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PRKR > SEC Filings for PRKR > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for PARKERVISION INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for PARKERVISION INC


14-Nov-2012

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public. This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, the statements about our future plans, objectives, and expectations contained in this Item. When used in this report and in future filings by us with the Securities and Exchange Commission ("SEC"), the words or phrases "will likely result", "management expects", "we expect", "will continue", "is anticipated", "estimated" or similar expressions are intended to identify "forward-looking statements." Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties identified in our annual report on Form 10-K for the fiscal year ended December 31, 2011 and in this Item 2 of Part I of this quarterly report. Examples of such risks and uncertainties include general economic and business conditions, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key business and sales relationships, reliance on our intellectual property, the outcome of our intellectual property litigation and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.

Overview

We are in the business of innovating fundamental wireless technologies. We design, develop and market our proprietary RF technologies and products for use in semiconductor circuits for wireless communication products. Since 2005, we have generated no product or royalty revenue from our wireless technologies. We are heavily reliant on our relationship with VIA Telecom, Inc. ("VIA") since our RF transmit product interfaces directly to VIA's CDMA baseband processors. We have been working with one of VIA's largest original equipment manufacturer ("OEM") mobile handset customers on the design and test of a handset solution incorporating our technology, the successful completion of which, we believe, will lead to the incorporation of our technology into one or more of this OEM's commercial products. We have committed significant resources in personnel, travel and related costs for our engineering and sales team to this design and test process.


We are also currently engaged in patent litigation with Qualcomm Incorporated ("Qualcomm") for their alleged infringement of a number of our patents that relate to a portion of our receiver intellectual property. We believe the outcome of this litigation is critical to our ability to generate meaningful revenue from certain of our receiver technologies, and we intend to devote substantial resources to this litigation. On August 6, 2012, the court held a claim construction hearing where we and Qualcomm presented our respective arguments for the proposed construction of disputed claim terms. The court has not yet issued a ruling on claim construction. The court has set a deadline for fact discovery of November 30, 2012, although the parties have a pending motion to extend the discovery deadline by approximately 30 days. A trial date is set for August 5, 2013. Discovery in the case is ongoing. At this time, we do not believe it is possible to predict the outcome of these proceedings. Although our litigation team is working on a partial contingency basis, we expect to incur significant costs for legal and expert fees related to this litigation.

The following discussion should be read along with the unaudited condensed financial statements included in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 30, 2012, which provides a more thorough discussion of our products and services, industry outlook, and business trends.

Liquidity and Capital Resources
On September 19, 2012, we completed the sale of an aggregate of 4,381,761 shares of our common stock, at a price of $2.30 per share, to a limited number of institutional and other investors in a registered offering under our shelf registration statement (File No. 333-183713), filed on September 4, 2012 and declared effective on September 11, 2012. The aggregate net proceeds from this offering were approximately $9.2 million. On April 18, 2012, we completed the sale of an aggregate of 8,139,050 shares of our common stock, at a price of $1.05 per share, to a limited number of institutional and other investors in a registered offering under our shelf registration statement (File No. 333-161903), filed on September 14, 2009 and declared effective on September 30, 2009. The aggregate net proceeds from this offering were approximately $8.3 million.

As of September 30, 2012, we had working capital of approximately $11.7 million which represented an increase of approximately $7.2 million from working capital at December 31, 2011. This increase in working capital is a result of approximately $17.6 million in net proceeds from the April 18, 2012 and September 19, 2012 offerings and $1.4 million in proceeds from the exercise of stock options and warrants, less $9.9 million to fund operations and $1.0 million used for patents and fixed assets during the nine months ended September 30, 2012. Our use of cash to fund operations increased approximately $2.0 million, or 25%, from the nine months ended September 30, 2011 to the same period in 2012. This increase in use of cash is primarily the result of an increase in outside professional fees, including litigation related fees and expenses.

Our future business plans call for continued investment in sales, marketing, customer support and product development for our technologies and products, as well as investment in continued protection of our intellectual property, including the prosecution of new patents and defense of existing patents. Our ability to generate revenues sufficient to offset costs is subject to our ability to successfully support our customers in completing their initial product designs incorporating our technologies, our ability to secure a reasonable share of the market through additional product offerings with our current customers and/or the addition of new customers, and our ability to defend our intellectual property, including through our current litigation with Qualcomm.

We do not expect to recognize revenue in 2012 and we expect that our continued losses and use of cash will be funded from our $11.7 million in working capital at September 30, 2012. In addition, we expect that available working capital may be used for initial production start-up costs, including test programs and production tooling, and for continued litigation expenses to defend our intellectual property. We currently have no significant commitments for capital expenditures.


Our current capital resources are sufficient to support our liquidity requirements through 2012; however, these resources may not be sufficient to support our liquidity requirements for the next twelve months and beyond without further cost containment measures that, if implemented, may jeopardize our future growth plans, including our ability to support initial production of our products. We believe we may be able to meet future liquidity needs through the issuance of equity securities under our currently effective shelf registration statement or in private placements or through short or long-term debt financing, although there can be no assurance that such financing will be available to us. We currently have no significant long-term debt obligations.

The long-term continuation of our business plan through 2012 and beyond is dependent upon the generation of sufficient revenues from our technologies and products to offset expenses. In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private financing and/or further reduce operating costs. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or further reduce operating costs could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.

Results of Operations for Each of the Three and Nine Months Ended September 30, 2012 and 2011

Revenue and Gross Margin
We had no product or royalty revenue for the three or nine months ended September 30, 2012 or 2011. We have been working with one of VIA's largest OEM mobile handset customers on the design and test of a handset solution incorporating our technology, the successful completion of which, we believe, will lead to the incorporation of our technology into one or more of this OEM's products. To the extent that our technology is incorporated in the form of integrated circuits supplied by us, additional working capital may be needed to support production start-up costs including test programs and production tooling.

Research and Development Expenses
Research and development expenses consist primarily of engineering and related management and support personnel costs; fees for outside engineering design services which we use from time to time to supplement our internal resources; amortization and depreciation expense related to our patents and other assets used in product development; prototype production and materials costs, which represent the fabrication and packaging costs for prototype integrated circuits, as well as the cost of supporting components for prototype board development; software licensing and support costs, which represent the annual licensing and support maintenance for engineering design and other software tools; and rent and other overhead costs for our engineering design facility. Personnel costs include share-based compensation amounts which have been determined based on the grant date fair value of equity-based awards to our employees and then recorded to expense over the vesting period of the award.

Our research and development expenses decreased approximately $108,000, or 5%, during the three months ended September 30, 2012 when compared to the same period in 2011. This decrease is primarily due to a decrease in outside engineering services of approximately $342,000 partially offset by an increase in employee share-based compensation expense of approximately $200,000 and an increase in software licensing and support costs of approximately $45,000.

Our research and development expenses decreased approximately $404,000, or 6%, during the nine months ended September 30, 2012 when compared to the same period in 2011. This decrease is primarily due to a decrease in outside engineering services of approximately $578,000 and a decrease in employee share-based compensation expense of approximately $189,000. These decreases were partially offset by an increase in personnel and related expenses, excluding share-based compensation, of approximately $179,000, an increase in software licensing and support costs of approximately $117,000, and an increase in prototype production and material costs of approximately $62,000.


The decrease in outside engineering services for the three and nine month periods ended September 30, 2012 is the result of a reduction in the use of outside design services due to timing of certain projects. The increase in personnel and related costs for the nine month period ended September 30, 2012 is primarily the result of the addition of new employees in mid-2011. The increase in software licensing and support costs for the three and nine month periods ended September 30, 2012 is a result of changes in the software tools necessary to support our product designs and the increase in prototype production and material costs for the nine month period ended September 30, 2012 is due to timing of certain design projects.

The increase in share-based compensation for the three month period ended September 30, 2012 is primarily the result of new long-term incentive equity awards granted to engineering executives and employees in July 2012. The decrease in share-based compensation for the nine month period ended September 30, 2012 is primarily the result of certain executive and employee RSU awards from prior years becoming fully vested in mid-2011, offset by the expense attributed to new awards granted in 2012 the fourth quarter of 2011.

We expect a significant percentage of our current working capital will continue to be invested in our research and product development activities. However, these expenses will fluctuate on a quarter to quarter basis depending on the timing of various projects.

Marketing and Selling Expenses
Marketing and selling expenses consist primarily of marketing and sales personnel costs, including share-based compensation and travel costs, and outside professional fees. Marketing and selling expenses increased approximately $79,000, or 23%, during the three months ended September 30, 2012 when compared to the same period in 2011. This increase is primarily due to an increase in employee share-based compensation expense of approximately $68,000.

Marketing and selling expenses increased approximately $158,000, or 15%, during the nine months ended September 30, 2012 when compared to the same period in 2011. This increase is primarily due to an increase in outside professional fees of approximately $144,000.

The increase in share-based compensation for the three month period ended September 30, 2012 is primarily the result of new long-term incentive equity awards granted to executive and other sales and marketing employees in July 2012. For the nine month period ended September 30, 2012, share-based compensation increased only $12,000 as the expense related to the new awards was offset by reduced expense from prior years' awards that became fully vested in mid-2011.

The increase in outside professional fees for the nine month period ended September 30, 2012 is a result of outsourced support for a potential customer in Asia and an increase in certain public relations activities.

General and Administrative Expenses
General and administrative expenses consist primarily of executive, director, finance and administrative personnel costs, including share-based compensation, and costs incurred for insurance, shareholder relations and outside professional services, including litigation and other legal services.

General and administrative expenses increased approximately $1,285,000, or 107%, during the three months ended September 30, 2012 when compared to the same period in 2011. This increase is primarily due to an increase in outside professional fees of approximately $664,000 and an increase in share-based compensation expense of approximately $539,000.

General and administrative expenses increased approximately $3,700,000, or 110%, during the nine months ended September 30, 2012 when compared to the same period in 2011. This increase is primarily due to an increase in outside professional services of approximately $2,021,000, an increase in share-based compensation expense of approximately $1,414,000, and an increase in executive taxable fringe benefits of approximately $153,000.


This increase in outside professional fees is primarily a result of litigation and other expenses related to our patent infringement litigation against Qualcomm. The increase in share-based compensation expense for the three month period ended September 30, 2012 is primarily the result of new long-term equity incentive awards granted to executive and other administrative employees, as well as equity awards to outside directors in July 2012. In addition, share-based compensation for the nine month period ended September 30, 2012 included $760,000 of expense recognized upon the June 2012 vesting of performance based RSUs issued to a third-party. The increase in executive taxable fringe benefits is the result of a $150,000 payment to our chief executive officer as reimbursement for life insurance premiums in accordance with his June 2012 employment agreement.

Net Loss and Net Loss per Common Share
Our net loss increased approximately $1,266,000, or 34%, during the three months ended September 30, 2012 when compared to the same period in 2011. This increase is primarily the result of a $1,285,000 increase in general and administrative expenses. On a per share basis, our net loss remained constant at $0.06 per share when compared to the same period in 2011 as a result of the 30% increase in the weighted average shares outstanding for the period.

For the nine months ended September 30, 2012, our net loss increased approximately $3,487,000, or 33%, when compared to the same period in 2011. This increase is primarily the result of the $3,700,000 increase in general and administrative expenses. On a per share basis, our net loss remained constant at $0.19 per share when compared to the same period in 2011 as a result of the 28% increase in the weighted average shares outstanding for the period.

Off-Balance Sheet Transactions, Arrangements and Other Relationships As of September 30, 2012, we had outstanding warrants to purchase 2,607,911 shares of common stock that were issued in connection with the sale of equity securities in various public and private placement transactions in 2009, 2010, and 2011. These warrants have exercise prices ranging from $0.54 to $1.88 per share, with a weighted average exercise price of $0.79 and a weighted average remaining contractual life of approximately 2.95 years. The estimated fair value of these warrants of $1,081,050 is included in shareholders' equity in our balance sheets.

Critical Accounting Policies
There have been no changes in critical accounting policies from those stated in our Annual Report on Form 10-K for the year ended December 31, 2011.

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