRO targeted for corporations and government facilities and PVTV Learning
targeted at educational users including high schools, colleges and universities.
The Company's PVTV sales to date have been primarily in the broadcast and cable
market segment. The list prices for PVTV systems generally range from
approximately $150,000 to $550,000.
The Company's patented CameraMan automated video camera control systems utilize
a computerized base which pans and tilts simultaneously to achieve fluid motion,
into which is integrated a three-chip (3-CCD) imaging broadcast quality camera.
CameraMan also includes, as an option, a proprietary and patented automatic
tracking capability. Additional peripheral devices are available to control the
automatic tracking functions and to remotely control base unit and camera
functions. CameraMan robotic camera products are offered in a variety of
application-specific packages. These products are targeted at broadcasters and
other users of high-end camera products and can be operated on a stand-alone
basis, or in connection with the PVTV systems. The Company's 3-CCD camera
control systems have list prices ranging from approximately $16,000 to $32,000.
In 2003, the Company introduced a lower cost 3-CCD CameraMan system developed
specifically for distance education and broadband webcasting applications. This
system, with deliveries beginning in the first quarter of 2004, is priced at
approximately $10,000 to $12,000.
The Company's training and other service revenue, and recurring support revenue
is primarily related to services and support for the PVTV system purchases. The
Company utilizes in-house trainers, project managers and support staff to guide
the broadcaster through the transition from a traditionally manual production
environment to an automated control room system as well as provide extended
support services after the transition is completed. Managing the transition to
automation in a broadcast environment requires extensive planning and training.
Training includes a basic PVTV system overview, advanced functionality and
workflow processes, shadowing existing newscasts to simulate the process, talent
rehearsals and finally recovery training so that PVTV operators are properly
prepared for the transition.
The Company has a product currently in beta testing called the PVTV WebSTATION
for News, which is a patent-pending system designed to leverage the automation
capabilities of PVTV NEWS for Internet live and on-demand distribution. The
Company is evaluating various business models for this product and believes it
will further enhance the broadcaster's relationship and investment with the
Company. The product is expected to interface with both existing and new PVTV
installations. The Company expects to launch its WebSTATION product in 2004.
Marketing and Sales
- -------------------
The Company's PVTV systems are targeted primarily at, and sold directly to
broadcasters in the US and Canada. The Company also markets corporate and
education-based PVTV systems that are sold either directly by the Company or by
authorized audio-visual dealers in the US.
6
The Company has built a comprehensive team that has successfully transitioned
broadcasters from a decades-old traditional process to the streamlined PVTV
technology-based process. Currently, the Company sells the majority of its PVTV
automated production systems in a consultative system selling process with its
own national sales organization. In addition to system sales, the Company
provides ongoing training and annual service and support contracts for its PVTV
systems. Primarily internal trainers, project managers and support personnel
provide these services.
In addition to its own sales force, the Company's video division has a network
of audiovisual product dealers, telecommunication dealers and systems
integrators. This dealer network is responsible for stand-alone three-chip
CameraMan video camera control system sales. Select dealers are also authorized
to market and sell the Company's lower-end PVTV solutions to corporate and
education customers.
The Company's video division revenue percentages by distribution channel are as
follows:
DISTRIBUTION CHANNEL 2003 2002 2001
- --------------------------------------------------------------------------------
Direct 75% 72% 29%
Resellers 25% 27% 62%
OEM Customers 0% 1% 9%
The Company's video division revenue percentages by geographic area are as
follows:
GEOGRAPHIC REGION 2003 2002 2001
- --------------------------------------------------------------------------------
United States 75% 93% 90%
Canada 22% 3% 0%
Other 3% 4% 10%
For the year ended December 31, 2003, two broadcast customers, Canadian
Broadcasting Corporation and Gray Communications, Inc., accounted for
approximately 22% and 10%, respectively, of the Company's total revenues. In
2002, three broadcast customers, Lin Television Corporation, McGraw-Hill
Broadcasting, Inc. and Cablevision, accounted for approximately15%, 14%, and
17%, respectively, of the Company's total revenues. No single customer accounted
for more than 10% of the Company's revenues in 2001.
The Company's sales cycle for its camera and production products can vary from
one to eighteen months. The period from execution of a customer's purchase order
to delivery of a CameraMan system is typically one to six weeks. The period from
execution of a customer's purchase contract to delivery of a PVTV system
typically ranges from one to three months depending on supply lead times,
customer site readiness, and customer installation schedules.
At December 31, 2003, the Company had a backlog of PVTV products and related
services of approximately $1,005,000, compared to approximately $700,000 at
December 31, 2002. This backlog consists of orders for which deposits and
purchase contracts have been received, and in some cases, represents the
services to be performed for PVTV systems that have already been delivered. The
Company had no material backlog of camera orders at either December 31, 2003 or
2002. As a result of the generally short cycle between order and shipment and
occasional customer changes in delivery schedules, the Company does not believe
its backlog, as of any particular date, is necessarily indicative of actual net
sales for any future period.
7
Competition
- -----------
Due to the comprehensive functionality of ParkerVision's PVTV solution, the
Company does not compete directly with any similar solution. The Company is not
aware of any competitors who currently offer an automated system solution
comparable to PVTV that integrates all of the discrete components and equipment
through a single interface. However, the Company competes with a range of
vendors who collectively offer video switchers and various other products for
production and control room environments. Competition within the broadcast
operations market is generally based on product performance, breadth of product
line, service and support, market presence and price.
The Company believes the most compelling reason for a broadcaster to purchase
PVTV is operational efficiencies and enhanced capabilities. The Company also
expects to successfully compete in the marketplace based on PVTV's patented
technology and technical services expertise.
Although unique in the industry as the only comprehensive totally integrated
3-CCD camera system, the Company's CameraMan product faces pricing competition
especially in the price sensitive videoconferencing and distance learning
applications. Competing applied systems exist whereby integrators can assemble
pan/tilt robotic heads and various other ancillary products to achieve a
competitive offering at lower price points. The Company believes it can compete
with this approach by selling a totally integrated solution produced and
supported by a single source supplier.
The Company's digital 3-CCD CameraMan camera system offering is typically
packaged with PVTV systems targeted at broadcasters, corporate, government and
education vertical markets. As a packaged solution, the product competes
successfully except in larger broadcast markets that use higher-end robotic
systems manufactured by others. In these applications, PVTV integrates with
these competitive camera system products to address customer requirements for
PVTV.
Production and Supply
- ---------------------
The Company currently produces products for its video division at its
Jacksonville, Florida manufacturing facility. The Company's operations involve
inspection of components, assembly of the system's electronic circuitry and
other components, a series of quality specification measurements, and various
other computer, visual and physical tests to certify final performance
specifications, and packaging. The Company believes it has sufficient production
capacity to satisfy increased demand for the foreseeable future.
The 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 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 OEM purchase contracts with key suppliers. The Company
purchases other system components pursuant to purchase orders placed from time
to time in the ordinary course of business.
For the year ended December 31, 2003, three suppliers of significant components
to the Company's video products individually accounted for more than 10% of the
Company's component purchases. Panasonic, Canon, USA, Inc. and Snell and Wilcox
accounted for approximately 15%, 14% and
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12%, respectively, of the Company's total component purchases in 2003. The
Company maintains OEM or integrator relationships with Snell and Wilcox and
Panasonic and purchases on a purchase order basis from Canon. The Company has
maintained a relationship with Panasonic for over three years and relationships
with its other significant suppliers for over five years. To date, the Company
has never terminated, or been terminated by, a significant supplier.
The Company attempts to forecast orders and to purchase long lead-time
components in advance of receipt of purchase orders so it can provide deliveries
of completed systems within its standard delivery period. At December 31, 2003,
the video division maintained an inventory of standard electronic and other
system components of approximately $1,571,000.
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 commissioning of a site. 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. The Company also offers, at an additional fee,
extended service and support contracts on its PVTV automated production systems.
The revenue from all extended support contracts is recognized on a straight-line
basis over the service period, generally one to three years.
PATENTS AND TRADEMARKS
The Company considers its intellectual property, including patents, patent
applications and trademarks, to be significant to the competitive positioning of
both the video and wireless business segments. The Company has a program to file
applications for and obtain patents, copyrights, and trademarks in the United
States and in selected foreign countries where it believes filing for such
protection is appropriate to establish and maintain its proprietary rights in
its technology and products.
In the wireless division, the Company has obtained 29 patents related to its D2D
technology and has over 90 patent applications pending in the United States and
other countries. In the video division, the Company has obtained 25 patents
related to its camera tracking technology and automated production systems and
has 27 additional applications pending. The Company estimates the economic life
of its wireless and video patents are approximately twenty and five years,
respectively.
GOVERNMENT REGULATION
The Company utilizes wireless communications in both its video and wireless
products. 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 similar government agencies in
foreign countries. The Company has obtained, is in the process of obtaining, or
will obtain all licenses and approvals necessary for the operation of its
products and technologies in those countries that it sells products. To date,
the Company has not encountered any significant inability or limitations on
obtaining required material licenses. 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 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, such as CE approval
in Europe. Amendments
9
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, 2003, 2002 and 2001, the Company spent
approximately $15,026,000, $13,939,000 and $12,796,000, respectively, on
research and development, largely related to the wireless division. For the past
three years, the Company's wireless division has accounted for approximately
89%, 87% and 88%, respectively, of total company research and development
spending. The wireless research and development efforts have been devoted to the
development of the D2D technology and related products.
EMPLOYEES
As of December 31, 2003, the Company had 102 full-time employees and 2 part-time
employees, of which 10 are employed in manufacturing, 50 in engineering research
and development, 11 in sales and marketing, 16 in product training and support,
and 17 in executive management, finance and administration. None of the
Company's employees is represented by a labor union.
Effective December 21, 2002, the Company entered into an arrangement with ADP
TotalSource for the outsourcing of its human resource functions. ADP, a division
of Automatic Data Processing, is a professional employer organization that
co-employs over 70,000 employees worldwide. As a co-employer, ADP assumes many
of the legal and administrative responsibilities of human resources management,
health benefits, workers' compensation, payroll, payroll tax compliance and
unemployment insurance. The Company considers its employee relations
satisfactory.
AVAILABLE INFORMATION AND ACCESS TO REPORTS
The Company files its annual report on Form 10-K and quarterly reports on Form
10-Q, including amendments, as well as its proxy and other reports
electronically with the Securities and Exchange Commission ("SEC"). The SEC
maintains an Internet site (http://www.sec.gov) where these reports may be
obtained at no charge. Copies of any materials filed with the SEC may also be
obtained from the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, DC 20549. Information on the operation of the SEC Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of these
reports may also be obtained via the Company's website
(http://www.parkervision.com) via the link "SEC filings". This provides a direct
link to the Company's reports on the SEC Internet site. The Company will provide
copies of this annual report on Form 10-K and the quarterly reports on Form
10-Q, including amendments, filed during the current fiscal year upon written
request to Investor Relations, 8493 Baymeadows Way, Jacksonville, Florida,
32256. These reports will be provided at no charge. In addition, exhibits may be
obtained at a cost of $.25 per page plus $5.00 postage and handling.
ITEM 2. PROPERTIES
The Company's headquarters and manufacturing operations are located in a 33,000
square foot leased facility in Jacksonville, Florida, pursuant to a lease
agreement with Jeffrey Parker, Chairman of the Board and Chief Executive Officer
of the Company, and Barbara Parker, a related party. The
10
Company believes that its manufacturing facility is adequate for its current and
reasonably foreseeable future needs. The Company believes that the physical
capacity at its current facility will accommodate expansion, if required.
The Company has additional leased facilities in Jacksonville, Lake Mary and
Melbourne, Florida primarily for the wireless division engineering and business
development staff as well as a leased facility in Los Angeles, California that
is utilized for video division training and sales demonstrations. The Company
believes its properties are in good condition and suitable for the conduct of
its business.
The Company previously had wireless design operations in a leased facility in
Pleasanton, California. Although the operations at this facility ceased in 2001,
the Company has remaining a lease obligation through March 2005. For the year
ended December 31, 2002, the remaining estimated future lease obligation for the
Pleasanton facility was charged to general and administrative expense. In
January 2004, the Company entered into a sublease for the facility that will
partially reduce its remaining lease obligation.
Refer to "Lease Commitments" in Footnote 9 to the Consolidated Financial
Statements included in Item 8 for information regarding the Company's
outstanding lease obligations.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims arising in the ordinary
course of its business. The Company, based upon the advice of outside legal
counsel, 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 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.
2003 2002 2001
--------------------------- --------------------------- ---------------------------
High Low High Low High Low
------------ ----------- ----------- ----------- ----------- -----------
1st Quarter $9.200 $4.080 $21.790 $17.400 $40.563 $22.375
2nd Quarter 10.900 5.060 24.850 15.520 29.550 21.328
3rd Quarter 8.470 6.000 18.950 11.160 25.690 13.180
4th Quarter 12.300 7.510 13.990 6.669 22.690 16.570
11
HOLDERS
- -------
As of March 1, 2004, there were 134 holders of record. The Company believes
there are at least 1,525 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 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 from terms
Number or other discounts to market registration of exercise or
Date of sale Title of security sold price afforded to purchasers claimed conversion
- ------------- -------------------- ----------- ------------------------------ ------------- ---------------------------
10/03/03 Options to 94,500 Options granted - no 4(2) Exercisable for five
to 11/21/03 purchase common consideration received by years from the date the
stock granted to Company until exercise options vest, options
nine employees vest over three to five
pursuant to the years at an exercise
2000 Plan price ranging from $7.90
to $10.14 per share
11/21/03 Options to 125,000 Options granted - no 4(2) Exercisable for five
purchase common consideration received by years from the date the
stock granted to Company until exercise options vest, options
an officer and vest over five years at
director an exercise price of
pursuant to the $9.00 per share
2000 Plan
12/8/03 Options to 100,000 Options granted - no 4(2) Exercisable for ten years
purchase common consideration received by from the date the options
stock granted to a Company until exercise vest, options vest over
director two years at an exercise
pursuant to the price of $8.60 per share
2000 Plan
12/12/03 Options to 32,250 Options granted - no 4(2) Exercisable for five
purchase common consideration received by years from the date of
stock granted to Company until exercise grant, options vest
94 employees immediately at an
pursuant to the exercise price of $8.75
2000 Plan per share
4(2)
Regulation
11/14/03 Common Stock 2,310,714 $8.75 per share D N/A
Accredited
Investors
12
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 consolidated financial statements of the Company. 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".
For the years ended December 31,
------------------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues, net $ 6,738 $ 11,912 $ 9,315 $ 15,965 $ 10,549
Gross margin 2,072 4,703 3,262 7,474 3,609
Operating expenses 24,563 22,880 21,613 22,445 14,647
Interest and other income 476 905 1,741 1,949 1,297
Net loss (22,015) (17,272) (16,610) (13,022) (9,741)
Basic and diluted net loss per
common share (1.43) (1.24) (1.20) (1.03) (0.83)
CONSOLIDATED BALANCE SHEET DATA:
Total assets $ 42,483 $ 37,745 $ 54,144 $ 63,468 $ 32,741
Shareholders' equity 39,399 34,047 50,547 60,020 30,136
Working capital 23,225 18,992 36,161 45,460 22,703
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The preparation of consolidated financial statements requires the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its significant
estimates, which include allowance for bad debts and sales returns, inventory
reserves, intangible assets, income taxes, warranty obligations, and
contingencies and litigation.
The Company bases its estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
The Company believes that the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:
13
REVENUE RECOGNITION
The Company recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the sales price is fixed or
determinable and collectibility is probable. For video division products, these
criteria are generally met when product is shipped. Contracts and customer
purchase orders are generally used to determine the existence of an arrangement
and the fee associated with the transaction. Shipping documents are used to
verify delivery. The Company assesses collectibility based primarily on the
creditworthiness of the customer as determined by credit checks and analysis, as
well as the customer's payment history.
Service revenue is deferred until the service has been performed and the Company
has no significant remaining obligation to the customer. Revenue from extended
support contracts is deferred and recognized ratably over the period in which
support services are to be performed, generally one to three years. Deferred
revenue for services and support was $789,000 and $618,000 at December 31, 2003
and 2002, respectively.
The Company's wireless division makes sales direct through its own website or
through TigerDirect.com, an internet retailer. TigerDirect.com is given business
terms that allow for the return of unsold inventory. In addition, the Company
currently offers a 30-day money back guarantee on its wireless products. With
regard to sales through a distribution channel where the right to return unsold
product exists, the Company recognizes revenue on a sell-through method
utilizing information provided by the distribution channel. In addition, 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 within the 30-day guarantee period. At December 31, 2003, the
Company has deferred revenue from sales of wireless products of approximately
$74,000.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
Company's accounts receivable balance, net of the allowance for doubtful
accounts, was approximately $989,000 and $2,159,000 at December 31, 2003 and
2002, respectively. The allowance for doubtful accounts was $64,200 at December
31, 2003, compared to $109,600 as of December 31, 2002. The allowance is based
on management's assessment of the collectibility of customer accounts.
Management regularly reviews the allowance by considering factors such as
historical experience, age of the account balance and current economic
conditions that may affect a customer's ability to pay. If the creditworthiness
of the Company's customers were to deteriorate, or if actual defaults are higher
than historical experience, additional allowances would be required.
WARRANTY COSTS
The Company provides for the estimated cost of product warranties at the time
revenue is recognized. The reserve for product warranties was $199,000 and
$248,000 at December 31, 2003 and 2002, respectively. The Company's PVTV
products are generally covered by a warranty period of 90 days and the Company's
camera and wireless products are covered by a one-year warranty. The Company's
warranty obligation is affected by product failure rates and material usage and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage or service delivery costs differ from the
Company's estimates, a revision to the estimated warranty liability would be
required and the Company's gross margins could be adversely affected.
RESERVES FOR OBSOLETE INVENTORY
The Company writes down its inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. The Company's inventory balance, net of
14
allowance, was $2,477,000 and $3,091,000 at December 31, 2003 and 2002. The
inventory allowance was $1,189,500 at December 31, 2003, compared to $832,300 at
December 31, 2002. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be required and
the Company's gross margins could be adversely affected.
ASSET IMPAIRMENT
The Company estimates the economic lives of its long-lived assets, including
patents and other intangibles and evaluates the need for impairment of these
assets based on the difference between the cost of the asset and the sum of
estimated future cash flows expected to result from the use of the asset. If
actual future cash flows are less favorable than those projected by management,
an impairment charge may be required.
ACCOUNTING FOR STOCK BASED COMPENSATION
The Company accounts for its stock-based employee compensation plans 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 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. If the
Company 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" it would
recognize stock based employee compensation of $14,867,000, $20,060,000 and
$17,854,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
The significant amount of employee-based stock compensation is due to the
substantial number of options granted under these plans as well as the factors
impacting the fair value calculation, including high price volatility of the
Company's common stock.
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 and has used the
proceeds from the sale of its equity securities to fund its operations.
The Company has executed an agreement to sell substantially all of the assets of
its video division which is expected to close in the second quarter of 2004. The
result of that sale will be the loss of revenue generated by that division with
a related reduction in expenses. Therefore, the discussion below of the past
three fiscal years should not be read as indicative of the future. As a result
of this transaction, the Company expects its cash assets to be increased by the
purchase price, less the expenses of the sale, its revenues to decline
substantially and its expenses to be reduced to some degree, but not in
proportion to the decline in revenues, as the video division has historically
represented all or most of the revenue of the Company, but only a portion of the
operating expenses.
The Company anticipates increases in revenues from the sale of its wireless
products in 2004; however the pending sale of its video division assets may
result in an overall reduction of revenues in 2004. The ability for wireless
revenues to offset costs is subject to the Company continuing to expand its
product line and attracting additional means of distribution, among other
things. The Company intends to continue to use its working capital 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 or that the Company has
adequate capital to complete its products or gain market acceptance before
requiring additional capital.
15
RESULTS OF OPERATIONS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2003, 2002 AND
- --------------------------------------------------------------------------------
2001
- ----
Revenues
- --------
Revenues for the years ended December 31, 2003, 2002 and 2001 were approximately
$6,738,000, $11,912,000 and $9,315,000, respectively. Essentially all of the
Company's revenues to date have been generated by its video division. In the
fourth quarter of 2003, the Company's wireless division commenced initial sales
of its wireless end-user products.
Revenues generated by the Company's major product lines, including service and
support related to those products, as a percentage of total revenues for the
years ended December 31, 2003, 2002 and 2001 are as follows:
2003 2002 2001
---- ---- ----
PVTV systems 61% 64% 24%
CameraMan systems 22% 26% 66%
Support and other services 17% 10% 10%
Wireless products * 0% 0%
* represents less than 1%
Video Division
- --------------
The number of PVTV and stand-alone CameraMan systems sold and the average
selling price per system for the years ended December 31, 2003, 2002 and 2001
were as follows:
PVTV Systems Camera Systems
----------------------------- --------------------------------
# Avg. Selling # Avg. Selling
Systems Price Per Systems Price Per
Sold System Sold System
----------- ----------------- --------------- ----------------
2003 13 $313,000 95 $15,600
2002 21 $363,000 361 $8,600
2001 9 $248,000 820 $7,500
The $5,174,000 decrease in revenues from 2002 to 2003 was due to a decrease in
PVTV revenue of approximately $3,500,000 and a decrease in camera revenues of
approximately $1,600,000. The decrease in PVTV revenue is due to a lower average
selling price per system combined with a decrease in the number of systems sold.
The decline in average selling price is due to the mix of products sold and a
price reduction implemented in 2003 on certain products. The Company believes
the decrease in PVTV system sales is due to economic conditions in the broadcast
market in the early part of 2003 as well as uncertainty among the broadcasters
as to the Company's plans for its video division. The decline in PVTV system
sales is expected to continue in 2004 due to the pending sale of video division
assets to Thomson as discussed in Note 16 to the Consolidated Financial
Statements.
The decline in camera revenues from 2002 to 2003 was due to the discontinuation
of the Company's single-chip camera line early in 2002. Although the overall
camera unit sales declined, the average selling price per system increased from
$8,600 to $15,600 per system. This increase is due to an increase in the
percentage of three-chip unit sales from approximately 24% of total camera sales
in 2002 to approximately 99% in 2003. This increase was somewhat offset by a
competitive driven
16
price reduction implemented in 2003 for the Company's camera products. The
Company recently introduced a lower priced three-chip camera system targeted at
education and corporate environments and anticipates increased camera sales in
2004 with a lower average selling price per system.
The Company's service and support revenue remained relatively stable from 2002
to 2003 despite the decline in PVTV system sales. This is largely due to the
timing of services in relation to system deliveries. A significant portion of
the 2003 service revenue relates to systems delivered late in 2002. In addition,
the Company's recurring support revenue from PVTV support contracts remained
relatively unchanged from 2002 to 2003. This is due to a price reduction on
support contracts late in 2002, offset by a larger number of customers covered
by such contracts as the Company's installed base of PVTV users continues to
grow.
The $2,600,000 increase in revenues from 2001 to 2002 was due to a $5,400,000
increase in PVTV system sales and a $200,000 increase in service and support
revenue, offset by a $3,000,000 decrease in revenues from camera system sales.
The Company believes the increase in PVTV system revenue was due to growing
market acceptance of the PVTV automated production system among broadcasters. In
addition, the average selling price per PVTV system increased from approximately
$248,000 in 2001 to $363,000 in 2002 due to the sale of higher end systems in
larger broadcast markets. The increase in service and support revenue was due to
services related to the increased system sales and an overall increase in
recurring support revenue due to a larger customer installed base.
The decline in camera revenues from 2001 to 2002 was anticipated with the
Company's announcement of the discontinuation of its single-chip camera line
early in 2002. The Company's decision to discontinue this product line resulted
from supply issues, declining demand and an increased focus on development and
marketing of the PVTV systems. Although the overall camera unit sales declined,
the average selling price per system increased from $7,500 to $8,600 per system.
This increase was due to an increase in the percentage of three-chip unit sales
from approximately 13% of total camera sales in 2001 to approximately 24% in
2002.
Wireless Division
- -----------------
In the fourth quarter of 2003, the Company's Wireless division began selling its
first D2D-based products, a wireless local area networking card for use in
laptop computers and a wireless USB adaptor for desktop computers. The Company
also added a wireless four-port router to its initial product line with
shipments beginning in 2004. In the fourth quarter of 2003, revenues of
approximately $21,000 were recognized from sales of wireless products. These
sales were made through the Company's newly developed website and through
TigerDirect.com, an Internet-based retailer specializing in high tech electronic
merchandise. The average selling price of the wireless local area networking
card was $75.50.
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 within the 30-day guarantee period. At December
31, 2003, the Company has deferred revenue from sales of wireless products of
approximately $74,000.
The Company is exploring additional channels of marketing and commercial product
distribution including manufacturer representative arrangements for introduction
of the Company's products to retail store-fronts and value-added reseller
relationships.
17
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
- ------------
The gross margin for products and services for the years ended December 31 were
as follows:
2003 2002 2001
------------------------------ ----------------------------- ------------------------------
$ % $ % $ %
----------- ----------- ----------- ----------- ----------- -----------
Products $ 2,076,000 37.2% $ 4,703,000 43.8% $ 3,336,000 40.0%
Services (4,000) (0.3)% 0 0.0% (74,000) (7.6)%
----------- ----------- ----------- ----------- ----------- -----------
Total $ 2,072,000 30.8% $ 4,703,000 39.5% $ 3,262,000 35.0%
=========== =========== =========== =========== =========== ===========
The decrease in the Company's product margin from 2002 to 2003 was due to the
decreased revenues from product sales, resulting in the absorption of relatively
fixed overhead, indirect labor costs and provisions for obsolete inventory over
a lower volume of production. In addition, PVTV systems, which carry higher
margins than camera systems, represented a lower percentage of total product
revenue in 2003 compared to 2002 and the mix of PVTV systems sold in 2003, as
evidenced by the lower selling price per system, were lower margin systems than
those sold in 2002.
The increase in product margin from 2001 to 2002 was due to the shift in
revenues from cameras to PVTV systems that have a higher gross margin per system
sale. This increase was somewhat offset by decreases in margins resulting from
the obsolescence of certain parts in connection with discontinuation of the
single-chip camera system in 2002.
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 2003. Gross margins in 2004 may be negatively impacted by
fluctuating component costs, a declining sales trend in the video division, and
the production costs associated with new product introductions in the wireless
division.
The Company's service revenue, which primarily represents training and support
services related to PVTV system sales, historically has had zero to slightly
negative margins. This is due in part to pricing pressures on the Company's
charges for services, under utilization of training and support staff at times
due to customer scheduling requirements, and the cost involved in training
technical support staff. As the Company's PVTV customer installed base
increases, the efficiencies of the technical support staff are expected to
increase as well, resulting in improved margins. In addition, the Company is
currently developing new training methodologies that are expected to reduce the
amount of training time required at the customer's site by allowing for on-line,
interactive training.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses increased by approximately
$1,087,000 or 8%, from $13,939,000 in 2002 to $15,026,000 in 2003. From 2001 to
2002, the Company's research and development expenses increased by $1,143,000 or
9% from $12,796,000 to $13,939,000, respectively. Research and development
expenses as a percentage of revenues were 223%, 117%
18
and 137% in 2003, 2002 and 2001, respectively. Approximately 87% to 89% of
research and development expenses for the years ended December 31, 2003, 2002
and 2001 were related to the Company's wireless division.
The increase in research and development expenses from 2002 to 2003 was due to
an increase in third party development fees and increased wireless prototype
chip development expenses including foundry costs and amortization of prepaid
licenses fees. These increases were somewhat offset by decreases in facilities
cost and recurring software maintenance costs. The Company made reductions in
its wireless engineering staffing late in the third quarter of 2003. Due to
severance costs and the timing of staff reductions, the full benefits of these
reductions will not be evidenced through decreases in research and development
expenses until 2004.
The increase in research and development expenses from 2001 to 2002 was due to
increased wireless chip development expenses and increased overhead from the
expansion of the Orlando wireless facility. The Company closed its California
wireless development facility at the end of 2001, and transferred those
development efforts to its Orlando facility.
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 2004.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses increased by approximately $111,000 or 3%, from
$3,568,000 in 2002 to $3,679,000 in 2003. Marketing and selling expenses
decreased by approximately $268,000 or 7%, from $3,836,000 in 2001 to $3,568,000
in 2002. Marketing and selling expenses, as a percentage of revenues were 55%,
30%, and 41% for the years ended December 31, 2003, 2002 and 2001, respectively.
The increase in marketing and selling expenses from 2002 to 2003 is primarily
due to an increase in the Company's marketing efforts in the wireless division
reflected by increased third party consulting fees, advertising and travel
expenses somewhat offset by a reduction of sales personnel and commissions in
the video division during 2003.
The decrease in marketing and selling expenses from 2001 to 2002 is primarily
due to sales and marketing personnel reductions in late 2001, decreases in video
trade show expenses and decreases in wireless facilities cost due to closing of
the California facility late in 2001. These decreases were somewhat offset by
increases in video sales commissions, travel costs and personnel costs related
to additional staffing in the wireless division in the fourth quarter of 2002.
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
2004 primarily to support the Company's commercialization of its D2D products.
19
General and Administrative Expenses
- -----------------------------------
The Company's general and administrative expenses increased by approximately
$453,000 or 9%, from $5,321,000 in 2002 to $5,774,000 in 2003. From 2001 to
2002, general and administrative expenses increased by $348,000 or 7%, from
$4,973,000 in 2001 to $5,321,000 in 2002. General and administrative expenses
consist primarily of executive and administrative personnel costs, insurance
costs and costs incurred for outside professional services.
The increase in general and administrative expenses from 2002 to 2003 is
primarily due to increases in insurance costs and professional fees, including
amortization of prepaid services.
The increase in general and administrative expenses from 2001 to 2002 is largely
due to a reserve of approximately $357,000 representing the estimated remaining
lease commitment for the California wireless facility. In addition, the Company
has incurred increases in insurance costs offset somewhat by decreases in
outside professional fees.
Other Expense
- -------------
Other expense consists of losses on the disposal or sale of fixed assets no
longer in service. For 2003, the loss of approximately $84,000 is due to the
sale of an interest in an aircraft. For 2002, the loss of approximately $52,000
is primarily due to the disposal of obsolete computer equipment.
Interest and Other Income
- -------------------------
Interest and other income represent interest earned on the Company's investment
of the proceeds from sales of its equity securities and net gains on the sale
and/or maturity of investments. Interest and other income was $476,000, $905,000
and $1,741,000 for the years ended December 31, 2003, 2002 and 2001,
respectively. The decrease of approximately $429,000 from 2002 to 2003 and
$836,000 from 2001 to 2002 is due to declining interest rates and the use of
funds to support operations, offset somewhat by net gains recognized on the sale
of investments.
Loss and Loss per Common Share
- ------------------------------
The Company's net loss increased from approximately $17,272,000, or $1.24 per
common share in 2002 to approximately $22,015,000, or $1.43 per share in 2003,
representing a net loss increase of approximately $4,743,000, or $.19 per common
share. The Company's net loss increased from approximately $16,610,000, or $1.20
per common share in 2001 to approximately $17,272,000, or $1.24 per share in
2002, representing a net loss increase of approximately $662,000, or $.04 per
common share.
The increases in net losses by reportable segment are as follows (in thousands):
2003 2002 2001
-------- -------- --------
Wireless division operating loss $(15,684) $(14,242) $(14,128)
Video division operating loss (3,381) (1,405) (2,522)
Corporate expense (3,426) (2,530) (1,702)
Interest income 476 905 1,742
-------- -------- --------
Total net loss $(22,015) $(17,272) $(16,610)
======== ======== ========
20
The $1.4 million increase in the wireless division's operating losses from 2002
to 2003 is due to increased operating expenses, primarily research and
development. The $2.0 million increase in the video division's operating losses
from 2002 to 2003 is due to the decline in revenues and related margins, offset
somewhat by decreases in operating expenses, primarily related to variable sales
costs. The $0.9 million in increase in corporate expenses is due to increased
insurance costs and professional fees, included in general and administrative
expense.
From 2001 to 2002, the increase in net loss is due to an increase in general and
administrative corporate expenses and a decrease in interest income, offset by a
$1.1 million decrease in video division operating losses. The decrease in losses
from video operations is due to increased sales and related margins, offset
somewhat by increases in variable sales costs, primarily commissions.
Liquidity and Capital Resources
- -------------------------------
At December 31, 2003, the Company had working capital of approximately
$23,225,000 including approximately $20,476,000 in cash, cash equivalents and
short-term investments. The Company used cash for operating activities of
approximately $16,507,000, $14,187,000 and $10,801,000 for the years ended
December 31, 2003, 2002 and 2001, respectively. The increase in cash used for
operating activities from 2002 to 2003 was approximately $2,320,000. This
increase is due to the increase in net loss and changes in accounts payable from
both video and wireless operations, offset somewhat by changes in video accounts
receivable. The increase in cash used for operating activities from 2001 to 2002
was approximately $3,386,000. This increase was primarily due to changes in
video accounts receivable and prepaid expenses.
The Company generated (used) cash from investing activities of approximately
$8,742,000, $10,210,000 and $(22,492,000) for the years ended December 31, 2003,
2002 and 2001, respectively. This generation or use of cash is primarily from
the maturity, sale and purchase of investments in government-backed securities,
in addition to the payment for intangible assets and capital expenditures.
The Company incurred approximately $1,176,000, $1,556,000 and $2,252,000, in
connection with patent costs primarily related to the Company's wireless
technology in 2003, 2002, and 2001, respectively. The Company incurred
approximately $1,173,000, $1,319,000 and $1,435,000, for capital expenditures in
2003, 2002, and 2001, respectively. These capital expenditures primarily
represent the purchase of certain research and development software and test
equipment, manufacturing equipment for the wireless division, marketing and
sales demonstration equipment and computer and office equipment to support
additional personnel.
The Company generated cash from financing activities of approximately
$24,145,000, $501,000, and $6,485,000, for the years ended December 31, 2003,
2002 and 2001, respectively. The cash generated from financing activities
represents proceeds from the exercise of stock options in all three years and
proceeds from the issuance of common stock in 2003 and 2001 to institutional and
other investors in private placement transactions exempt from registration under
the Securities Act of 1933.
The Company's future business plans call for continued investment in sales,
marketing and product development costs principally related to its wireless
division. Although management expects increases in revenues from sales of its
wireless products in 2004, these revenues are not likely to offset the
anticipated decline in revenues from the video 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
21
and increase production volumes sufficiently to meet such demand. 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 anticipates that its working capital will be
augmented by the net proceeds from the sale of the video division assets. The
Company believes it currently has sufficient capital to fund its business plan
for 2004. The Company's principal source of liquidity at December 31, 2003
consisted of approximately $20.5 million in cash, cash equivalents and
short-term investments.
The Company's contractual obligations and commercial commitments at December 31,
2003 were as follows:
Payments due by period
------------------------------------------------------------------------------
1 year 2-3 4 - 5 After 5
Contractual Obligations: Total or less years years years
---------- ---------- ---------- ---------- ----------
Operating leases $1,853,000 $ 893,000 $ 913,000 $ 47,000 $ 0
Unconditional purchase
Obligations 0 0 0 0 0
Commercial Commitments 0 0 0 0 0
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
22
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 24
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets - December 31, 2003 and 2002 25-26
Consolidated Statements of Operations - for the years ended
December 31, 2003, 2002 and 2001 27
Consolidated Statements of Shareholders' Equity - for the years ended
December 31, 2003, 2002 and 2001 28-29
Consolidated Statements of Cash Flows - for the years ended
December 31, 2003, 2002 and 2001 30
Notes to Consolidated Financial Statements - December 31, 2003, 2002
and 2001 31-48
FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts 56
Schedules other than those listed have been omitted since they are
either not required, not applicable or the information is
otherwise included.
23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Shareholders
of ParkerVision, Inc.:
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, 2003 and 2002, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the consolidated 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 audit 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
February 28, 2004
24
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $17,467,875 $ 1,087,033
Short-term investments available for sale 3,008,427 13,867,763
Accounts receivable, net of allowance for doubtful
accounts of $64,159 and $109,584 at December
31, 2003 and 2002, respectively 988,849 2,158,577
Inventories, net 2,476,985 3,090,884
Prepaid expenses and other 2,366,792 2,486,603
----------- -----------
Total current assets 26,308,928 22,690,860
PROPERTY AND EQUIPMENT, net 4,860,261 6,183,534
OTHER ASSETS, net 11,313,621 8,870,803
----------- -----------
Total assets $42,482,810 $37,745,197
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
25
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
------------- -------------
CURRENT LIABILITIES:
Accounts payable $ 693,820 $ 759,242
Accrued expenses:
Salaries and wages 592,369 951,430
Warranty reserves 199,084 248,230
Lease obligation 185,857 357,417
Professional fees 143,893 271,225
Other accrued expenses 42,200 107,598
Deferred revenue 1,226,929 1,003,466
------------- -------------
Total current liabilities 3,084,152 3,698,608
------------- -------------
Total liabilities 3,084,152 3,698,608
------------- -------------
COMMITMENTS AND CONTINGENCIES
(Notes 9 and 13)
SHAREHOLDERS' EQUITY:
Convertible preferred stock, $1 par value, 5,000,000 shares
authorized, 0 and 13,678 shares issued and outstanding at
December 31, 2003 and 2002, respectively 0 13,678
Common stock, $.01 par value, 100,000,000 shares
authorized, 17,959,504 and 13,989,329 shares
issued and outstanding at December 31, 2003 and
2002, respectively 179,595 139,893
Warrants outstanding 16,807,505 16,807,505
Additional paid-in capital 118,048,964 90,428,998
Accumulated other comprehensive income 31,746 310,869
Accumulated deficit (95,669,152) (73,654,354)
------------- -------------
Total shareholders' equity 39,398,658 34,046,589
------------- -------------
Total liabilities and shareholders' equity $ 42,482,810 $ 37,745,197
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
26
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
2003 2002 2001
------------ ------------ ------------
Product revenue $ 5,576,472 $ 10,733,769 $ 8,340,528
Support and other services revenue 1,161,597 1,178,144 974,917
------------ ------------ ------------
Net revenues 6,738,069 11,911,913 9,315,445
------------ ------------ ------------
Cost of goods sold - products 3,500,064 6,031,027 5,005,121
Cost of goods sold - support and other services 1,165,609 1,178,258 1,048,683
------------ ------------ ------------
Total cost of goods sold 4,665,673 7,209,285 6,053,804
------------ ------------ ------------
Gross margin 2,072,396 4,702,628 3,261,641
------------ ------------ ------------
Research and development expenses 15,025,747 13,939,480 12,796,442
Marketing and selling expenses 3,679,203 3,568,208 3,835,724
General and administrative expenses 5,774,239 5,320,557 4,972,889
Other expense 84,007 51,643 8,241
------------ ------------ ------------
Total operating expenses, net 24,563,196 22,879,888 21,613,296
------------ ------------ ------------
Loss from operations (22,490,800) (18,177,260) (18,351,655)
Interest and other income 476,002 905,438 1,741,188
------------ ------------ ------------
Net loss $(22,014,798) $(17,271,822) $(16,610,467)
============ ============ ============
Basic and diluted net loss per common share $ (1.43) $ (1.24) $ (1.20)
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
27
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
2003 2002 2001
------------ ------------ ------------
CONVERTIBLE PREFERRED SHARES - BEGINNING OF YEAR 13,678 27,356 114,019
Conversion of preferred stock to common stock (13,678) (13,678) (86,663)
------------ ------------ ------------
CONVERTIBLE PREFERRED SHARES - END OF YEAR 0 13,678 27,356
============ ============ ============
PAR VALUE OF CONVERTIBLE PREFERRED SHARES -
BEGINNING OF YEAR $ 13,678 $ 27,356 $ 114,019
Conversion of preferred stock to common stock (13,678) (13,678) (86,663)
------------ ------------ ------------
PAR VALUE OF CONVERTIBLE PREFERRED SHARES - END OF YEAR $ 0 $ 13,678 $ 27,356
============ ============ ============
COMMON SHARES - BEGINNING OF YEAR 13,989,329 13,913,806 13,445,675
Issuance of common stock upon exercise of options and
warrants 16,100 52,600 294,700
Issuance of restricted common stock as employee
compensation 27,778 6,291 4,606
Issuance of common stock in private offering 3,465,151 0 83,451
Issuance of common stock as payment for license fees and
services 388,158 0 0
Conversion of preferred stock to common stock 72,988 16,632 85,374
------------ ------------ ------------
COMMON SHARES - END OF YEAR 17,959,504 13,989,329 13,913,806
============ ============ ============
PAR VALUE OF COMMON STOCK - BEGINNING OF YEAR $ 139,893 $ 139,138 $ 134,457
Issuance of common stock upon exercise of options and
warrants 161 526 2,947
Issuance of restricted common stock as employee
compensation 278 63 46
Issuance of common stock in private offering 34,652 0 835
Issuance of common stock as payment for license fees and
services 3,881 0 0
Conversion of preferred stock to common stock 730 166 853
------------ ------------ ------------
PAR VALUE OF COMMON STOCK - END OF YEAR $ 179,595 $ 139,893 $ 139,138
============ ============ ============
WARRANTS OUTSTANDING - BEGINNING OF YEAR $ 16,807,505 $ 16,807,505 $ 15,659,035
Exercise of warrants 0 0 (259,840)
Issuance of warrants in connection with private offering 0 0 1,408,310
------------ ------------ ------------
WARRANTS OUTSTANDING - END OF YEAR $ 16,807,505 $ 16,807,505 $ 16,807,505
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
28
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
2003 2002 2001
------------- ------------- -------------
ADDITIONAL PAID-IN CAPITAL - BEGINNING OF YEAR $ 90,428,998 $ 89,804,504 $ 83,937,839
Issuance of common stock upon exercise of options and
warrants 136,881 500,059 4,256,465
Issuance of restricted common stock as employee
compensation 129,846 110,923 125,088
Issuance of common stock in private offering 23,994,172 0 1,075,989
Issuance of common stock as payment for license fees and
services 3,346,119 0 0
Conversion of preferred stock to common stock 12,948 13,512 85,810
Issuance of options for consulting services 0 0 323,313
------------- ------------- -------------
ADDITIONAL PAID-IN CAPITAL - END OF YEAR $ 118,048,964 $ 90,428,998 $ 89,804,504
============= ============= =============
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - BEGINNING
OF YEAR $ 310,869 $ 151,359 $ (52,880)
Change in unrealized gain (loss) on investments (279,123) 159,510 204,239
------------- ------------- -------------
ACCUMULATED OTHER COMPREHENSIVE INCOME - END OF
YEAR $ 31,746 $ 310,869 $ 151,359
============= ============= =============
ACCUMULATED DEFICIT - BEGINNING OF YEAR $ (73,654,354) $ (56,382,532) $ (39,772,065)
Net loss (22,014,798) (17,271,822) (16,610,467)
------------- ------------- -------------
ACCUMULATED DEFICIT - END OF YEAR $ (95,669,152) $ (73,654,354) $ (56,382,532)
============= ============= =============
TOTAL SHAREHOLDERS' EQUITY - BEGINNING OF YEAR $ 34,046,589 $ 50,547,330 $ 60,020,405
Issuance of common stock upon exercise of options and
warrants 137,042 500,585 3,999,572
Issuance of restricted common stock as employee
compensation 130,124 110,986 125,134
Issuance of common stock and warrants in private offering 24,028,824 0 2,485,134
Issuance of common stock as payment for license fees and
services 3,350,000 0 0
Issuance of options for consulting fees 0 0 323,313
Comprehensive loss (22,293,921) (17,112,312) (16,406,228)
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY - END OF YEAR $ 39,398,658 $ 34,046,589 $ 50,547,330
============= ============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
29
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(22,014,798) $(17,271,822) $(16,610,467)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and patent amortization 2,952,475 2,950,859 2,782,757
Amortization of premium on investments 155,848 281,377 68,099
Provision for obsolete inventories 401,271 521,573 320,000
Stock compensation 972,471 1,275,394 1,647,090
Gain on sale of investments (228,960) (158,482) (20,267)
Loss on sale of equipment 84,007 51,643 8,798
Changes in operating assets and liabilities:
Accounts receivable, net 1,169,728 (1,211,942) 1,397,281
Inventories 212,628 707,082 (646,530)
Prepaid and other assets 402,920 (1,435,399) 104,199
Accounts payable and accrued expenses (837,919) 85,028 145,438
Deferred revenue 223,463 17,854 2,568
------------ ------------ ------------
Total adjustments 5,507,932 3,084,987 5,809,433
------------ ------------ ------------
Net cash used in operating activities (16,506,866) (14,186,835) (10,801,034)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments available for sale (5,603,060) (16,786,291) (25,252,137)
Proceeds from maturity/sale of investments 16,256,385 29,863,504 6,447,302
Purchase of property and equipment (1,172,715) (1,318,947) (1,434,740)
Proceeds from sale of equipment 437,855 7,660 0
Payment for patent costs (1,175,998) (1,556,178) (2,252,466)
------------ ------------ ------------
Net cash provided by (used in) investing activities 8,742,467 10,209,748 (22,492,041)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 24,145,241 500,585 6,484,706
------------ ------------ ------------
Net cash provided by financing activities 24,145,241 500,585 6,484,706
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 16,380,842 (3,476,502) (26,808,369)
CASH AND CASH EQUIVALENTS, beginning of year 1,087,033 4,563,535 31,371,904
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 17,467,875 $ 1,087,033 $ 4,563,535
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
30
PARKERVISION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
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 Wireless Division and the Video 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 its
equity securities to fund its operations. In the opinion of management, the
Company has adequate funds to meet its liquidity needs for 2004. 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 D2D, LLC, after elimination of all inter-company transactions and
accounts. The Company formed another subsidiary, Direct2Data Technologies, Inc.,
which, to date, has no assets or operations.
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, reserves for sales returns,
inventory reserves for potential excess or obsolete inventory, the impairment of
assets and amortization period for intangible and long-lived 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.
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, and overnight
repurchase agreements with original maturities of three months or less when
purchased.
31
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." These investments are classified as available for
sale and are intended to be held for indefinite periods of time and are not
intended to be held to maturity. Securities available for sale are recorded at
fair value. Net 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 operations.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
allowance is based on management's assessment of the collectibility of customer
accounts. Management regularly reviews the allowance by considering factors such
as historical experience, age of the account balance and current economic
conditions that may affect a customer's ability to pay. If the creditworthiness
of the Company's customers were to deteriorate, or if actual defaults are higher
than historical experience, additional allowances would be required.
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. The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
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
Furniture and fixtures 7 years
The cost and accumulated depreciation of assets sold or retired are removed from
their respective accounts, and any resulting net gain or loss is recognized in
the accompanying consolidated statements of operations.
REVENUE RECOGNITION
The Company recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the sales price is fixed or
determinable and collectibility is probable. For video division products, these
criteria are generally met when product is shipped. Contracts and customer
purchase orders are generally used to determine the existence of an arrangement
and the fee
32
associated with the transaction. Shipping documents are used to verify delivery.
The Company assesses collectibility based primarily on the creditworthiness of
the customer as determined by credit checks and analysis, as well as the
customer's payment history.
Service revenue is deferred until the service has been performed and the Company
has no significant remaining obligation to the customer. Revenue from extended
support contracts is deferred and recognized ratably over the period in which
support services are to be performed, generally one to three years.
The Company's wireless division makes sales direct through its own website or
through TigerDirect.com, an internet retailer. TigerDirect.com is given business
terms that allow for the return of unsold inventory. In addition, the Company
currently offers a 30-day money back guarantee on its wireless products. The
Company recognizes revenue for its wireless products in accordance with SFAS No.
48, "Revenue Recognition When Right of Return Exists". With regard to sales
through a distribution channel, the Company recognizes revenue on a sell-through
method utilizing information provided by the distribution channel. In addition,
since the Company does not have sufficient history with sales of this nature to
establish an estimated expected return, the Company has deferred 100% of
wireless product sales within the 30-day guarantee period. At December 31, 2003,
the Company has deferred revenue from sales of wireless products of
approximately $74,000.
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. For the years
ended December 31, 2003, 2002 and 2001, warranty expenses were $55,729, $106,974
and $71,541, respectively.
A reconciliation of the changes in the aggregate product warranty liability for
the years ended December 31, 2003 and 2002 is as follows:
Warranty Reserve
Debit(Credit)
--------------------------
2003 2002
--------- ---------
Balance at the beginning of the year $(248,230) $(212,107)
Accruals for warranties issued during the year (55,729) (106,974)
Accruals related to pre-existing warranties
(including changes in estimates) 0 0
Settlements made (in cash or in kind) during the year 104,875 70,851
--------- ---------
Balance at the end of the year $(199,084) $(248,230)
========= =========
The Company offers extended service and support contacts on its PVTV automated
production systems. A reconciliation of the changes in the aggregate deferred
revenue from extended service contracts for the years ended December 31, 2003
and 2002 is as follows:
33
Deferred Revenue from
Extended Service
Contracts
Debit(Credit)
--------------------------
2003 2002
--------- ---------
Balance at the beginning of the year $(383,704) $(176,521)
Accruals for contracts issued during the year (737,617) (708,013)
Revenue recognized during the year 559,737 500,830
--------- ---------
Balance at the end of the year $(561,584) $(383,704)
========= =========
ADVERTISING COSTS
Advertising costs are charged to operations when incurred. The Company incurred
advertising costs of approximately $175,000, $61,000, and $47,000 for the years
ended December 31, 2003, 2002 and 2001, respectively.
LOSS PER COMMON SHARE
Basic loss per common share is determined based on the weighted-average number
of common shares 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 outstanding for the years ended
December 31, 2003, 2002, and 2001, was 15,446,857, 13,941,068, and 13,785,276,
respectively. The total number of options and warrants to purchase 7,007,767,
6,518,250, and 5,765,599 shares of common stock that were outstanding at
December 31, 2003, 2002 and 2001, respectively, were excluded from the
computation of diluted earnings per share as the effect of these options and
warrants would have been anti-dilutive.
IMPAIRMENT OF ASSETS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," as modified by SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" requires that long-lived
assets, including intangibles other than goodwill of an entity, be reviewed for
impairment during each reporting period. If circumstances suggest that their
values may be impaired, an assessment of 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 were 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, 2003, the Company does not believe any such assets
are impaired.
SFAS No. 142, "Goodwill and Other Intangible Assets", requires that goodwill and
intangible assets with indefinite lives be reviewed at least annually for
impairment. The Company has applied SFAS No. 142 to its intangible assets. As of
December 31, 2003, the Company has no intangible assets with indefinite lives.
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 net unrealized gains (losses)
on investments available-for-sale which are included in accumulated other
comprehensive income in the consolidated statements of shareholders' equity.
34
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company paid no interest or taxes during 2003, 2002 or 2001. During 2003,
the Company issued restricted common stock as compensation to employees with an
aggregate fair value of approximately $130,000. 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 14). On September 19, 2003 the Company issued restricted
common stock, valued at approximately $950,000, as consideration for a license
agreement (see note 14).
During 2002, the Company issued restricted common stock as compensation to
employees with an aggregate fair value of approximately $111,000. During 2001,
the Company issued restricted common stock as compensation to employees and
issued options for professional services with an aggregate fair value of
approximately $448,000.
INCOME TAX POLICY
The provision for income taxes is based on income before taxes as reported in
the accompanying consolidated statements of operations. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns, in
accordance with SFAS No. 109. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
An assessment is made as to whether or not a valuation allowance is required to
offset deferred tax assets. This assessment includes anticipating future income.
ACCOUNTING FOR STOCK BASED COMPENSATION
At December 31, 2003, the Company has two stock-based employee compensation
plans, which are described more fully in Note 13. The Company accounts for those
plans 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 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.
2003 2002 2001
---------------- ---------------- ----------------
Net loss, as reported $ (22,014,798) $ (17,271,822) $ (16,610,467)
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects (14,867,054) (20,060,070) (17,853,766)
---------------- ---------------- ----------------
Pro forma net loss (36,881,852) (37,331,892) (34,464,233)
================ ================ ================
Basic net loss per common
share: As reported $ (1.43) $ (1.24) $ (1.20)
================ ================ ================
Pro forma $ (2.39) $ (2.68) $ (2.50)
================ ================ ================
RECLASSIFICATIONS
Certain reclassifications have been made to the 2002 and 2001 consolidated
financial statements in order to conform to the 2003 presentation.
35
3. INVESTMENTS
-----------
At December 31, 2003 and 2002, short-term investments included investments
classified as available-for-sale reported at their fair value based on quoted
market prices of $3,008,427 and $13,867,763, respectively. For the years ended
December 31, 2003, 2002 and 2001, the Company recognized gains on the sale of
investments of $228,960, $158,482, and 20,267, respectively. For the years ended
December 31, 2003, 2002 and 2001, unrealized (losses) gains of $(279,123),
$159,510, and $204,239 were recognized in other comprehensive income.
4. INVENTORIES
-----------
Inventories consisted of the following at December 31, 2003 and 2002:
2003 2002
----------- -----------
Purchased materials $ 1,869,542 $ 2,010,578
Work in process 185,041 74,707
Finished goods 404,765 672,356
Spare parts and demonstration inventory 1,207,097 1,165,545
----------- -----------
3,666,445 3,923,186
Less allowance for inventory obsolescence (1,189,460) (832,302)
----------- -----------
$ 2,476,985 $ 3,090,884
=========== ===========
5. PREPAID EXPENSES AND OTHER
--------------------------
Prepaid expenses and other consisted of the following at December 31, 2003 and
2002:
2003 2002
---------- ----------
Prepaid insurance $ 942,999 $1,193,781
Prepaid services 800,000 0
Prepaid compensation 0 242,347
Other prepaid expenses 569,386 859,892
Interest and other receivables 54,407 190,583
---------- ----------
$2,366,792 $2,486,603
========== ==========
Prepaid services represent the current portion of consulting services prepaid
with shares of the Company's common stock in April 2003 as discussed in Note 14.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, at cost, consisted of the following at December 31, 2003
and 2002:
2003 2002
------------ ------------
Manufacturing and office equipment $ 12,727,865 $ 11,596,559
Tools and dies 850,842 809,432
Leasehold improvements 748,976 748,976
Aircraft 340,000 919,847
Furniture and fixtures 592,237 592,237
------------ ------------
15,259,920 14,667,051
Less accumulated depreciation (10,399,659) (8,483,517)
------------ ------------
$ 4,860,261 $ 6,183,534
============ ============
36
Depreciation expense related to property and equipment was $1,974,126,
$1,999,111 and $1,945,121, in 2003, 2002 and 2001, respectively.
7. OTHER ASSETS
------------
Other assets consist of the following at December 31, 2003 and 2002:
2003
--------------------------------------------------------
Gross Carrying
Amount Accumulated 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
============ ============ ============
2002
--------------------------------------------------------
Gross Carrying
Amount Accumulated 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
Prepaid compensation 2,327,677 (2,327,677) 0
Non-compete agreement 300,000 (300,000) 0
Other intangible assets 364,830 (339,489) 25,341
Deposits and other 254,821 0 254,821
------------ ------------ ------------
$ 13,939,156 $ (5,068,353) $ 8,870,803
============ ============ ============
The Company has pursued an aggressive schedule for filing and acquiring patents
related primarily 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. Capitalized patent costs are being
amortized over the estimated lives of the related patents, ranging from five to
twenty years.
Prepaid services represent the long-term portion of consulting services paid
with shares of the Company's common stock in April 2003 as discussed in Note 14.
Prepaid licensing fees represent costs incurred to obtain licenses for use of
certain technologies in future products. These fees include fees of $950,000
paid with shares of the Company's common stock in September 2003 as discussed in
Note 14. Prepaid license fees are being amortized over their estimated economic
lives, generally three to five years.
Prepaid compensation represents compensation under employment agreements in
connection with the acquisition of STI assets in 2000. This prepaid compensation
was amortized to expense over the term of the related employment agreements, or
approximately three years. Prepaid non-compete and other intangible assets
represent intangible assets acquired in connection with the acquisition of STI
assets in 2000. These assets are being amortized over their estimated useful
lives of two to three years.
37
Amortization expense for the years ended December 31, 2003, 2002 and 2001 is as
follows:
Amortization Expense
-------------------------------------------------------------
Weighted
average
estimated life
(in years) 2003 2002 2001
-------------- ---------- ---------- ----------
Patents and copyrights 17 $ 657,842 $ 678,723 $ 566,028
Prepaid services 3 600,000 0 0
Prepaid licensing fees 4 295,166 120,167 0
Prepaid compensation 3 0 243,488 1,028,833
Non-compete 2 0 31,250 150,000
Other intangibles 3 25,341 121,608 121,608
---------- ---------- ----------
Total amortization 11 $1,578,349 $1,195,236 $1,866,469
========== ========== ==========
Future estimated amortization expense for other assets that have remaining
unamortized amounts as of December 31, 2003 were as follows:
2004 $1,966,000
2005 1,330,000
2006 1,010,000
2007 611,000
2008 480,000
8. INCOME TAXES AND TAX STATUS
---------------------------
The Company accounts for income taxes in accordance with SFAS No.109,
"Accounting for Income Taxes." As a result of current losses and full deferred
tax valuation allowances for all periods, no current or deferred tax provision
(benefit) was recorded for 2003, 2002, and 2001. 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, 2003, 2002 and 2001 is as
follows:
2003 2002 2001
----------- ----------- -----------
Tax benefit at statutory rate $(7,382,964) $(5,872,419) $(5,647,559)
State tax benefit (760,011) (604,514) (581,366)
Increase in valuation allowance 8,330,346 7,062,479 7,998,118
Research and development credit
(319,560) (671,999) (1,842,778)
Other 132,189 86,453 73,585
----------- ----------- -----------
$ 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, 2003 and 2002:
38
2003 2002
------------ ------------
Gross deferred tax assets:
Net operating loss carryforward $ 37,220,093 $ 29,383,587
Research and development credit 6,919,376 6,048,088
Inventories 609,572 466,262
Accrued liabilities 159,229 231,201
Deferred revenue 0 34,153
Patents and other 1,445,598 1,059,393
------------ ------------
46,353,868 37,222,684
Less valuation allowance (44,863,806) (36,533,459)
------------ ------------
1,490,062 689,225
------------ ------------
Gross deferred tax liabilities:
Depreciation 425,405 689,255
Deferred revenue 389,657 0
Restricted stock issuance 675,000 0
------------ ------------
1,490,062 689,255
------------ ------------
Net deferred tax asset $ 0 $ 0
============ ============
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, 2003 and 2002 was $44,863,806 and
$36,533,459, respectively.
At December 31, 2003, the Company had net operating loss and research and
development tax credit carryforwards for income tax purposes of approximately
$99,253,582 and $6,919,376, respectively, which expire in varying amounts from
2008 through 2023. The Company's ability to benefit from the net operating loss
and research and development tax credit carryforwards could be limited under
certain provisions of the Internal Revenue Code if ownership of the Company
changes by more than 50%, as defined.
To the extent that net operating loss carryforwards, if realized, relate to the
portion associated with stock-based compensation, the resulting benefit will be
credited to shareholders' equity, rather than results of operations.
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
LEASE COMMITMENTS
The Company's headquarters and manufacturing operations are located in
Jacksonville, Florida, pursuant to a non-cancelable lease agreement with related
parties (see Note 10). The lease is on a triple net basis and currently provides
for a monthly base rental payment of $23,276 through February 2007, with an
option for renewal.
The Company leases additional office space in Jacksonville, Florida under a
non-cancelable lease agreement which currently provides for a monthly base
rental payment of approximately $9,600 through May 2004.
The Company leases office space in Lake Mary, Florida for a wireless design
center. The lease term, as amended, commenced in September 2000 and provides for
a monthly rental payment of approximately $30,250 through December 2005.
39
The Company leases office space in Pleasanton, California under a non-cancelable
lease agreement which commenced in March 2000 and provides for a monthly rental
payment of approximately $13,700 through March 2005. The Company ceased its
operations in Pleasanton at the end of 2001. Although the operations at this
facility ceased in 2001, the Company has a remaining lease obligation through
March 2005. For the year ended December 31, 2002, the remaining estimated future
lease obligation for this facility in the amount of approximately $357,000 was
charged to general and administrative expense in the 2002 Consolidated
Statements of Operations. In January 2004, the Company entered into a sublease
agreement for this facility that will partially offset its remaining lease
obligation.
The Company leases a demonstration and training facility in Los Angeles,
California pursuant to a non-cancelable lease agreement. The lease provides for
a monthly rental payment of approximately $1,700 per month through May 2005.
The Company leases approximately 800 square feet in Melbourne, Florida for a
wireless division design center. The lease term commenced in November 2003 and
provides for a monthly base rental payment of approximately $1,200 through
November 2005.
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, 2003, 2002 and 2001 was $882,454, $1,403,075,
and $971,283, respectively. Future minimum lease payments under all
non-cancelable operating leases that have initial or remaining terms in excess
of one year as of December 31, 2003 were as follows:
2004 $893,000
2005 634,000
2006 279,000
2007 47,000
---------------
$1,853,000
===============
PURCHASE COMMITMENTS
The Company had no outstanding purchase commitments at December 31, 2003. For
the year ended December 31, 2003, three suppliers of significant components,
Panasonic, Canon USA, Inc. and Snell and Wilcox accounted for approximately 15%,
14% and 12% of the Company's total component purchases, respectively. For the
year ended December 31, 2002, four suppliers of significant components of the
Company's PVTV system, Leitch Incorporated, Panasonic, Snell and Wilcox, and
Television Equipment Association accounted for approximately 12%, 12%, 14% and
12% of the Company's total component purchases, respectively. One supplier of
significant components of the Company's PVTV system, Snell and Wilcox, accounted
for approximately 14% of the Company's component purchases for the year ended
December 31, 2001. No other supplier accounted for more than 10% of the
Company's component purchases in 2003, 2002 or 2001.
LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. The Company believes, based upon advice from
outside legal counsel, that the final disposition of such matters will not have
a material adverse effect on its financial position, results of operations or
liquidity.
40
10. RELATED-PARTY TRANSACTIONS
--------------------------
The Company leases its manufacturing and headquarters office facilities from the
Chairman and Chief Executive Officer of the Company and Barbara Parker, a
related party. The lease's current terms obligate the Company through February
28, 2007 at a monthly base rental payment of $23,276, with an option for
renewal.
The Company paid approximately $1,801,000 and $2,949,000, in 2002 and 2001,
respectively, for patent-related legal services to a law firm, of which Robert
Sterne, a Company director during 2002 and 2001, is a partner.
The Company paid Todd Parker, a director and related party, approximately
$75,000 and $34,000 for consulting services in 2002 and 2001, respectively.
In March 2003, the Company sold 495,050 shares of its common stock in a private
placement transaction to members of the Parker family, including CEO Jeffrey
Parker, at a market price of $5.05 per share.
11. CONCENTRATIONS OF CREDIT RISK
-----------------------------
Financial instruments that potentially subject the Company to a concentration of
credit risk principally consist of cash, cash equivalents and accounts
receivable. At December 31, 2003, 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.
For the year ended December 31, 2003, two broadcast customers, Canadian
Broadcasting Corporation and Gray Communications, accounted for approximately
22% and 10%, respectively, of the Company's total revenues. For the year ended
December 31, 2002, three broadcast customers, LIN Television Corporation,
McGraw-Hill Broadcasting, Inc. and Cablevision accounted for approximately 15%,
14%, and 17%, respectively, of the Company's total revenues. No single customer
accounted for more than 10% of the Company's revenue in 2001. Canadian
Broadcasting Corporation, Cablevision and Gray Communications accounted for 25%,
25%, and 24%, respectively, of accounts receivable at December 31, 2003. The
Company closely monitors extensions of credit and has never experienced
significant credit losses.
12. 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 wireless
division and the video division.
The Company's wireless division is engaged in the design, development and
marketing of products based on its proprietary Direct2Data(TM) or D2D(TM)
technology. The D2D technology is a wireless direct conversion radio frequency
technology which may be applied to all areas of wireless communications.
The video division is engaged in the design, development and marketing of
automated live television production systems, marketed under the tradename
PVTV(TM), and automated video camera control systems, marketed under the
tradename CameraMan(R). This division also provides training, support
41
and other services related to these products.
Management primarily evaluates the operating performance of its segments based
on net sales and income (loss) 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. Certain reclassifications
have been made to the 2002 and 2001 segment results in order to conform to the
2003 presentation. Segment results are as follows (in thousands):
2003 2002 2001
-------- -------- --------
NET REVENUES:
Wireless division $ 21 $ 0 $ 0
Video division 6,717 11,912 9,315
-------- -------- --------
Total net sales $ 6,738 $ 11,912 $ 9,315
======== ======== ========
LOSS FROM OPERATIONS
Wireless division $(15,684) $(14,242) $(14,128)
Video division (3,381) (1,405) (2,522)
Corporate (3,426) (2,530) (1,702)
-------- -------- --------
Total loss from operations $(22,491) $(18,177) $(18,352)
======== ======== ========
DEPRECIATION:
Wireless division $ 1,388 $ 1,351 $ 1,283
Video division 427 494 476
Corporate 159 154 186
-------- -------- --------
Total depreciation $ 1,974 $ 1,999 $ 1,945
======== ======== ========
AMORTIZATION OF INTANGIBLES
AND OTHER ASSETS:
Wireless division $ 795 $ 813 $ 741
Video division 183 139 97
-------- -------- --------
Total amortization $ 978 $ 952 $ 838
======== ======== ========
CAPITAL EXPENDITURES:
Wireless division $ 1,035 $ 703 $ 1,120
Video division 138 590 302
Corporate 0 26 13
-------- -------- --------
Total capital expenditures $ 1,173 $ 1,319 $ 1,435
======== ======== ========
ASSETS:
Wireless division $ 13,469 $ 12,893 $ 13,305
Video division 4,662 7,052 6,843
Corporate 24,352 17,800 33,996
-------- -------- --------
Total assets $ 42,483 $ 37,745 $ 54,144
======== ======== ========
42
Corporate assets consist of the following components:
December 31, 2003 December 31, 2002
----------------- -----------------
Cash and investments $20,476 $14,955
Prepaid and other 1,775 1,356
Property and equipment, net 595 1,276
Other assets 1,506 213
------- -------
Total $24,352 $17,800
======= =======
13. 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, provided 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 provided 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 vest for periods up to ten years and are exercisable for a period of
five years from the date the options vest. Options granted to directors under
the 1993 Plan are exercisable immediately and expire ten years from the date of
grant. As of September 10, 2003, the Company was no longer able to issue grants
under the 1993 Plan.
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 2000 Plan are
generally exercisable immediately and expire ten years from the date of grant.
Options to purchase 1,595,590 shares of common stock were available for future
grants under the 2000 Plan at December 31, 2003.
The following table summarizes option activity in aggregate under the 1993 and
2000 Plans for each of the years ended December 31:
43
2003 2002 2001
---------------------------- ---------------------------- ----------------------------
Wtd. Wtd. Wtd.
Avg. Ex. Avg. Ex. Avg. Ex.
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
beginning of year 4,534,224 $ 25.98 3,761,573 $ 27.90 4,018,435 $ 27.28
Granted 1,243,800 8.05 846,701 17.00 581,350 27.07
Exercised (16,100) 6.21 (32,600) 12.29 (193,200) 15.76
Forfeited (203,598) 23.39 (41,450) 28.96 (645,012) 26.65
Expired (12,960) 18.62 0 0.00 0 0.00
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
end of year 5,545,366 $ 22.13 4,534,224 $ 25.98 3,761,573 $ 27.90
========== ========== ========== ========== ========== ==========
Exercisable at
end of year 3,623,958 $ 23.83 2,709,330 $ 24.68 1,877,577 $ 25.12
========== ========== ========== ========== ========== ==========
Weighted average
fair value of
options granted $ 3.97 $ 10.05 $ 17.19
========== ========== ==========
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 securities 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:
2003 2002 2001
---------------------------- ---------------------------- ----------------------------
Wtd. Wtd. Wtd.
Avg. Ex. Avg. Ex. Avg. Ex.
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------
Outstanding at
beginning of year 1,984,026 $ 34.56 2,004,026 $ 34.26 2,122,075 $ 32.91
Granted 0 0 0 0.00 83,451 34.30
Exercised 0 0 (20,000) 5.00 (101,500) 10.00
Forfeited (476,625) 21.38 0 0.00 (100,000) 29.94
Expired (45,000) 9.58 0 0.00 0 0.00
---------- ---------- ---------- ---------- ---------- ----------
Outstanding end of
year 1,462,401 $ 39.62 1,984,026 $ 34.56 2,004,026 $ 34.26
========== ========== ========== ========== ========== ==========
Exercisable at
end of year 1,439,901 $ 39.88 1,749,098 $ 36.28 1,176,798 $ 31.79
========== ========== ========== ========== ========== ==========
Weighted average
fair value of
options granted N/A N/A $ 16.88
========== ========== ==========
44
The options outstanding at December 31, 2003 under all plans, including the
non-plan options and warrants, have exercise price ranges and weighted average
contractual lives as follows:
Options Outstanding Options Exercisable
------------------------------------------------------ ----------------------------------
Number Wtd. Avg. Number
Range of Exercise Outstanding at Remaining Wtd. Avg. Exercisable at Wtd. Avg.
Prices December Contractual Exercise December 31, Exercise
31, 2003 Life Price 2003 Price
- ----------------------- ----------------- -------------- -------------- ---------------- -------------
$4.87-$7.25 261,800 9 years $7.03 37,410 $7.14
$7.55-$8.78 975,550 9 years $8.04 307,950 $7.90
$9.00-$11.88 377,500 6 years $10.44 226,165 $11.31
$12.23-$17.60 761,400 4 years $14.85 610,900 $14.86
$18.09-$26.94 1,855,016 5 years $21.56 1,486,484 $21.57
$27.19-$39.00 1,225,363 7 years $32.07 1,170,663 $32.13
$39.84-$61.50 1,551,138 7 years $49.29 1,224,287 $49.32
----------------- ----------------
7,007,767 5,063,859
================= ================
In March 2001, in connection with a private placement transaction (see note 14),
the Company issued warrants for the purchase of 83,451 shares of the Company's
common stock to Texas Instruments, Inc. These warrants are immediately vested
with exercise prices ranging from $29.96 to $39.84 per share and expire ten
years from the date of grant. The warrants had an estimated fair market value of
$16.88 per share, or approximately $1.4 million. 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 6.3%, no
expected dividend yield, expected life of five years and expected volatility of
63%.
In April 2001, the Company granted stock options under the 1993 Stock Plan (the
"1993 Plan") to purchase an aggregate of 35,000 shares of its common stock to
various patent attorneys. The shares were granted at an exercise price of $25
per share and expire three years from the date of grant. The estimated fair
value of these options at the date of grant was approximately $9.22 per share,
or $323,300, which is included in expense in the accompanying consolidated
statements of operations. The fair value was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rate of 6%, no expected dividend yield, expected
life of two years and expected volatility of 60%.
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, as amended by SFAS No.
148, the Company's net loss and net loss per share would have been increased to
the following pro forma amounts:
45
2003 2002 2001
-------------- -------------- --------------
Net loss: as reported $ (22,014,798) $ (17,271,822) $ (16,610,467)
Pro forma (36,881,852) (37,331,892) (34,464,233)
Basic net loss per common
share:
As reported $ (1.43) $ (1.24) $ (1.20)
Proforma $ (2.39) $ (2.68) $ (2.50)
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 2003, 2002 and 2001:
2003 2002 2001
---------- ---------- ----------
Expected volatility 74%-78% 48%-71% 59%-64%
Risk free interest rate 1.30%-3.25% 2.74%-5.29% 3.62%-5.28%
Expected life 5-10 years 5-11 years 4-11 years
Dividend yield -- -- --
14. STOCK AUTHORIZATION AND ISSUANCE
--------------------------------
PREFERRED STOCK
In March 2000, the Company issued 79,868 shares of Series D Preferred Stock, $1
par value, $25 stated value, for the acquisition of substantially all of the
assets of 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.
In March 2001, the Series A and D preferred shares were converted to
approximately 86,000 shares of common stock. In March 2002, the Series B shares
were converted to approximately 16,600 shares of common stock. The Series C
Preferred Stock was automatically converted to approximately 73,000 shares of
common stock on March 10, 2003.
COMMON STOCK
On November 14, 2003, ParkerVision consummated the sale of an aggregate of
2,310,714 shares of common stock in a private placement to a limited number of
institutional and other investors in a private placement pursuant to offering
exemptions under the Securities Act of 1933. These shares were subsequently
registered for resale under an S-3 registration statement. These shares were
sold at a price of $8.75 per share for gross proceeds of $20,218,747.
ParkerVision engaged Wells Fargo Securities LLC as placement agent pursuant to
an agreement dated October 23, 2003, under which it paid an aggregate of
$1,243,124 in fees and expenses in connection with the offering.
On September 3, 2003, the Company entered into a license agreement with
SkyCross, Inc. ("SkyCross") for certain antenna technology to be utilized in
current and future products for the Company's wireless division. In
consideration for the license, the Company issued 138,158 shares of restricted
common stock with an aggregate value of $950,000 or $6.88 per share. These
shares were subsequently registered for resale by SkyCross under an S-3
registration statement. The agreement provided that, if under certain
circumstances SkyCross did not realize at least $950,000 from the sale of the
stock by January 1, 2004, the Company would issue additional shares or pay
SkyCross an
46
amount equal to the value of the shortfall. As of December 31, 2003, SkyCross
had received at least $950,000, therefore no additional shares were issued by
the Company.
On April 28, 2003, the Company entered into a written 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. These shares were subsequently registered for
resale under an S-3 registration statement. 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.
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
were subsequently registered for resale under an S-3 registration statement.
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.
In March 2001, the Company issued 83,451 shares of its Common Stock to Texas
Instruments, Inc. in a private placement transaction. The shares were sold at a
price of $29.96 per share for net proceeds of approximately $2.5 million and
were subsequently registered for resale under an S-3 registration statement.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
For the three months ended For the year
----------------------------------------------------------------------------- ended
March 31, June 30, September 30, December 31, December 31,
2003 2003 2003 2003 2003
---------------- ----------------- ----------------- --------------- ---------------
Revenues $ 1,760,170 $ 2,390,237 $ 1,350,539 $ 1,237,123 $ 6,738,069
Gross margin 565,916 825,187 416,888 264,405 2,072,396
Net loss (5,558,093) (5,049,118) (5,627,158) (5,780,429) (22,014,798)
Basic and diluted
net loss per
common share $ (0.39) $ (0.33) $ (0.36) $ (0.35) $ (1.43)
For the three months ended For the year
----------------------------------------------------------------------------- ended
March 31, June 30, September 30, December 31, December 31,
2002 2002 2002 2002 2002
---------------- ----------------- ----------------- --------------- ---------------
Revenues $ 3,026,007 $ 3,024,108 $ 2,280,596 $ 3,581,202 $ 11,911,913
Gross margin 1,273,474 1,129,889 747,501 1,551,764 4,702,628
Net loss (3,654,921) (4,269,573) (4,400,322) (4,947,006) (17,271,822)
Basic and diluted
net loss per
common share $ (0.26) $ (0.31) $ (0.31) $ (0.35) $ (1.24)
47
16. SUBSEQUENT EVENT
----------------
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, after the
approval of the Company's stockholders is obtained and other customary 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 adjustment 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 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 transaction is closed, currently
anticipated to be the second quarter of 2004. The operations of the video
division are disclosed in Note 12; 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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the Company's disclosure controls and
procedures as of December 31, 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 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
48
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Election of Directors" in the
Company's definitive Proxy Statement for its 2004 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 "2004 Proxy
Statement"), is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Election of Directors - Executive
Compensation" in the 2004 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
- ------------------------------------
The following table gives the information about our common stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2003, including the 1993
Stock Plan, the 2000 Performance Equity Plan and other miscellaneous plans.
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
Plan Category ( a ) ( b ) ( c )
------------- -------------------- -------------------- -----------------------
Equity compensation plans
approved by security holders 5,545,366 $22.13 1,595,590
Equity compensation plans not
approved by security holders 150,000 $23.66 None
--------------------- -----------------------
Total 5,695,366 1,595,590
===================== =======================
The equity compensation plans reported upon in the above table not approved by
security holders include:
i) Options to purchase an aggregate of 25,000 shares granted to two
directors in March 1999 at exercise prices of $23.25 per share.
These options were immediately vested and expire in March 2009.
49
ii) Options to purchase 100,000 shares granted to an employee in March
1999 at an exercise price of $23.25. These options vest ratably over
five years and expire in May 2009. As of December 31, 2003, options
to purchase 90,000 shares were outstanding.
iii) Options to purchase 35,000 shares granted to the Company's patent
attorneys at an exercise price of $25. These options vested upon
issuance and expire three years from the date of grant.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners" in the 2004 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 2004 Proxy Statement is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained under the caption "Election of Directors - Audit
Committee Information and Report" in the 2004 Proxy Statement is incorporated
herein by reference.
ITEM 15. 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)
50
4.2 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)
4.3 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)
4.4 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)
4.5 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)
4.6 Purchase Option between the Registrant and Texas Instruments,
Inc. dated March 8, 2001(incorporated by reference from exhibit
4.7 of Annual Report on Form 10-K for the year ended December 31,
2000)
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 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)
10.5 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)
10.6 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)
51
10.7 Fourth 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 10.8 of the Annual Report on Form 10-K for the
period ended December 31, 2001)
10.8 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)
10.9 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)
10.10 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)
10.11 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)
10.12 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)
10.13 Subscription agreement between the Registrant and Texas
Instruments, Inc. dated March 8, 2001 (incorporated by reference
fro the Exhibit 10.16 of the Annual Report on Form 10-K for the
period ended December 31, 2000)
10.14 Employment agreement dated September 7, 2000 between Jeffrey
Parker and Registrant (incorporated by reference from Exhibit
10.1 of Quarterly Report on Form 10-Q for the period ended June
30. 2001)
10.15 Stock option agreement dated September 7, 2000 between Jeffrey
Parker and Registrant (incorporated by reference from Exhibit
10.2 of Quarterly Report on Form 10-Q for the period ended June
30. 2001)
10.16 Stock option agreement dated September 7, 2000 between Jeffrey
Parker and Registrant (incorporated by reference from Exhibit
10.3 of Quarterly Report on Form 10-Q for the period ended June
30. 2001)
10.17 Employment agreement dated March 6, 2002 between David Sorrells
and Registrant (incorporated by reference from Exhibit 10.21 of
Annual Report on Form 10-K for the period ended December 31,
2001)
52
10.18 2000 Performance Equity Plan (incorporated by reference from
Exhibit 10.11 of Registration Statement No. 333-43452)
10.19 Development and Foundry Agreement between Registrant and Texas
Instruments dated March 8, 2001 (incorporated by reference from
Exhibit 10.3 of Registration Statement No. 333-110712)
10.20 Form of 2002 Indemnification Agreement for Directors and Officers
(incorporated by reference from Exhibit 10.1 of Quarterly Report
on Form 10-Q for the period ended September 30, 2002)
10.21 Subscription agreement between the Registrant and Leucadia
National Corporation dated March 26, 2003 (incorporated by
reference from Exhibit 10.24 of Annual Report on Form 10-K for
the period ended December 31, 2002)
10.22 Subscription agreement between the Registrant and Jeffrey Parker
dated March 26, 2003 (incorporated by reference from Exhibit
10.25 of Annual Report on Form 10-K for the period ended December
31, 2002)
10.23 Subscription agreement between the Registrant and Barbara Parker
dated March 26, 2003 (incorporated by reference from Exhibit
10.26 of Annual Report on Form 10-K for the period ended December
31, 2002)
10.24 Subscription agreement between the Registrant and Todd Parker
dated March 26, 2003 (incorporated by reference from Exhibit
10.27 of Annual Report on Form 10-K for the period ended December
31, 2002)
10.25 Subscription agreement between the Registrant and Stacie Wilf
dated March 26, 2003 (incorporated by reference from Exhibit
10.28 of Annual Report on Form 10-K for the period ended December
31, 2002)
10.26 Subscription agreement between the Registrant and David Cumming
dated March 26, 2003 (incorporated by reference from Exhibit
10.29 of Annual Report on Form 10-K for the period ended December
31, 2002)
10.27 Form of SkyCross, Inc. License Agreement dated September 3, 2003
(incorporated by reference from Exhibit 10.1 of Registration
Statement No. 333-108954)
10.28 Form of Stock Purchase Agreement with each of the investors in
the November 2003 private placement who are the Selling
Stockholders (incorporate by reference from Exhibit 10.1 of
Registration Statement No. 333-110712)
10.29 Asset Purchase Agreement and related ancillary agreements, dated
as of February 25, 2004, among the Company, Thomson and Thomson
Licensing (incorporated by reference from Exhibits 2.1, 10.1,
10.2, 10.3, 10.4, 10.4 and 10.6 of Current Report on Form 8-K for
the event date of February 25, 2004)
53
22.1 Table of Subsidiaries*
23.1 Consent of PricewaterhouseCoopers LLP*
31.1 Rule 13a-14 and 15d-14 Certification of Jeffrey Parker*
31.2 Rule 13a-14 and 15d-14 Certification of Cynthia Poehlman*
32.1 Section 1350 Certification of Jeffrey Parker and Cynthia
Poehlman*
99.1 Risk Factors*
* Filed herewith
(b) REPORTS ON FORM 8-K.
None.
54
SIGNATURES
In accordance with Section 13 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 12, 2004 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 12, 2004
---------------------------- of the Board (Principal Executive Officer)
Jeffrey L. Parker
By: /s/ William A. Hightower President and Director March 12, 2004
----------------------------
William A. Hightower
By: /s/ Todd Parker President, Video Business Unit and Director March 12, 2004
----------------------------
Todd Parker
By: /s/ David F. Sorrells Chief Technical Officer and Director March 12, 2004
----------------------------
David F. Sorrells
By: /s/ Stacie Wilf Secretary, Treasurer and Director March 12, 2004
----------------------------
Stacie Wilf
By: /s/ Cynthia L. Poehlman Chief Accounting Officer March 12, 2004
---------------------------- (Principal Accounting Officer)
Cynthia L. Poehlman
By: /s/ Richard A. Kashnow Director March 12, 2004
----------------------------
Richard A. Kashnow
By: /s/ William L. Sammons Director March 12, 2004
----------------------------
William L. Sammons
By: /s/ Nam P. Suh Director March 12, 2004
----------------------------
Nam P. Suh
By: /s/ Papken der Torossian Director March 12, 2004
----------------------------
Papken der Torossian
55
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, 2001 $768,285 $320,000 $ (108,715) $ 979,570
Year ended December 31, 2002 979,570 521,573 (668,841) 832,302
Year ended December 31, 2003 832,302 401,271 (44,113) 1,189,460
Balance at Balance at
Valuation Allowance for Beginning End of
Income Taxes of Period Provision Write-Offs Period
- ----------------------------------------------------------------------------------------------------
Year ended December 31, 2001 $21,472,862 $ 7,998,118 0 $29,470,980
Year ended December 31, 2002 29,470,980 7,062,479 0 36,533,459
Year ended December 31, 2003 36,533,459 8,330,347 0 44,863,806
56