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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, 2001
( ) 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
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PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2971472
(State of Incorporation) (I.R.S. Employer ID No.)
8493 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
(904) 737-1367
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if there is no disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K ( ).
As of March 25, 2002, the aggregate market value of the Issuer's Common Stock,
$.01 par value, held by non-affiliates of the Issuer was approximately
$198,973,000 (based upon $20.70 per share closing price on that date, as
reported by The Nasdaq National Market).
As of March 25, 2002, 13,936,606 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 2002 Annual Meeting are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
ParkerVision, Inc. was incorporated under the laws of the state of Florida on
August 22, 1989. ParkerVision's operations consist of two operating segments -
the Video Products Division ("Video Division") and the Wireless Technology
Division ("Wireless Division"). The Wireless Division operates under the name
Direct2Data Technologies.
Video Division
- --------------
The Video Division is engaged in the design, development and marketing of
automated video camera control systems, marketed under the tradename
CameraMan(R) and automated production systems, marketed under the tradename
PVTV(TM). The Company also provides training, support and other services related
to these products. The Company sells its CameraMan(R) video products primarily
through audiovisual dealers and other equipment manufacturers throughout the
United States as well as in Canada, Latin America and Asia and it's corporate
and education-based PVTV(TM) systems primarily through dealers in the United
States and Canada. The Company sells its broadcast market PVTV NEWS(TM) systems
direct to broadcasters in the United States and Canada.
The Company's Video Division revenue percentages by product and/or service lines
are as follows:
Product/Service 2001 2000 1999
- ------------------------------- -------- -------- --------
CameraMan(R)systems 66% 59% 89%
PVTV(TM)systems 24% 36% 10%
Training and other services 3% 3% 1%
Recurring & other support 7% 2% 0%
The CameraMan(R) systems were initially developed to allow the creation of
professional-quality video communication by non-professional video users. The
Company markets its CameraMan(R) systems to certain educational and
videoconferencing segments of the commercial market that utilize audiovisual
solutions for communication, training, presentation, instructional and
educational needs. The Company offers its CameraMan(R) products in a variety of
application-specific packages designed for these markets. These packages include
either single-chip or three-chip imaging cameras. The Company also offers a
higher quality digital CameraMan(R) system targeted toward the broadcast and
professional video user.
Since 1995, the Company has produced its single-chip camera products for Forgent
Corporation, formerly named Vtel Corporation ("VTEL") under an Original
Equipment Manufacturer ("OEM") agreement. In March 2002, the Company terminated
its OEM agreement with VTEL.
The Company's unit sales of its single-chip camera products declined
approximately 45% from 2000 to 2001. This decline is largely due to declining
sales to VTEL, which the Company attributes in part to VTEL's restructuring of
its operations during 2001. The Company believes the decline in single-chip
sales is also due to the Company's product development and marketing focus on
its PVTV(TM) broadcast systems and to increasing price pressure from competitive
offerings. The Company anticipates continued declines in its single chip camera
sales in 2002. In the fourth quarter of 2001, the Company reduced its direct
production staffing in anticipation of reduced camera sales volume.
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The Company's PVTV(TM) systems were designed specifically to meet the needs of
studio production markets. The PVTV(TM) product line includes a professional,
broadcast television quality video production system that integrates video,
audio, machine control and camera control functions into an intelligent
single-operator station. PVTV(TM) systems also typically incorporate two or more
of the Company's three chip camera systems. The system was designed to allow
organizations to economize their resources by maximizing their production
capabilities. A single operator can control, in parallel, the production
functions that traditionally require as many as four to twelve individuals to
operate using traditionally available broadcast equipment.
During 1998 and 1999, the Company sold its PVTV(TM) systems to several beta or
"pilot" sites in broadcast, corporate and educational markets. The Company
worked extensively with these sites during 1998 and 1999 to increase the
technological capabilities of its system. During this time, the Company also
focused on filing patents to protect its proprietary technologies related to the
PVTV (TM) system. In 1999, the Company introduced a digital version of its PVTV
NEWS(TM) package and an education-based system marketed under the tradename PVTV
Learning(TM).
During 2000, the Company continued to enhance the features, functionality and
third party interfaces of its PVTV(TM) systems. During 2000, the Company
received a purchase contract from The Ackerley Group ("Ackerley"), a broadcast
ownership group, for the purchase of PVTV(TM) systems for nine of Ackerley's
television news stations. Substantially all of these system sales were completed
in 2000 resulting in approximately $4,700,000 in revenue from system sales and
services. Ackerley accounted for approximately 30% of the Company's revenues in
2000.
In 2001, the broadcast marketplace experienced a downturn with significant
decreases in advertising revenue and resulting profits. Despite these industry
trends, the Company did continue to gain momentum in the broadcast industry. In
the second half of the year, the Company received purchase contracts from two
large station ownership groups, LIN Television Corporation and McGraw-Hill
Broadcasting Company, Inc. These two ownership groups committed to purchase a
total of twelve PVTV(TM) systems for stations throughout the United States,
including one station in Puerto Rico. Due to customer installation schedules,
only three of the twelve systems were delivered in 2001. An additional four
systems were delivered in the first quarter of 2002 and the remaining five
systems are scheduled for delivery in the second quarter of 2002.
The broadcast news industry measures market size in terms of Designated Market
Area ("DMA"). DMA is a designation for measuring the viewing market share of
television stations. There are currently 210 DMA's throughout the United States
with DMA 1 representing the largest viewing market and DMA 210 representing the
smallest viewing market. As of the end of 2001, the Company had systems
installed in television stations in DMA markets ranging from 53 to 205. In
addition, the Company has sales commitments for PVTV(TM) systems in DMA markets
as large as DMA 18.
The Company's development efforts in 2001 were focused on continued enhancements
to the PVTV(TM) product line, including a scaled offering of systems. The less
expensive systems have limited features and functionality and target corporate
and educational markets while the more expensive systems target the broadcast
news market. The Company started development of its highest-end digital PVTV
NEWS(TM) system, called the CR4000(TM), which is specifically targeted for
broadcast networks and large market (DMA 1 - 25) local broadcast stations. This
new system provides an increased number of video inputs, mixed effects and
keyers, audio inputs and control
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ports, as well as advanced automation software features specifically designed
for larger markets. The Company completed development of this high-end system in
the first quarter of 2002.
Wireless Division
- -----------------
The Company's Wireless Division is engaged in the development and initial
marketing of its Direct2Data(TM), or D2D(TM), technology. The D2D(TM) technology
is wireless Direct Conversion radio frequency ("RF") technology that the Company
believes will reduce the complexity, cost, size, and power consumption of radio
transceivers when compared with Super Heterodyne-based radio transceivers. The
Company is initially targeting wireless local area networks ("WLAN") and
cellular telephone applications for its technology, but believes the technology
is applicable to many other markets. The Company's Wireless Division has not
generated any revenue to date.
The Company believes its D2D(TM) technology represents a completely new circuit
architecture for constructing RF front-ends (transmitters, receivers and
transceivers) that has the capability of replacing traditional RF heterodyne
architectures. In 1998, the Company announced that its D2D(TM) technology
allowed for a single-step direct conversion of a received modulated RF carrier
signal to its analog baseband data waveform. The Company also determined that
its D2D(TM) technology could be applied to RF transmitter use for producing
direct single-step up-conversion for on-channel modulated RF carriers. This
single-step process eliminates the need for the traditional multiple-step
receiver architectures based on heterodyne mixers (also referred to as
Super-heterodyne receivers) which are commonly deployed in RF receiver design.
The Company believes the Super-Heterodyne based radios are currently the most
widely deployed radio circuit architecture utilized in wireless communications.
Super heterodyne receivers process RF carriers via one or more Intermediate
Frequency ("IF") steps before achieving extraction of the modulated data in the
form of an analog baseband waveform.
The Company's focus has been on the creation of application-specific,
highly-integrated silicon chips embodying the circuits necessary to produce zero
Intermediate Frequency ("zero IF") RF front-ends based on the D2D(TM) direct
conversion technology. Zero IF radios eliminate all of the intermediate
frequency stages currently utilized in broadly deployed multi-step conversion
heterodyne transmitters and receivers.
The Company believes the D2D(TM) architecture can be implemented in a wide range
of semiconductor processes allowing the opportunity to integrate other system
functions such as amplifiers, local oscillators, and baseband filters onto the
same IC as the RF up and down-conversion. This integration would allow the
creation of highly integrated RF receivers, transmitters or transceivers. The
Company believes its D2D(TM) technology represents a significant improvement in
the development of radio transceivers by enabling the reduction of complexity,
size, power consumption and cost of many wireless communication systems. The
Company believes the D2D(TM) technology represents a significant improvement
over alternate circuit approaches for achieving higher levels of RF front-end
circuit integration. Alternate approaches that are based on traditional RF to
data conversion methods often achieve high levels of RF circuit integration at
the expense of certain performance attributes. Traditionally-constructed
Super-heterodyne RF front-ends are built from multiple discrete components and
sub-systems whereby each step is constructed from discrete circuits that can be
highly isolated from each other. This high degree of isolation allows for the
achievement of what the industry considers to be excellent levels of RF
front-end performance, usually referenced in terms of large dynamic range,
excellent sensitivity, and high levels of adjacent channel rejection,
4
among other attributes. The Company believes that integrating Super-heterodyne
architectures into silicon chips on a single die (chip) has resulted in the
degradation of certain performance characteristics when compared to the
traditionally-constructed Super-heterodyne RF front-end and that this
degradation is problematic to designers who employ such RF front-ends in
products requiring high performance. The Company also believes that it is not
practical to implement certain sub-systems of a Super-heterodyne receiver into
silicon circuits, such as the required IF filters and the various isolation
requirements necessary between the multiple local oscillators and conversion
stages.
The industry has more recently been trending toward the development of direct
conversion RF architectures for high levels of circuit integration. However, to
the best of the Company's knowledge, these efforts have been based on the use of
the heterodyne mixer as the fundamental RF-to-baseband building block of the
direct conversion RF front-end. The Company believes that the heterodyne mixer
was largely developed as a frequency translator device, which is how it is used
in Super-heterodyne architectures. In direct conversion architecture, however,
the heterodyne mixer is deployed as a data extraction device, and the Company
believes that there are fundamental shortcomings and design challenges in using
a heterodyne mixer for single-step data extraction. The Company believes that
the end result of using heterodyne mixers in highly integrated direct conversion
RF front-ends will result in the compromise of certain performance figures of
merit when compared to the Super-heterodyne counterparts that such RF front-ends
are often attempting to replace in products requiring high performance.
It is possible that the industry will accept compromises in performance such as
higher power consumption, lower sensitivity and dynamic range, less adjacent
channel rejection, or all of the aforementioned. However, the Company believes
that its D2D(TM) technology will enable the creation of RF front-ends that will
meet, or in certain instances exceed, the performance figures of merit of the
Super-heterodyne RF front-ends that such implementations would be replacing. The
Company also believes that it will distinguish itself from other direct
conversion offerings by delivering high levels of RF front-end circuit
integration without the compromises that it believes will be found in offerings
based on the use of traditional heterodyne mixers or hybrid approaches to direct
conversion. It is also possible that the industry will develop advancements to
the traditional approaches which will enable fewer compromises in performance.
During 1998 and 1999, the Company focused much of its efforts on filing patents
to protect its intellectual property and continued to develop technology
enhancements. The Company's development efforts in the second half of 1999
became focused on verifying the applicability of its D2D(TM) technology to
specific industry standards-based applications including the IEEE 802.11b WLAN
standard, GSM cellular application, and CDMA IS-95 cellular application.
Although the Company believes the technology to be applicable to all of these
wireless standards, the Company is currently in active development of D2D(TM)
transceivers for application to 2.4GHz IEEE 802.11b. Upon successful completion
of the 802.11b transceiver, the Company intends to expand its offering to 5.0
GHz IEEE 802.11a standards and CDMA IS-95/2000 1X and analog AMPs cellular
standards.
In 1999, the Company completed the development of an IEEE 802.11b WLAN
demonstrator that demonstrates several of the technological breakthroughs made
possible by the Company's D2D(TM) technology. The Company also entered into a
licensing agreement with Symbol Technologies, Inc. ("Symbol"), a leading
provider of mobile data management systems and services for WLAN products. The
agreement calls for D2D(TM) to be incorporated into the majority of Symbol's
future WLAN products and for Symbol to be the sole licensee in the WLAN
marketplace. Under the terms of the agreement, the Company received prepaid
royalties, which are included in deferred revenue,
5
and may receive additional payments over time for the sale by Symbol of products
including the D2D(TM) technology. Under the terms of the agreement with Symbol,
the Company preserves its rights to develop and market its own D2D(TM)-based
transceivers for the WLAN marketplace as well as contract with others to
incorporate into their own IC's implementations of the D2D(TM) technology
developed by the Company.
The Company also completed a D2D(TM)-based transmitter demonstration platform
that the Company believes meets or exceeds the requirements of the CDMA IS-95
standard. Early in 2000, the Company announced that the identical D2D(TM)
transmitter hardware was utilized to complete a demonstrator platform that the
Company believes exceeds the GSM standard. CDMA is the fastest growing digital
cellular standard in several regions of the world and is considered to be the
most demanding of the current digital cellular standards in terms of radio
transceiver performance requirements. GSM is currently the world's most popular
digital cellular communications standard. The Company now also has completed a
CDMA receiver prototype that the Company has tested and believes meets or
exceeds the performance requirements to be compliant with the CDMA 2000 1X
standard. The Company has started the process of developing integrated circuits
for the development of a highly integrated CDMA 2000 RF front-end chipset. The
Company believes that such a chipset would not be ready for commercial use for
at least twelve months after the Company has completed a successful
commercially-deployable implementation for its 802.11b WLAN IC.
In March 2000, the Company acquired substantially all of the assets of Signal
Technologies, Inc., a privately owned, Orlando, Florida based RF design firm
which had previously provided application engineering and design services to the
Company for the D2D(TM) technology. The assets of STI were acquired for
approximately $2 million in convertible preferred stock. In addition, the
Company employed all of the former STI employees and entered into employment
agreements with several key employees. Throughout 2000 and 2001, the Company
expanded its facilities and its engineering personnel in its Orlando facility
and has plans to continue increasing its Orlando engineering staff in 2002.
The Company's wireless design centers are located in Jacksonville and Orlando,
Florida. During 2001, the Company closed its California and Utah offices which
were established primarily as design centers.
Early in 2001, the Company entered into an agreement with PrairieComm, Inc.
("PrairieComm"), a cellular chipset and embedded software developer, to jointly
develop new chipsets using D2D(TM)-based RF transceivers and PrairieComm
baseband processors for wireless devices, including cellular telephones. As the
Company's wireless product development is currently heavily focused on the
successful completion of its 802.11b WLAN transceiver IC, the Company's
interaction with PrairieComm is limited at this time. The Company believes that
its first CDMA transceiver IC will not be available for at least twelve months
after the completion of the 802.11b IC.
The Company also entered into an agreement with Texas Instruments Incorporated
("TI") for the development of interfaces between the Company's transceiver IC's
and TI's baseband processors in the areas of wireless networking and cellular
applications. In addition, TI agreed to manufacture D2D(TM)-based IC's for the
Company using various TI semiconductor processes. TI purchased $2.5 million in
the Company's equity securities in a private placement transaction in 2001.
In the first half of 2001, the Company completed the design of its first
highly-integrated 2.4 GHz IEEE 802.11b WLAN D2D(TM)-based RF transceiver IC's.
The Company subsequently decided to
6
move its design from the semiconductor process that it was using to a process
manufactured by TI. The Company believes the transition from the original
semiconductor process to TI's process and the resulting production of
commercially available IC's is a twelve to twenty-four month process. The
Company expects to have WLAN IC's available in the second half of 2002 for
demonstrations to prospective customers. The Company also believes that its WLAN
IC's produced on the TI process will be ready for commercial use in the second
half of 2002; however, it is possible that such IC's could require further
design modifications as the Company receives feedback from certain potential
customers and conducts extensive testing on its first WLAN IC's. The Company
believes that it is not uncommon for multiple iterations of IC's for certain
customer requirements to occur before a commercially deployable product is
achieved for those customers. Each iteration is typically a ten to sixteen week
process due to semiconductor foundry process lead-times and packaging.
PRODUCTS
- --------
Video Division
- --------------
The Company's patented CameraMan(R) automated video camera control systems
utilize a portable, computerized base which pans and tilts simultaneously to
achieve fluid motion, into which is integrated a professional quality
single-chip or three-chip imaging camera that provides the system camera control
functions, such as auto-focus and auto-iris control. The base unit also includes
a proprietary automatic tracking capability. Additional peripheral devices are
available to control the automatic tracking functions and to remotely control
base unit and camera functions. CameraMan(R) camera products are offered in a
variety of application-specific packages. The Company plans to focus its future
development efforts on its three-chip camera systems and its PVTV(TM) product
line.
The Company's three-chip product line is available in both an analog and a
digital version. The three-chip camera systems, in addition to being available
in application-specific packages for distance education and corporate use, are
packaged with the Company's PVTV(TM) systems. Digital camera systems are
available in standard 4:3 aspect ratios and switchable 4:3/16:9 formats in order
to take advantage of the eventual market transition from standard NTSC 4:3
television to 16:9 digital format television
The Company's analog automated camera control systems have list prices ranging
from approximately $5,000 to $8,000 for a single-chip system and $20,000 to
$24,000 for an analog three-chip system. The Company's digital three-chip camera
systems have list prices ranging from approximately $27,000 to $41,000.
The Company's patents-pending PVTV(TM) system provides fully integrated PC-based
production systems with unique functionality. These systems often incorporate
two or more CameraMan(R) three-chip analog or digital camera systems with
additional audio, video and machine control functions, a graphical user
interface and software based on a Microsoft(R) operating system. A proprietary
Transition Macro(TM) technology allows the system operator to build, revise and
preview a production in storyboard fashion and then run the entire live or
live-to-tape production from a single user interface. These systems also allow
the operator to manually pause or interrupt the automated production, as needed,
to insert changes. In addition to CameraMan(R) cameras, the PVTV(TM) systems can
work with other video sources such as satellite feeds, compression/decompression
devices, video and audio playback devices, character generators, still stores,
and manually-operated or robotic cameras produced by other manufacturers.
7
The PVTV(TM) product line is currently available in three application-specific
packages: PVTV NEWS(TM) targeted for broadcast and cable production markets,
PVTV PRO(TM) targeted for corporations and government facilities and PVTV
Learning(TM) targeted at educational environments including high schools,
colleges and universities.
The PVTV NEWS(TM) system is a switchable 4:3/16:9 aspect ratio digital
production system that adds proprietary functionality such as the Transition
Macro(TM) technology that allows for "event driven" automation for a one or two
person live production control room. Rundown Converter(TM) technology is also
provided to integrate News Automation Systems such as AVID's "iNEWS", Associated
Press's "News Center" or "ENPS" and others to directly program the PVTV NEWS(TM)
system for a seamless newsroom work flow process. In addition, the system allows
for dynamic changes such as adding, deleting or moving stories as required
including the insertion of late breaking news in a live broadcast environment.
The PVTV NEWS CR4000(TM) is the latest development of the PVTV NEWS(TM) digital
system product line specifically targeted for broadcast networks and large
market local broadcast stations. This new system includes advanced software
features that simplify the user interface for single operator control, improves
Transition Macro(TM) timeline management and workflow processes while expanding
automation functionality. The CR4000 is a rack mount system which provides for
expanded video, keyer, audio and control capabilities.
The PVTV NEWS(TM) product line includes the PVTV NEWS(TM) 8, 16, 24, 24 Plus!
and the CR4000. The PVTV NEWS(TM) 8 is targeted for remote news bureaus and
secondary or "B" control rooms for breaking news, news cut-ins and webcast-only
applications. The PVTV NEWS(TM) 16 is targeted for local news television
stations above DMA 150. The PVTV NEWS(TM) 24 is targeted for local news
television stations between DMA 75 - 150. The PVTV NEWS(TM) 24 Plus! is targeted
for local news television stations between DMA markets 25 - 75. Finally, the new
CR4000 is targeted for networks and large market television stations in DMA 1
- -25. The larger PVTV NEWS(TM) systems can also be used in cost efficient
applications for secondary control rooms for breaking news, news cut-ins and
digital multicasting "B", "C" and "D" control rooms. The PVTV NEWS(TM) systems
are generally available in single or dual packages. The dual packages provide
for system redundancy and back-to-back newscasting. The list price for a PVTV
NEWS(TM) system ranges from $175,000 to $870,000.
The PVTV PRO(TM) and Learning(TM) systems are the baseline "value" priced
offerings for the corporate and education markets, respectively. The PVTV
PRO(TM) system targets corporate webcast applications such as CEO addresses,
training, product launch announcements and human resource communications as well
as traditional live production and presentation image magnification applications
for events such as seminars and guest speakers. The PVTV Learning(TM) system,
which is packaged with a comprehensive curriculum on CD-ROM, is a single-source
all digital production solution that facilitates the specification, design and
procurement process for the customer. The PVTV PRO(TM) and Learning(TM) packages
have list prices ranging from $175,000 to $205,000.
The PVTV(TM) product line includes various package configurations including
components that provide additional functionality. These components include the
ScriptViewer(TM), Shot Director(TM) and CameraMan(R) camera systems. The
ScriptViewer(TM) system is an automated teleprompter system that integrates with
News Automation Systems and PVTV Studio NEWS(TM). The Shot Director(TM) is a
multi-camera joystick controller which is compatible with three-chip analog and
digital CameraMan(R) camera systems and provides real-time camera control and
setup configuration
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functionality for up to sixteen CameraMan(R) cameras. The Shot Director(TM) is
also offered as a stand-alone component for use with CameraMan(R) cameras. In
addition, in 2001, the Company designed its XSWITCH(TM) product that allows for
seamless interface between dual PVTV(TM) systems for system redundancy and
backup.
The Company believes its 2002 product line will address expanded functional
requirements for broadcast networks, local affiliates and cable channels that
produce news as well as address functional and price point targets to enable
operating efficiencies with new startup opportunities for Internet-only
webcasters. The Company has a product currently in beta testing and development
called the PVTV WebSTATION(TM) for News which is a patent-pending system
designed to leverage the automation capabilities of PVTV NEWS(TM) for Internet
live and on-demand distribution. The Company is evaluating various business
models for this product and does not currently have an anticipated release date.
Wireless Division
- -----------------
The Company is currently focused on developing its own IC's for application to
the WLAN 802.11b, 802.11g, and 802.11a standards as well as CDMA 2000 1X
cellular standards. The initial application for which the Company believes it
will deliver its first commercially viable IC's is for the WLAN 802.11b
application. The Company believes the D2D(TM) architecture will allow
manufacturers to reduce component costs, reduce power consumption and simplify
design and manufacturing of WLAN products when compared with the
Super-heterodyne RF front-ends currently employed for enterprise, consumer and
other vertical markets. The Company further believes that its WLAN IC's will
meet or exceed the performance of the high performance Super-heterodyne RF
front-ends that are currently employed in the more expensive, better quality
WLAN 802.11b products.
The Company anticipates that it will begin demonstrations with reference designs
and initial sampling of WLAN IC's to targeted OEM customers during the second
half of 2002. The Company anticipates receiving its first completed
highly-integrated WLAN IC's on the TI process in the middle of 2002 and will
undergo testing and sampling of such IC's to prospective customers shortly
thereafter. There can be no guarantee that the highly-integrated WLAN IC will
not require multiple iterations to achieve the feature set and performance that
the Company desires, although the Company believes that there are no technical
impediments to achieving such. Each iteration is typically a ten to sixteen week
process due to semiconductor foundry lead-times and packaging. The Company is
also developing a CDMA 2000-1X transceiver which also includes analog AMPs for
use in mobile handset applications. The first chipsets that the Company would
have available to sample to prospective customers for this application are at
least twelve months following the Company's successful completion of
commercially acceptable IC's for 802.11b WLAN.
MARKETING AND SALES
- -------------------
Video Division
- --------------
The Video Division is primarily focused on market penetration of the broadcast
television industry with its PVTV(TM) News products. To establish the PVTV(TM)
automation system platform as a live production industry standard, the Company
believes that acceptance by broadcasters for their news operations, the most
demanding of all applications, is critical. The Company believes other vertical
markets (such as corporate, government and education) will likely follow the
lead of the broadcast community.
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The Company sells the majority of its PVTV(TM) automated production systems
direct through its own national sales force. In addition to system sales, the
Company provides training and annual service and support contracts for its
PVTV(TM) systems. These services are supported primarily by internal trainers,
project managers and support personnel.
In addition to its internal sales force, the Company's video division has a
network of both national and international audiovisual product dealers,
telecommunication dealers and systems integrators. This dealer network is
primarily responsible for stand-alone CameraMan(R) video camera control system
sales. Select dealers are also authorized to market and sell the Company's
lower-end PVTV(TM) solutions to corporate and educational environments.
The majority of the Company's sales to date have been generated through its
authorized dealers, primarily located in the United States. Although the Company
has a small international dealer network, primarily in Asia, overseas sales have
not represented a significant portion of the Company's revenues to date. The
Company's revenue percentages by distribution channel are as follows:
Distribution Channel 2001 2000 1999
- ------------------------------- -------- -------- --------
Direct 29% 40% 10%
National Resellers 52% 38% 53%
International Resellers 10% 6% 8%
OEM Customers 9% 16% 29%
No single customer accounted for more than 10% of the Company's revenue in 2001.
VTEL and Ackerley accounted for approximately 16% and 30%, respectively of the
Company's revenues in 2000. In 1999, VTEL accounted for 29% of the Company's
revenue.
As the Company's sales and marketing efforts focus primarily on the broadcast
industry, the Company anticipates that its direct sales channel will become a
higher contributor to revenues in 2002 and future years. The Company anticipates
reducing the number of dealers in its network which will allow more focused
efforts on qualifying and training those dealers that will be instrumental in
three-chip camera and lower-end PVTV(TM) system sales.
Wireless Division
- -----------------
The Company began its initial commercialization of its wireless technology by
focusing its efforts on commercialization through license arrangements with
third parties. This resulted in a licensing arrangement with Symbol for WLAN in
1999. The Company subsequently refocused its efforts to the production and
marketing of its own IC's to product manufacturers in targeted markets.
In the WLAN marketplace the Company's current plans are to sell IC's directly to
OEM's who manufacture and sell products including WLAN Network Interface Cards
("NIC's") and Access Points ("AP's"). The Company plans to increase its sales
and marketing staff in 2002 in order to launch its sales efforts for its WLAN
IC's. This would include support staff for creating reference designs of the
Company's WLAN IC's for use with other complimentary IC's to create complete
NIC's and AP's as well as sales and marketing staff to build relationships with
OEM's that the company plans on targeting for sales of its WLAN IC's. The
Company also anticipates that it may
10
develop relationships with manufacturers' representatives who represent IC-based
products to the OEM's.
The Company may also pursue strategic relationships with other companies that
produce complimentary IC's such as baseband processors and power amplifiers. The
Company has entered into a relationship with PrairieComm to develop interfaces
between the Company's cellular IC's and PrairieComm's baseband processor IC's.
The initial collaborative efforts with PrairieComm are focused on CDMA
applications. Additionally, the Company entered into a relationship with Texas
Instruments with an initial focus on developing interfaces between the Company's
transceiver IC's and TI's baseband processors in the areas of wireless
networking and cellular applications.
COMPETITION
- -----------
Video Division
- --------------
The videoconferencing industry, which includes distance education, is highly
competitive. The Company is aware of other companies that have commercialized or
developed technologies and products, which are competitive with certain
functions of the CameraMan(R) automated camera control systems. The Company has
experienced declines in its single-chip system sales which it believes is in
part due to price competition from offerings which offer limited functions but
for substantially lower prices. The Company believes that it competes
principally on the basis of the capabilities of the patented and patent-pending
CameraMan(R) camera system, ease of system application, and system flexibility.
The studio production industry is also highly competitive. Thomson/Grass Valley
Group, Sony Corporation, Panasonic Corporation, Ross Video, and E-Studio Live,
among others, offer video switchers and various other products for production
environments. The Thomson/Grass Valley Group and Sony Corporation are the most
dominant competitors in the broadcast market which is the target of the PVTV(TM)
News systems. A traditional audio/video production environment involves the
coordination of multiple operators who independently operate various pieces of
equipment in parallel to achieve audio, video, machine control and camera
control functions. The Company is not aware of any competitors who currently
offer a system solution that integrates audio, video, machine control and camera
control through a single interface and provides the technology to allow these
functions to operate automatically and in parallel. In addition, the Company is
not aware of any competitors who currently offer a level of automation with
integration to news automation systems.
The Company believes the most compelling reason for a broadcaster to purchase
PVTV(TM) is operational efficiencies and enhanced capabilities. Poor business
conditions in 2001 and the resulting lack of advertising revenue have forced
many broadcasters to seek long-term solutions that address quick returns to
capital equipment investments. The Company believes these industry conditions
resulted in a general slowdown in broadcast equipment purchases that are
unrelated to government-mandated broadcast requirements. The Company believes
that PVTV(TM) will allow the broadcaster to lower operational costs while
maintaining their quality of presentation. In addition, PVTV(TM) helps
broadcasters establish new workflow processes and technology that will allow
them to take advantage of the digital transition. The Company intends to compete
based on its patents-pending technology and continued enhancements of its system
to offer users more automation and functionality than its competitors.
11
Many of the Company's competitors, in both the videoconferencing and studio
production industries, are well-established, have substantially greater
financial and other resources than the Company, have established reputations for
success in the development, sale and service of products, and have significant
advertising budgets to permit them to implement extensive advertising and
promotional campaigns in response to competitors. Certain of these competitors
dominate their respective industries and have the financial resources necessary
to enable them to withstand substantial price competition, which is expected to
increase, and downturns in the markets for communication products.
Wireless Division
- -----------------
The Company intends to compete in the wireless industry based on the unique
attributes of its patent-issued and patent-pending D2D(TM) technology which the
Company believes will provide one or more of the attributes of lower cost,
smaller size, lower power consumption and better performance than other
technologies and approaches of which the Company is aware. The Company believes
that the competing approaches are either traditional Super-Heterodyne multi-step
up and down-conversion based transceivers or direct conversion transceivers
which are fundamentally based on utilizing more traditional devices to achieve
the Direct Conversion function instead of the Company's approach. Although the
Company expects to compete in this market on the basis of its patented
technology, it is possible that competitors will attempt and be successful at
finding alternative solutions or will develop technology with benefits that are
equivalent to or superior to the benefits of the Company's technology.
The Company believes its wireless technology represents a significant
advancement in the approach to processing RF carrier signals in the direct
up-conversion (transmitter) and down-conversion (receiver) of the RF carrier to
the baseband analog data waveform. The Company believes that one primary source
of competition will be from older technological solutions which designers and
manufacturers are currently using and about which they are knowledgeable. The
Company further believes that other developers of RF IC's will develop and
introduce their own direct conversion transceiver IC's which will be another
source of competition. The Company also expects competition to arise from other
RF technologies that are emerging or currently under development that may
provide equivalent or superior benefits to the Company's technology.
Several wireless companies have announced the development of direct conversion
or near direct conversion products including transceivers for use in GSM and
CDMA cellular applications, Bluetooth standard applications and WLAN
applications. The Company believes several of these applications do not
represent single-step direct conversion like the Company's D2D(TM) technology,
but rather represent architectures that employ a low IF or other variation on
traditional heterodyne-based up/down conversion architectures. In some cases,
the Company does not have sufficient information to determine the approach these
competitors have taken in their direct conversion products. At this time, the
Company believes that it has the only direct conversion approach to date that is
not fundamentally based on previous up/down conversion devices and circuits, the
most common being the heterodyne-based mixer or variants of such mixers.
PRODUCTION AND SUPPLY
- ---------------------
Video Division
- --------------
The Company engages in assembly operations for its automated video camera
control and production
12
systems at its facility in Jacksonville, Florida. The Company's operations
involve the inspection of each component, assembly of the system's electronic
circuitry and other components, a series of quality specification measurements,
and various other computer, visual and physical tests, including product field
testing to certify final performance specifications. The Company believes that
it has sufficient production capacity to satisfy increased demand for these
systems for the foreseeable future. The 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 purchase contracts with these suppliers. The Company
purchases other system components pursuant to purchase orders placed from time
to time in the ordinary course of business.
For the year ended December 31, 2001, two suppliers accounted for an aggregate
of 21% of the Company's component purchases. For the years ended December 31,
2000 and 1999, one supplier accounted for approximately 20% and 26%,
respectively of the Company's component purchases. These suppliers represent
single-source suppliers of camera and other components utilized primarily in the
Company's PVTV(TM) products. No other supplier accounted for more than 10% of
the Company's component purchases in 2001, 2000 or 1999.
At December 31, 2001, the Company had commitments to purchase camera modules and
other parts totaling approximately $477,000 through 2002. These commitments
primarily represent blanket purchase orders with a few single source suppliers
of camera and other components which are critical to the Company's production of
PVTV(TM) products. The Company is substantially dependent on the ability of its
suppliers, among other things, to satisfy performance and quality specifications
and dedicate sufficient production capacity for components within scheduled
delivery times. Failure or delay by the Company's suppliers in supplying
necessary components to the Company would adversely affect the Company's ability
to obtain and deliver products on a timely and competitive basis. The Company
endeavors to mitigate the potential adverse effect of supply interruptions by
carefully qualifying vendors on the basis of quality and dependability, and by
maintaining an inventory of certain components, but there can be no assurances
that such components will be readily available when needed.
The Company's sales cycle for its camera and production products is estimated to
be from one to eighteen months. The period from execution of a customer's
purchase order to delivery of a CameraMan(R) camera system is typically one to
six weeks. The period from execution of a customer's purchase contract to
delivery of a PVTV(TM) system can be as short as two to three weeks, however due
to customer site readiness, customer installation schedules and workflow process
changes required, the delivery period may be delayed for up to six months from
the time the purchase contract is received. The Company attempts to forecast
orders and to purchase long lead-time components in advance of receipt of
purchase orders to permit it to provide deliveries of completed systems within
its standard delivery period. At December 31, 2001, the Company maintained an
inventory of standard electronic and other system components of $2,726,813.
Substantially all of the Company's systems are delivered to customers by common
carrier.
13
The Company offers a one-year limited warranty on its products covering defects
in workmanship and materials and software bugs. During the warranty period the
Company will replace parts and make repairs to system components at its expense.
The Company records a reserve for future warranty costs at the time of sale.
Extended support and service contracts are offered to the customer to cover
hardware and software maintenance support and upgrades for the PVTV(TM) systems.
The revenues from all extended support contracts are recognized ratably over the
service period.
Wireless Division
- -----------------
The Company plans to utilize semiconductor foundries for the production of RF
IC's. Early in 2001, the Company entered into an agreement with TI for the
production of its IC's using various TI semiconductor processes. The Company
will be substantially dependent upon TI and possibly other foundries to satisfy
performance and quality specifications and dedicate sufficient production
capacity for IC's within scheduled delivery times. Additionally, there can be no
assurance that the foundry process specifications will remain constant and the
Company could be required to re-design its circuits without notice from the
semiconductor provider. Failure or delay by the foundries in supplying IC's to
the Company, failure or delay by the foundries in meeting the performance or
quality specifications, or changes by the foundry in its semiconductor process
specifications would adversely affect the Company's ability to obtain and
deliver such IC's on a timely and competitive basis. The Company endeavors to
mitigate the potential adverse effect of supply interruptions by carefully
qualifying foundries on the basis of quality and dependability.
PATENTS AND TRADEMARKS
- ----------------------
As of March 25, 2002, the Company's patent portfolio consists of the following
patents and patents pending:
Video Wireless Total
----- -------- -----
U.S. Utility patents 16 5 21
Foreign Utility patents 8 3 11
U.S. Utility patent applications 8 41 49
Foreign Utility patent applications 5 41 46
Patent Cooperation Treaty applications 2 9 11
U.S. provisional patent applications 3 1 4
German Registered Utility Models - 2 2
The Company's video patents relate to certain tracking functions and methods for
controlling the field of view in an automatic tracking camera system and other
applications relating to its automated video production systems. The Company's
wireless patents pertain primarily to the Company's wireless D2D(TM) technology.
The economic life of the Company's patents ranges from five to twenty years.
The Company promotes its camera, video production and wireless technologies
under the United States registered trademarks ParkerVision, CameraMan, and the
Three Triangles Logo. The Company currently holds United States trademark and
service mark applications for the marks D2D, DIRECT2DATA, and DIRECT CONVERSION
WITHOUT THE COMPROMISES, and a United States trademark application for the mark
PVTV.
14
The Company currently holds various foreign trademark and service mark
registrations for the marks D2D, DIRECT2DATA, and DIRECT CONVERSION WITHOUT THE
COMPROMISES. The Company further promotes its products and services under other
marks.
GOVERNMENT REGULATION
- ---------------------
The Company utilizes wireless communications in its CameraMan(R) camera and
PVTV(TM) systems and in its D2D(TM) technology. These wireless communications
utilize infrared and radio frequency technology that is subject to regulation by
the Federal Communications Commission ("FCC") in the United States and other
government agencies in foreign countries. The Company has obtained, is in the
process of obtaining, or will attempt to obtain all licenses and approvals
necessary for the operation of its products and technologies in those 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.
Amendments to existing statutes and regulations, adoption of new statutes and
regulations and the Company's expansion into foreign jurisdictions, could
require the Company to alter methods of operations at costs that could be
substantial, which could have an adverse effect on the Company. There can be no
assurance that the Company will be able, for financial or other reasons, to
comply with applicable laws and regulations and licensing requirements.
RESEARCH AND DEVELOPMENT
- ------------------------
For the years ended December 31, 2001, 2000 and 1999, the Company expended
approximately $12,796,000, $12,601,000 and $6,203,000, respectively, on research
and development. For the past three years, the Company's principal research and
development efforts have been devoted to the development of the PVTV(TM) product
line in the Video Division and the D2D(TM) technology in the Wireless Division.
EMPLOYEES
- ---------
As of December 31, 2001, the Company had 120 full-time employees and 1 part-time
employee, of which 12 are employed in manufacturing, 71 in engineering research
and development, 12 in sales and marketing, 11 in product training and support,
and 15 in finance and administration. None of the Company's employees are
represented by a labor union. The Company considers its employee relations
satisfactory.
ITEM 2. PROPERTIES
The Company's executive offices and Video Division manufacturing, sales and
distribution operations are located in approximately 33,000 square feet of
leased space on three acres of land in Jacksonville, Florida, pursuant to a
lease agreement with Jeffrey Parker, Chairman of the Board and
15
Chief Executive Officer of the Company, and Barbara Parker, a related party. The
lease is on a triple net basis and currently provides for a monthly base rental
payment of $23,276, or approximately $8.46 per square foot annually through
February 2007. Independent management of the Company recently conducted a study
and concluded that the rate charged under this lease agreement is competitive
with comparable properties. The 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 leases approximately 5,300 square feet of office space in
Jacksonville, Florida for its Wireless Division engineering and business
development staff. The lease provides for a monthly rental payment of
approximately $9,300 through May 2003.
The Company also leases approximately 17,400 square feet of office space in Lake
Mary, Florida for the Wireless Division's Orlando design center. The lease term
commenced in September 2000 and provides for a monthly rental payment of
approximately $29,200 through December 2005.
The Company leases approximately 5,600 square feet of office space in
Pleasanton, California. The lease term commenced in March 2000 and provides for
a monthly rental payment of approximately $13,700 through March 2005. The
Company is currently marketing this space for sub-lease.
The Company leases approximately 1,200 square feet in Los Angeles, California as
a demonstration and training facility for the Company's video products. The
lease provides for a monthly rental payment of approximately $1,700 per month
through May 2005.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have a material adverse effect on its financial position,
results of operations or liquidity.
ITEM 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.
16
2001 2000 1999
------------------ ------------------ ------------------
High Low High Low High Low
------- ------- ------- ------- ------- -------
1st Quarter $40.563 $22.375 $36.500 $25.250 $31.500 $22.063
2nd Quarter 29.550 21.328 52.875 21.000 37.313 25.938
3rd Quarter 25.690 13.180 52.000 36.250 39.063 21.875
4th Quarter 22.690 16.570 56.438 36.500 32.000 18.500
HOLDERS
- -------
As of March 18, 2002, there were 117 holders of record. The Company believes
there are approximately 1,700 beneficial holders of the Company's common stock.
DIVIDENDS
- ---------
To date, the Company has not paid any dividends on its common stock. The payment
of dividends in the future is at the discretion of the board of directors and
will depend upon the Company's ability to generate earnings, its capital
requirements and financial condition, and other relevant factors. The Company
does not presently intend to declare any dividends in the foreseeable future,
but instead it intends to retain all earnings, if any, for use in the Company's
business.
SALES OF UNREGISTERED SECURITIES
- --------------------------------
If option, warrant
Consideration received and Exemption or convertible
description of underwriting from security, terms
Date of Title of Number or other discounts to market registration of exercise or
sale security sold price afforded to purchasers claimed conversion
- -------------------------------------------------------------------------------------------------------------
10/01/01 Options to 86,350 Options granted - no 4(2) Exercisable for five
to purchase consideration received by years from the date
12/31/01 common stock Company until exercise the options vest,
granted to options vest over
employees three to five years
pursuant to at an exercise price
the 1993 and ranging from $17.30
2000 Plans to $22.44 per share
10/05/01 Options to 17,500 Options granted - no 4(2) Exercisable for ten
purchase consideration received by years from the date
common stock Company until exercise of grant, options
granted to the vest immediately
Board of upon grant date at
Directors an exercise price of
pursuant to $18.94 per share
the 2000 Plan
17
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 included in Item 8. The
selected financial data should be read in conjunction with the consolidated
financial statements of the Company and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
For the years ended December 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues, net $ 9,315 $ 15,965 $ 10,549 $ 9,892 $ 10,799
Gross margin 3,262 7,474 3,609 3,461 4,290
Operating expenses 21,593 22,445 14,647 9,644 8,243
Interest income 1,721 1,949 1,297 1,477 1,019
Net loss (16,610) (13,022) (9,741) (4,706) (2,934)
Basic and diluted net loss per
common share (1.20) (1.03) (0.83) (0.41) (0.28)
CONSOLIDATED BALANCE SHEET DATA:
Total assets $ 54,174 $ 63,608 $ 32,771 $ 40,250 $ 38,685
Long term liabilities 31 140 30 18 5
Shareholders' equity 50,547 60,020 30,136 38,982 37,527
Working capital 36,191 45,600 22,733 25,290 24,424
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
- --------------------------
When used in the Form 10-K and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "expects" or "the
Company expects", "will continue," "is anticipated," "estimated" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. These risks include, but are not limited to, the continuing losses of
the Company which may result in the need for additional capital in the future or
a change in current operations, the need for substantial capital and use of
current working capital to develop new products and for research and
development, uncertainty of product development, technological obsolescence,
market acceptance of its products
18
and dependence on third party suppliers and distributors. The Company may also
have to expend substantial employee time and financial resources to meet
governmental regulation requirements and for the protection of its intellectual
property rights. The Company has no obligation to publicly release the result of
any revisions that may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
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 estimates,
which include allowance for bad debts, inventory reserves, intangible assets,
income taxes, warranty obligations, and contingencies and litigation.
The Company bases its estimates on historical experience and on 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 the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:
o The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the sales price is fixed or
determinable and collectibility is probable. For product sales, these
criteria are generally met at the time product is shipped. At the time
revenue is recognized, the Company provides for the estimated cost of
product warranties. For training and other service revenue, the
Company recognizes revenue as the services are complete and the
Company has no significant remaining obligation to the customer.
Revenue from multi-element support contracts is recognized ratably
over the life of the agreement, generally one year.
o The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required
payments. If the financial condition of the Company's customers were
to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
o The Company provides for the estimated cost of product warranties at
the time revenue is recognized. 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, revisions to the estimated warranty
liability would be required.
o 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.
19
GENERAL
- -------
The Company has made significant investments in developing the technology and
manufacturing capability for its products, the returns on which are dependent
upon the generation of future revenues for realization. The Company has not yet
generated revenues sufficient to offset its operating expenses. To date the
Company has used the proceeds from the sale of its equity securities to fund its
operations. The Company anticipates increases in revenues in 2002. These
increases are subject to the Company continuing to expand its product lines and
attracting additional means of distribution and customers, among other things.
The Company intends to continue to use its working capital to build its
infrastructure to support future marketing and sales and research and
development activities for its products. No assurance can be given that such
expenditures will result in increased sales, new products, or technological
advances or that the Company has adequate capital to complete its products or
gain market acceptance before requiring additional capital.
RESULTS OF OPERATIONS FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2001, 2000
- --------------------------------------------------------------------------------
AND 1999
- --------
Revenues
- --------
Revenues for the years ended December 31, 2001, 2000 and 1999 were $9,315,445,
$15,964,587 and $10,549,081, respectively. The Company's revenues to date have
been generated entirely by its Video Division. 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,
2001, 2000 and 1999 are as follows:
2001 2000 1999
-------- -------- --------
CameraMan(R) systems 66% 59% 86%
PVTV(TM)systems 24% 36% 13%
Support and other services 10% 5% 1%
The number of CameraMan(R) and PVTV(TM) systems sold and the average selling
price per system for the years ended December 31, 2001, 2000 and 1999 were as
follows:
Camera Systems PVTV(TM) Systems
---------------------- ----------------------
# Avg. Selling # Avg. Selling
Systems Price Per Systems Price Per
Sold System Sold System
------- ------------ ------- ------------
2001 820 $ 7,500 9 $248,000
2000 1,431 $ 6,600 15 $398,000
1999 1,415 $ 6,600 5 $240,000
The decrease in revenues from 2000 to 2001 was due to a decline in sales of both
major product lines. The decline in camera sales is primarily due to reduced
sales to Forgent Corporation, formerly Vtel Corporation ("VTEL"). The Company
believes this resulted from the restructuring of VTEL during 2001 which ended
with the spin-off of VTEL's product division in March 2002. In addition to the
decline in VTEL sales, the Company's single-chip camera sales declined overall.
The Company
20
believes this was caused by increased pricing pressure from competing
technologies as well as the Company's decision to focus its sales and marketing
efforts on its PVTV(TM) product line.
The decrease in revenue from PVTV(TM) products is due a decline in group sales
revenue in 2001 in comparison with 2000, as well as a decrease in the average
selling price per system. In 2000, the Company recognized revenue on nine
systems sold to The Ackerley Group ("Ackerley") which accounted for
approximately 30% of the Company's total revenue in 2000. The Company received
purchase contracts from two broadcast ownership groups in 2001 for a total of 12
stations, however, because of customer installation schedules, only three of
these systems were delivered in 2001. The remaining systems are reported in the
Company's backlog and are expected to be delivered during the first and second
quarters of 2002. The decrease in the average selling price per system is due to
increased sales of the lower-end PVTV(TM) systems, and decreased sales of dual
system packages which have a higher selling price per installation.
The increase in revenues from 1999 to 2000 was primarily the result of increased
revenues from PVTV(TM) systems and related support services. The increase in
revenue from PVTV(TM) systems is due to an increase in the number of systems
sold as well as an increase in the average selling price per system. The
increase in the number of PVTV(TM) systems sold is because of the Company's
direct selling efforts and marketing of this new product line and the sale of
nine systems to Ackerley. The increase in the average selling price is due to
higher discounts offered on 1999 system sales as they represented "pilot sites",
as well as increased sales of digital systems and dual systems in 2000 which
have a higher selling price.
Although the Company anticipates further declines in its camera system revenues
in 2002, the Company anticipates overall revenue will increase from the sales of
its PVTV(TM) systems and related services and support.
The Company is also attempting to commercialize its D2D(TM) RF technology. The
Company's various commercialization efforts could result in initial product or
licensing revenues in 2002.
While the Company strives for consistent revenue growth, there can be no
assurance that consistent revenue growth or profitability can be achieved. The
Company's ability to achieve revenue growth is dependent upon many factors,
including market acceptance of new products and technologies, ability of vendors
to supply key components, development of new products in a timely manner,
relationships with significant customers and resellers, and changes in capital
spending by customers. There can be no assurance that the Company will be able
to increase or even maintain its current level of revenues on a quarterly or
annual basis in the future.
Gross Margin
- ------------
For the years ended December 31, 2001, 2000 and 1999, gross margins as a
percentage of sales were 35%, 47% and 34%, respectively.
The decrease in margin from 2000 to 2001 is due to the decreased revenues from
PVTV(TM) systems which have a higher gross margin percentage per system sale
than the camera sales, an overall decrease in the average selling price of
PVTV(TM) systems and increased absorption of fixed overhead and indirect labor
cost due to lower production volumes.
21
The increase in margin from 1999 to 2000 is primarily due to the increased
revenues from PVTV(TM) systems which have a higher gross margin percentage per
system sale than the historical camera sales as well as increased production
efficiencies recognized during the second half of 2000. The margin increase is
offset somewhat by increases in the Company's inventory reserves due to a shift
in market demand from analog to digital PVTV(TM) systems.
Fluctuations in margin are in part due to changes in the product mix and
discounts offered on used systems to reduce the Company's inventory of finished
products used for demonstrations and tradeshows. While the Company continuously
works to improve its gross margin through product pricing, labor efficiencies,
reduction of overhead, and product design, there can be no assurance that gross
margins will improve significantly over, or remain stable with, the gross
margins attained in 2001 due to the highly competitive nature of the industry,
the introduction of new products, and fluctuations in the cost of component
parts.
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses increased by approximately
$195,000 or 2% from 2000 to 2001 and increased by approximately $6,399,000 or
103% from 1999 to 2000. Research and development expenses as a percentage of
revenues were 137%, 79% and 59% in 2001, 2000 and 1999, respectively.
The increase in research and development expenses from 2000 to 2001 is due to
increased personnel and additional office space for the Wireless Division as
well as increased prototype expenses for wireless chip wafer runs in 2001.
From 1999 to 2000, the increase in research and development expenses was
primarily due to the opening of design centers in California and Orlando during
2000 for wireless development. The opening of these design centers resulted in
the addition of approximately forty engineers, increased capital spending for
the setup and support of the development efforts and increased overhead related
to the new facilities. These increases in the Wireless Division were somewhat
offset by decreases in the use of third-party application engineering services.
In addition, the Company's Video Division increased outside development fees
related to certain aspects of its PVTV(TM) Studio product line and also incurred
a non-recurring charge of $625,000 related to the write-off of a deposit for
licensing rights for certain camera technology.
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 2002.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses decreased by approximately $1,044,000 or 21% from
2000 to 2001 and increased by approximately $891,000, or 22% from 1999 to 2000.
Marketing and selling expenses as a percentage of revenues were 41%, 31% and 38%
for the years ended December 31,
22
2001, 2000 and 1999, respectively.
The decreases in marketing and selling expenses from 2000 to 2001 is primarily
due to decreased sales commissions as a result of the decline in revenue, as
well as a reduction in personnel, advertising and promotional costs as a result
of restructuring and cost cutting measures that took place in 2000 and 2001.
The increases in marketing and selling expenses from 1999 to 2000 were due to
increases in the wireless business development expenses, primarily personnel,
focused on initial commercialization of the D2D(TM) technology. The increases in
marketing and selling expenses in the Wireless Division were offset somewhat by
decreases in sales and marketing expenses for the Company's Video Division.
Although the Video Division experienced increases in sales commissions, due to
increased revenues, this increase was offset by reductions in personnel and
reduced advertising, trade show and other promotional expenses during the second
half of 2000.
The 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
2002 primarily to support the Company's commercialization of its D2D(TM)
technology.
General and Administrative Expenses
- -----------------------------------
The Company's general and administrative expenses increased by approximately
$12,000 from 2000 to 2001 and $577,000 from 1999 to 2000. 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 2000 to 2001 is due to
increases in insurance costs, professional fees and executive travel costs,
offset largely by decreases in personnel costs.
The increases in general and administrative expenses from 1999 to 2000 are
primarily a result of increases in administrative and accounting personnel to
support the Company's growing operations as well as an increase in compensation
expense for the Company's Chief Executive Officer.
As a percentage of revenues, general and administrative expenses were 53%, 31%
and 42% in 2001, 2000, and 1999, respectively. The Company does anticipate
further increases in general and administrative expenses, in order to support
the commercialization of its D2D(TM) technology and the continued growth of its
Video Division.
Other Income/Expense
- --------------------
Other income consists of gains on the sale or maturity of investments. Other
expense consists of losses on the disposal of fixed assets no longer in service,
primarily obsolete computer equipment.
Interest Income
- ---------------
Interest income decreased by approximately $228,000 from 2000 to 2001 and
increased by approximately $652,000 from 1999 to 2000. Interest income
represents interest earned on the
23
Company's investment of the proceeds from sales of its equity securities. The
decrease of interest income from 2000 to 2001 is due to declining interest rates
as well as the use of funds to support operations. The increase in interest
income from 1999 to 2000 is due to the investment of funds by the Company's sale
of equity securities in May 2000, offset by funds used to support operations.
Loss and Loss per Share
- -----------------------
The Company's net loss increased from approximately $13,022,000, or $1.03 per
share in 2000 to approximately $16,610,000, or $1.20 per share in 2001,
representing a net loss increase of approximately $3,588,000 or $0.17 per common
share. The increase in net loss is primarily due to a $4.2 million decrease in
gross margin, somewhat offset by a $0.9 million decrease in operating expenses
attributable primarily to reduced sales and marketing expenses.
The Company's net loss increased from approximately $9,741,000, or $0.83 per
share in 1999 to approximately $13,022,000, or $1.03 per share in 2000,
representing a net loss increase of approximately $3,281,000 or $0.20 per common
share. The increase in net loss is primarily due to a $7.4 million increase in
Wireless Division operating expenses, primarily for research and development
activities, offset by an increase in gross margin of approximately $3.9 million
due to increased revenues generated by the Company's Video Division.
Backlog
- -------
As of December 31, 2001, 2000, and 1999, the Company had a camera backlog of
approximately $414,000, $281,000, and $390,000, respectively. Camera backlog
consists of camera system orders received from customers, which generally have a
specified delivery schedule within one to six weeks of receipt. In addition, at
December 31, 2001, 2000 and 1999, the Company had a backlog of PVTV(TM) sales
and services of approximately $5,200,000, $350,000 and $560,000, respectively.
The significant increase in PVTV(TM) backlog is due to the receipt of two
purchase contracts from broadcast ownership groups for multiple site sales
during the second half of 2001. Because of customer installation schedules, the
majority of the systems under the contract were scheduled for 2002 delivery.
Liquidity and Capital Resources
- -------------------------------
At December 31, 2001, the Company had working capital of approximately
$36,191,000, including approximately $31,472,000 in cash, cash equivalents and
short-term investments. The Company used cash for operating activities of
approximately $10,801,000, $10,297,000, and $7,556,000, for the years ended
December 31, 2001, 2000, and 1999, respectively. The increase in cash used for
operating activities in 2001 is primarily the result of increases in the net
losses generated by the Company due to decreased revenues generated by its Video
Division offset somewhat by reductions in accounts receivable. The increase in
cash used for operating activities in 2000 is due to increased net losses
generated by the Wireless Division.
The Company used cash for investing activities of approximately $22,492,000 and
$1,815,000 for the years ended December 31, 2001 and 1999, respectively, and
generated cash from investing activities of approximately $2,587,000 for the
year ended December 31, 2000. The cash provided by and used
24
for investing activities is primarily a result of the purchase and maturity of
investments in government backed securities, the payment for intangible assets,
and capital expenditures. The Company incurred approximately $2,252,000,
$2,298,000, and $1,655,000, in connection with patent costs primarily related to
the Company's wireless technology in 2001, 2000, and 1999, respectively. The
Company incurred approximately $1,435,000, $5,116,000, and $1,489,000, for
capital expenditures in 2001, 2000, and1999, respectively. These capital
expenditures primarily represent the purchase of certain research and
development software and test equipment, marketing and sales demonstration
equipment and computer and office equipment to support additional personnel. The
increase in capital expenditures during 2000 is primarily due to the setup of
new wireless design centers, the purchase of design software for wireless chip
development, and the acquisition of a fractional share in an aircraft. At
December 31, 2001, the Company was not subject to any significant commitments to
make additional capital expenditures.
The Company generated cash from financing activities of approximately
$6,485,000, $36,954,000, and $930,000 for the years ended December 31, 2001,
2000, and 1999, respectively. The cash generated from financing activities
represents proceeds from the issuance of common stock to institutional investors
in transactions exempt from registration under the Securities Act of 1933 and
the exercise of employee stock options as well as warrants issued in connection
with previous financing transactions and outside consulting agreements.
The Company's future business plans call for continued increases in research,
development and marketing costs related to its wireless technology. The Company
intends to utilize its working capital to fund these increases. The Company
believes it has sufficient capital to fund its business plan for 2002 and on a
longer term basis without additional capital. The Company's principal source of
liquidity at December 31, 2001 consisted of $31.5 million in cash, cash
equivalents and investments resulting from the sale of its common stock from
time to time. Until the Company generates sufficient revenues from system and
other sales, it will be required to continue to utilize its cash and investments
to cover the continuing expense of product development, marketing and general
administration.
The Company's contractual obligations and commercial commitments at December 31,
2001 were as follows:
Payments due by period
--------------------------------------------------------------
Contractual Obligations: 1 year 2-3 4 - 5 After 5
Total or less years years years
---------- ---------- ---------- ---------- ----------
Operating leases $4,123,000 $ 934,000 $1,708,000 $1,481,000 $ 0
Unconditional purchase obligations 477,000 477,000 0 0 0
Commercial Commitments None
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
25
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 27
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets - December 31, 2001 and 2000 28-29
Consolidated Statements of Operations - for the years ended
December 31, 2001, 2000 and 1999 30
Consolidated Statements of Shareholders' Equity - for the
years ended December 31, 2001, 2000 and 1999 31-32
Consolidated Statements of Cash Flows - for the years ended
December 31, 2001, 2000 and 1999 33
Notes to Consolidated Financial Statements - December 31,
2001, 2000 and 1999 34-50
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.
26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Shareholders
of ParkerVision, Inc. and Subsidiary:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
ParkerVision, Inc. and its subsidiary at December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001 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 18, 2002
27
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
2001 2000
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 4,563,535 $31,371,904
Short-term investments 26,908,362 7,947,120
Accounts receivable, net of allowance for doubtful
accounts of $84,103 and $103,199 at December
31, 2001 and 2000, respectively 946,635 2,343,916
Inventories, net 4,319,539 3,993,009
Prepaid expenses and other 3,049,099 3,391,595
----------- -----------
Total current assets 39,787,170 49,047,544
PROPERTY AND EQUIPMENT, net 7,003,465 7,522,645
OTHER ASSETS, net 7,383,169 7,037,705
----------- -----------
Total assets $54,173,804 $63,607,894
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
28
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
2001 2000
------------- -------------
CURRENT LIABILITIES:
Accounts payable $ 938,488 $ 893,406
Accrued expenses:
Salaries and wages 1,184,780 697,675
Warranty reserves 212,107 198,140
Sales tax payable 6,927 110,720
Other accrued expenses 267,812 564,735
Deferred revenue 985,612 983,044
------------- -------------
Total current liabilities 3,595,726 3,447,720
DEFERRED INCOME TAXES 30,748 139,769
COMMITMENTS AND CONTINGENCIES
(Notes 10 and 14)
------------- -------------
Total liabilities 3,626,474 3,587,489
------------- -------------
SHAREHOLDERS' EQUITY:
Convertible preferred stock, $1 par value,
5,000,000 shares authorized, 27,356 and
114,019 shares issued and outstanding at 27,356 114,019
December 31, 2001 and 2000, respectively
Common stock, $.01 par value, 100,000,000
shares authorized, 13,913,806 and
13,445,675 shares issued and outstanding
at December 31, 2001 and 2000, respectively 139,138 134,457
Warrants outstanding 16,807,505 15,659,035
Additional paid-in capital 89,804,504 83,937,839
Accumulated other comprehensive income (loss) 151,359 (52,880)
Accumulated deficit (56,382,532) (39,772,065)
------------- -------------
Total shareholders' equity 50,547,330 60,020,405
------------- -------------
Total liabilities and shareholders'
equity $ 54,173,804 $ 63,607,894
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
29
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
2001 2000 1999
------------ ------------ ------------
Product revenue $ 8,340,528 $ 15,161,552 $ 10,399,186
Support and other services revenue 974,917 803,035 149,895
------------ ------------ ------------
Net revenues 9,315,445 15,964,587 10,549,081
------------ ------------ ------------
Cost of goods sold - products 5,005,121 7,164,708 6,522,588
Cost of goods sold - support and other services 1,048,683 1,325,169 417,852
------------ ------------ ------------
Total cost of goods sold 6,053,804 8,489,877 6,940,440
------------ ------------ ------------
------------ ------------ ------------
Gross margin 3,261,641 7,474,710 3,608,641
------------ ------------ ------------
Research and development expenses 12,796,442 12,601,496 6,202,937
Marketing and selling expenses 3,835,724 4,879,626 3,988,189
General and administrative expenses 4,972,889 4,961,082 4,383,785
Other (income) expense (12,024) 2,889 71,573
------------ ------------ ------------
Total operating expenses, net 21,593,031 22,445,093 14,646,484
------------ ------------ ------------
Loss from operations (18,331,390) (14,970,383) (11,037,843)
Interest income 1,720,923 1,948,610 1,296,451
------------ ------------ ------------
Net loss $(16,610,467) $(13,021,773) $ (9,741,392)
============ ============ ============
Basic and diluted net loss per common share $ (1.20) $ (1.03) $ (0.83)
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
30
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
2001 2000 1999
--------------------------------------------
CONVERTIBLE PREFERRED SHARES - BEGINNING OF YEAR 114,019 0 0
Conversion of preferred stock to common stock (86,663) 0 0
Issuance of preferred stock for purchase of STI assets 0 79,868 0
Issuance of preferred stock as employee compensation 0 34,151 0
--------------------------------------------
CONVERTIBLE PREFERRED SHARES - END OF YEAR 27,356 114,019 0
============================================
PAR VALUE OF CONVERTIBLE PREFERRED SHARES - BEGINNING OF YEAR $ 114,019 $ 0 $ 0
Conversion of preferred stock to common stock (86,663) 0 0
Issuance of preferred stock for purchase of STI assets 0 79,868 0
Issuance of preferred stock as employee compensation 0 34,151 0
--------------------------------------------
PAR VALUE OF CONVERTIBLE PREFERRED SHARES - END OF YEAR $ 27,356 $ 114,019 $ 0
============================================
COMMON SHARES - BEGINNING OF YEAR 13,445,675 11,790,048 11,718,678
Issuance of common stock upon exercise of options and
warrants 294,700 504,565 71,370
Issuance of restricted common stock as employee
compensation 4,606 92,112 0
Issuance of common stock in private offering 83,451 1,058,950 0
Conversion of preferred stock to common stock 85,374 0 0
--------------------------------------------
COMMON SHARES - END OF YEAR 13,913,806 13,445,675 11,790,048
============================================
PAR VALUE OF COMMON STOCK - BEGINNING OF YEAR $ 134,457 $ 117,900 $ 117,187
Issuance of common stock upon exercise of options and
warrants 2,947 5,046 713
Issuance of restricted common stock as employee
compensation 46 921 0
Issuance of common stock in private offering 835 10,590 0
Conversion of preferred stock to common stock 853 0 0
--------------------------------------------
PAR VALUE OF COMMON STOCK - END OF YEAR $ 139,138 $ 134,457 $ 117,900
============================================
WARRANTS OUTSTANDING - BEGINNING OF YEAR $ 15,659,035 $ 3,232,025 $ 3,257,625
Exercise of warrants (259,840) (738,385) (25,600)
Issuance of warrants in connection with private offering 1,408,310 13,165,395 0
--------------------------------------------
WARRANTS OUTSTANDING - END OF YEAR $ 16,807,505 $ 15,659,035 $ 3,232,025
============================================
The accompanying notes are an integral part of these consolidated financial
statements.
31
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
2001 2000 1999
--------------------------------------------
ADDITIONAL PAID-IN CAPITAL - BEGINNING OF YEAR $ 83,937,839 $ 53,723,742 $ 52,543,817
Issuance of common stock upon exercise of options and
warrants 4,256,465 7,723,866 954,676
Issuance of restricted common stock as employee
compensation 125,088 2,853,139 0
Issuance of common stock in private offering 1,075,989 16,787,015 0
Conversion of preferred stock to common stock 85,810 0 0
Issuance of preferred stock for purchase of STI assets 0 1,916,832 0
Issuance of preferred stock as employee compensation 0 819,624 0
Issuance of options for consulting services 323,313 0 0
Amortization of deferred compensation 0 113,621 225,249
--------------------------------------------
ADDITIONAL PAID-IN CAPITAL - END OF YEAR $ 89,804,504 $ 83,937,839 $ 53,723,742
============================================
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - BEGINNING
OF YEAR $ (52,880) $ (187,052) $ 72,241
Change in unrealized gain (loss) on investments 204,239 134,172 (259,293)
--------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - END OF YEAR $ 151,359 $ (52,880) $ (187,052)
============================================
ACCUMULATED DEFICIT - BEGINNING OF YEAR $(39,772,065) $(26,750,292) $(17,008,900)
Net loss (16,610,467) (13,021,773) (9,741,392)
--------------------------------------------
ACCUMULATED DEFICIT - END OF YEAR $(56,382,532) $(39,772,065) $(26,750,292)
============================================
TOTAL SHAREHOLDERS' EQUITY - BEGINNING OF YEAR $ 60,020,405 $ 30,136,323 $ 38,981,970
Issuance of common stock upon exercise of options and
warrants 3,999,572 6,990,526 929,789
Issuance of restricted common stock as employee
compensation 125,134 2,854,060 0
Issuance of common stock and warrants in private offering 2,485,134 29,963,001 0
Issuance of preferred stock for purchase of STI assets 0 1,996,700 0
Issuance of preferred stock as employee compensation 0 853,775 0
Issuance of options for consulting services 323,313 0 0
Amortization of deferred compensation 0 113,621 225,249
Comprehensive loss (16,406,228) (12,887,601) (10,000,685)
--------------------------------------------
TOTAL SHAREHOLDERS' EQUITY - END OF YEAR $ 50,547,330 $ 60,020,405 $ 30,136,323
============================================
The accompanying notes are an integral part of these consolidated financial
statements.
32
PARKERVISION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(16,610,467) $(13,021,773) $ (9,741,392)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and patent amortization 2,782,757 2,002,896 1,573,932
Amortization of premium (discounts) on investments 68,099 (282,512) (41,961)
Provision for obsolete inventories 320,000 320,000 240,000
Stock compensation 1,647,090 1,299,101 0
Gain on sale of investments (20,267) 0 0
Loss on sale of equipment 8,798 2,889 71,416
Changes in certain operating assets and liabilities:
Accounts receivable, net 1,397,281 (1,467,284) (70,752)
Inventories (646,530) (390,093) (925,349)
Prepaid and other assets 104,199 (163,545) (16,705)
Accounts payable and accrued expenses 145,438 1,256,055 552,418
Deferred revenue 2,568 147,056 802,584
------------ ------------ ------------
Total adjustments 5,809,433 2,724,563 2,185,583
------------ ------------ ------------
Net cash used in operating activities (10,801,034) (10,297,210) (7,555,809)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments available for sale (25,252,137) 0 (5,740,892)
Purchase of investments held to maturity 0 0 (3,929,482)
Proceeds from maturity/sale of investments 6,447,302 10,000,000 11,000,000
Purchase of property and equipment (1,434,740) (5,115,619) (1,489,267)
Payment for patent costs (2,252,466) (2,297,536) (1,655,032)
------------ ------------ ------------
Net cash provided by (used in) investing activities (22,492,041) 2,586,845 (1,814,673)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 6,484,706 36,953,527 929,789
------------ ------------ ------------
Net cash provided by financing activities 6,484,706 36,953,527 929,789
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (26,808,369) 29,243,162 (8,440,693)
CASH AND CASH EQUIVALENTS, beginning of year 31,371,904 2,128,742 10,569,435
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 4,563,535 $ 31,371,904 $ 2,128,742
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
33
PARKERVISION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
1. THE COMPANY AND NATURE OF BUSINESS
----------------------------------
ParkerVision, Inc. (the "Company") was incorporated under the laws of the state
of Florida on August 22, 1989. The Company's operations are categorized into two
operating segments -- the Video Products Division ("Video Division") and the
Wireless Technology Division ("Wireless Division").
The Company operates in highly competitive industries with rapidly changing and
evolving technologies and an increasing number of market entrants. The Company's
potential competitors have substantially greater financial, technical and other
resources than those of the Company. The Company has made significant
investments in developing the technology and manufacturing capability for its
products, the returns on which are dependent upon the generation of future
revenues for realization. The Company has not yet generated sufficient revenues
to offset its expenses and, thus, has utilized proceeds from the sale of its
equity securities to fund its operations. In the opinion of management, the
Company has adequate funds to meet its liquidity needs for 2002. 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 intercompany transactions and
accounts. The Company formed another subsidiary, Direct2Data Technologies, Inc.
which has not been used to date and 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, inventory reserves for potential
excess or obsolete inventory, the impairment 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.
34