20150630 Q2

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

(Mark One)

      (X)QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

      (   )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________to____________

 

Commission file number 000-22904

 

PARKERVISION, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Florida

 

59-2971472

(State or other jurisdiction of

 

(I.R.S. Employer Identification No)

incorporation or organization)

 

 

 

7915 Baymeadows Way, Suite 400

Jacksonville, Florida 32256 

(Address of principal executive offices)

 

(904) 732-6100

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No __.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such file).    Yes X  No __.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.   See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

 

 

Large accelerated filer __

 

Accelerated filer           X

Non-accelerated filer    __ (Do not check if a smaller reporting company)

 

Smaller reporting company __

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __  No X.

 

As of August 4, 2015,  98,818,517 shares of the issuer’s common stock, $.01 par value, were outstanding.

 


 

TABLE OF CONTENTS

 

 

 

PART I -  FINANCIAL INFORMATION

 

 

 

Item 1.    Financial Statements (Unaudited)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

11 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

15 

Item 4.    Controls and Procedures

15 

 

 

PART II - OTHER INFORMATION

 

Item 1.    Legal Proceedings

16 

Item 1A. Risk Factors

16 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

16 

Item 3.    Defaults Upon Senior Securities

16 

Item 4.    Mine Safety Disclosures

16 

Item 5.    Other Information

16 

Item 6.    Exhibits

16 

 

 

SIGNATURES

18 

EXHIBIT INDEX

19 

 

 

 

 

 

2


 

PART I - FINANCIAL INFORMATION

 

ITEM 1.  Financial Statements

PARKERVISION, INC.

BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

2015

 

 

2014

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

$

223,843 

 

$

218,925 

Available-for-sale securities

 

3,756,654 

 

 

10,985,000 

Accounts receivable, net

 

20,400 

 

 

Inventories, net

 

123,503 

 

 

66,468 

Prepaid expenses and other

 

593,422 

 

 

812,577 

Total current assets

 

4,717,822 

 

 

12,082,970 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net

 

703,588 

 

 

633,084 

 

 

 

 

 

 

INTANGIBLE ASSETS, net

 

7,912,963 

 

 

8,002,638 

Total assets

$

13,334,373 

 

$

20,718,692 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

$

1,694,839 

 

$

475,200 

Accrued expenses:

 

 

 

 

 

Salaries and wages

 

236,714 

 

 

394,964 

Professional fees

 

514,439 

 

 

940,581 

Other accrued expenses

 

164,275 

 

 

59,277 

Capital leases, current portion

 

144,524 

 

 

40,337 

Deferred rent, current portion

 

65,085 

 

 

54,426 

Deferred revenue

 

20,000 

 

 

Total current liabilities

 

2,839,876 

 

 

1,964,785 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Capital leases, net of current portion

 

1,128 

 

 

10,244 

Deferred rent, net of current portion

 

89,489 

 

 

127,964 

Total long-term liabilities

 

90,617 

 

 

138,208 

Total liabilities

 

2,930,493 

 

 

2,102,993 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

   

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

Common stock, $.01 par value, 150,000,000 shares authorized, 97,781,117  and 97,183,433 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively  

 

977,811 

 

 

971,834 

Accumulated other comprehensive loss

 

(11,708)

 

 

Warrants outstanding

 

1,655,778 

 

 

355,778 

Additional paid-in capital

 

331,980,038 

 

 

330,867,750 

Accumulated deficit

 

(324,198,039)

 

 

(313,579,663)

Total shareholders' equity

 

10,403,880 

 

 

18,615,699 

Total liabilities and shareholders' equity

$

13,334,373 

 

$

20,718,692 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

3


 

 

 

 

 

PARKERVISION, INC.

STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 

$

 

$

 

$

Cost of sales

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

1,694,357 

 

 

2,240,694 

 

 

3,451,791 

 

 

4,505,174 

Marketing and selling expenses

 

390,516 

 

 

788,350 

 

 

876,313 

 

 

1,445,341 

General and administrative expenses

 

2,749,503 

 

 

2,846,255 

 

 

6,293,317 

 

 

5,719,123 

Total operating expenses

 

4,834,376 

 

 

5,875,299 

 

 

10,621,421 

 

 

11,669,638 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

1,265 

 

 

36,366 

 

 

13,367 

 

 

60,250 

Interest expense

 

(9,283)

 

 

(2,337)

 

 

(10,322)

 

 

(3,534)

Total interest and other income and interest expense

 

(8,018)

 

 

34,029 

 

 

3,045 

 

 

56,716 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(4,842,394)

 

 

(5,841,270)

 

 

(10,618,376)

 

 

(11,612,922)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

(11,708)

 

 

332 

 

 

(11,708)

 

 

8,215 

Other comprehensive (loss) income, net of tax

 

(11,708)

 

 

332 

 

 

(11,708)

 

 

8,215 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

$

(4,854,102)

 

$

(5,840,938)

 

$

(10,630,084)

 

$

(11,604,707)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

$

(0.05)

 

$

(0.06)

 

$

(0.11)

 

$

(0.12)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

97,645,311 

 

 

96,999,397 

 

 

97,543,304 

 

 

95,359,994 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

4


 

PARKERVISION, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(4,842,394)

 

$

(5,841,270)

 

$

(10,618,376)

 

$

(11,612,922)

Adjustments to reconcile net loss to net cash used in

 

 

 

 

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

343,770 

 

 

314,508 

 

 

686,701 

 

 

625,387 

Share-based compensation

 

350,607 

 

 

1,447,153 

 

 

870,265 

 

 

3,271,174 

(Gain) loss on disposal of assets

 

(3,200)

 

 

887 

 

 

(3,200)

 

 

887 

Realized loss (gain) on available-for-sale securities

 

7,060 

 

 

(1,014)

 

 

7,060 

 

 

6,869 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(20,400)

 

 

 

 

(20,400)

 

 

Inventories

 

(27,410)

 

 

 

 

(57,035)

 

 

Prepaid expenses and other assets

 

399,459 

 

 

94,397 

 

 

469,155 

 

 

62,919 

Accounts payable and accrued expenses

 

(47,793)

 

 

(47,197)

 

 

740,245 

 

 

(966,208)

Deferred rent

 

(13,909)

 

 

9,442 

 

 

(27,816)

 

 

61,575 

Deferred revenue

 

20,000 

 

 

 

 

20,000 

 

 

Total adjustments

 

1,008,184 

 

 

1,818,176 

 

 

2,684,975 

 

 

3,062,603 

Net cash used in operating activities

 

(3,834,210)

 

 

(4,023,094)

 

 

(7,933,401)

 

 

(8,550,319)

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Purchase of available-for-sale investments

 

(8,325)

 

 

(35,347)

 

 

(945,422)

 

 

(11,561,474)

Proceeds from sale of investments

 

3,690,000 

 

 

3,405,000 

 

 

8,155,000 

 

 

7,205,000 

Proceeds from sale of assets

 

3,200 

 

 

 

 

3,200 

 

 

Payments for patent costs and other intangible assets

 

(302,884)

 

 

(256,323)

 

 

(466,357)

 

 

(414,410)

Purchases of property and equipment

 

(10,429)

 

 

(14,495)

 

 

(47,623)

 

 

(40,640)

Net cash provided by (used in) investing activities

 

3,371,562 

 

 

3,098,835 

 

 

6,698,798 

 

 

(4,811,524)

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from issuance of common stock and warrants in public and

 

 

 

 

 

 

 

 

 

 

 

private offerings

 

 

 

 

 

1,298,000 

 

 

11,946,365 

Net proceeds from exercise of options and warrants

 

 

 

728,054 

 

 

 

 

1,655,550 

Principal payments on capital lease obligation

 

(43,177)

 

 

(14,148)

 

 

(58,479)

 

 

(20,436)

Net cash (used in) provided by financing activities

 

(43,177)

 

 

713,906 

 

 

1,239,521 

 

 

13,581,479 

 

 

 

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH

 

 

 

 

 

 

 

 

 

 

 

 EQUIVALENTS

 

(505,825)

 

 

(210,353)

 

 

4,918 

 

 

219,636 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, beginning of period

 

729,668 

 

 

652,686 

 

 

218,925 

 

 

222,697 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, end of period

$

223,843 

 

$

442,333 

 

$

223,843 

 

$

442,333 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

5


 

PARKERVISION, INC.

 

CONDENSED NOTES TO FINANCIAL STATEMENTS

 

(UNAUDITED)

1.  Description of Business

 

ParkerVision, Inc. (“we”, the “Company”, or “ParkerVision”) is in the business of innovating fundamental wireless technologies.   We design, develop and market our proprietary radio frequency (“RF”) technologies and products for use in semiconductor circuits for wireless communication products.   We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.  In addition, we offer engineering consulting and design services, for a negotiated fee, to assist customers in developing prototypes and/or products incorporating wireless technologies

 

2.  Liquidity and Going Concern

 

Our financial statements were prepared assuming we would continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business.  These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern.

 

Our future business plans call for continued investment in patent prosecution and enforcement, product development and sales, marketing, and customer support for our technologies and products.  Our ability to generate revenues sufficient to offset costs is subject to successfully enforcing our intellectual property rights, securing new product and licensing customers for our technologies, and successfully supporting those customers in completing their product designs. 

 

In June 2015, we implemented a reduction in staff which will result in a 39% reduction in our recurring payroll costs (see Note 12).  Also in June, we entered into a fully contingent funding arrangement for our ongoing patent infringement litigation against Qualcomm, HTC and Samsung in district court.  Despite these cost reduction measures, we expect that revenues generated from patent enforcement actions, technology licenses and/or the sale of products in 2015 will not be sufficient to cover our operational expenses for 2015, and that our expected continued losses and use of cash will be funded from available working capital. 

 

Our capital resources at June 30, 2015 include cash, cash equivalents, and available-for-sale securities of approximately $4.0 million.  These capital resources will not be sufficient to support our liquidity requirements through 2015 without the generation of sufficient revenues or further cost containment measures, which, if implemented, may jeopardize our future growth plans.  These circumstances raise substantial doubt about our ability to continue as a going concern.  We may secure additional funding through public or private debt or equity financing arrangements or contingent fee arrangements, although no such arrangements are in place at this time

 

The long-term continuation of our business plan beyond 2015 is dependent upon the generation of sufficient revenues from our technologies and/or 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 debt or equity financing or contingent fee arrangements, and/or reduce operating costs.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs could have a material adverse effect on our ability to meet

6


 

our long-term liquidity needs and achieve our intended long-term business objectives.

 

3.  Basis of Presentation

 

The accompanying unaudited financial statements for the period ended June 30, 2015 were prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or future years.  All normal and recurring adjustments which, in the opinion of management, are necessary for a fair statement of the financial condition and results of operations have been included. 

 

The year-end balance sheet data was derived from audited financial statements for the year ended December 31, 2014, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  These interim financial statements should be read in conjunction with our latest Annual Report on Form 10-K for the year ended December 31, 2014 

 

4.   Accounting Policies

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”)  to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures.  ASU 2014-15 is effective for interim and annual periods beginning after December 15, 2016 and earlier adoption is permitted.  We are currently assessing the impact of this update on future discussions of our liquidity position in our financial statements and have not early adopted ASU 2014-15.

 

There have been no other changes in accounting policies from those stated in the Annual Report on Form 10-K for the year ended December 31, 2014.

 

5.   Loss per Common Share

 

Basic loss per common share is determined based on the weighted-average number of common shares outstanding during each period.  Diluted loss per common share is the same as basic loss per common share as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive.

 

Options and warrants to purchase  13,224,282  and 7,649,496 shares of common stock were outstanding at June 30, 2015 and 2014, respectively.  In addition, unvested restricted stock units (“RSUs”), representing 1,855,642 and  1,714,825 shares of common stock, were outstanding at June 30, 2015 and 2014, respectively.   These options, warrants and RSUs were excluded from the computation of diluted loss per common share as their effect would have been anti-dilutive. 

 

7


 

6. Inventories

 

Inventories consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

December 31, 2014

Work-in-process

$

79,746 

 

$

66,468 

Finished goods

 

43,757 

 

 

 

 

123,503 

 

 

66,468 

Less allowance for inventory obsolescence

 

 

 

Total inventories

$

123,503 

 

$

66,468 

 

 

 

 

 

 

 

 

7.   Intangible Assets

 

Intangible assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

Patents and copyrights

$

20,082,834 

 

$

12,169,871 

 

$

7,912,963 

Prepaid licensing fees

 

574,000 

 

 

574,000 

 

 

 

$

20,656,834 

 

$

12,743,871 

 

$

7,912,963 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

Patents and copyrights

$

19,616,477 

 

$

11,613,839 

 

$

8,002,638 

Prepaid licensing fees

 

574,000 

 

 

574,000 

 

 

 

$

20,190,477 

 

$

12,187,839 

 

$

8,002,638 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.  Share-Based Compensation

 

There has been no material change in the assumptions used to compute the fair value of our equity awards, nor in the method used to account for share-based compensation from those stated in our Annual Report on Form 10-K for the year ended December 31, 2014

 

The following table presents share-based compensation expense included in our statements of comprehensive loss for the three and six month periods ended June 30, 2015 and 2014, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

Research and development expense

$

7,014 

 

$

349,409 

 

$

122,258 

 

$

733,484 

Sales and marketing expense

 

8,078 

 

 

69,574 

 

 

29,511 

 

 

143,752 

General and administrative expense

 

352,510 

 

 

1,028,170 

 

 

735,491 

 

 

2,393,938 

Total share-based expense

$

367,602 

 

$

1,447,153 

 

$

887,260 

 

$

3,271,174 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

 

As of June 30, 2015, we had approximately $0.3 million in unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation awards.  This cost is expected to be recognized over a weighted average period of approximately  one year.     

 

For the three and six-month periods ended June 30, 2015, total share based compensation expense includes $16,995 representing the fair value of shares withheld for payment of payroll taxes on the distribution of employee share-based compensation awards.  General and administrative share-based compensation expense includes expense recognized upon vesting of RSUs awarded to consultants of approximately $76,000 and $158,000 for the three months ended June 30, 2015 and 2014, respectively, and approximately $192,000 and $633,000, for the six months ended June 30, 2015 and 2014, respectively.  As of June 30, 2015, we have an aggregate of 80,000 time-based RSUs and 750,000 performance-based RSUs awarded to consultants that remain unvested.  The time-based RSUs, awarded in August 2014, vest in equal monthly installments through August 2015.  The performance-based RSUs, awarded in November 2013, vest only upon achievement of certain market conditions, as measured based on the closing price of our common stock during a period ending on the earlier of (i) December 31, 2015 or (ii) thirty days following termination of the related consulting agreements.  Achievement of the specified market conditions is not considered probable as of June 30, 2015.  Upon thirty days’ notice, the consulting agreements may be terminated and any unvested portion of the time-based or performance-based RSUs will be cancelled.   

 

9.   Stock Authorization and Issuance

 

On January 15, 2015, we consummated the sale of three warrants, each for the purchase of up to 1,884,058 shares of our common stock at exercise prices of $1.50,  $2.50 and $3.50, respectively, to 1624 PV, LLC (“1624”) for an aggregate purchase price of approximately $1.3 million.  The warrants are exercisable through January 15, 2018.  On January 26, 2015, we issued 250,000 shares of unregistered common stock to our securities counsel, Graubard Miller, in exchange for a $250,000 prepaid retainer for legal services.  The common stock issuable upon exercise of the warrants issued to 1624 and the shares of common stock issued to Graubard Miller were registered on Form S-3 (File No. 333-202802) which was declared effective on May 4, 2015.     

 

10. Fair Value Measurements

 

We have determined the estimated fair value amounts of our financial instruments using available market information.  Our assets that are measured at fair value on a recurring basis include the following as of June 30, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements

 

 

Total

 

 

Quoted Prices in Active Markets  (Level 1)

 

 

Significant Other Observable Inputs     (Level 2)

 

 

Significant Unobservable Inputs      (Level 3)

June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

Municipal bond mutual funds

$

3,756,654 

 

$

3,756,654 

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

9


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements

 

 

Total

 

 

Quoted Prices in Active Markets  (Level 1)

 

 

Significant Other Observable Inputs     (Level 2)

 

 

Significant Unobservable Inputs        (Level 3)

December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

Municipal bond mutual funds

$

10,985,000 

 

$

10,985,000 

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.  Commitments and Contingencies

 

Legal Proceedings

 

From time to time, we are subject to legal proceedings and claims which arise in the ordinary course of our business.   We believe, based on advice from our outside legal counsel, that the final disposition of such matters will not have a material adverse impact on our financial position, results of operation or liquidity.   In addition, we are subject to the following legal proceedings:

 

ParkerVision vs. Qualcomm, Inc.

In October 2013, a jury in the United States District Court of the Middle District of Florida awarded us $172.7 million in damages in a patent infringement action filed against Qualcomm Incorporated (“Qualcomm”) in July 2011.  The jury also found that Qualcomm did not prove its claims of invalidity for any of the eleven claims of the four patents in the case.  On June 20, 2014, a final district court ruling was issued in which the court denied Qualcomm’s motion to overturn the jury’s verdict regarding patent validity but granted Qualcomm’s motion to overturn the jury’s verdict of infringement.   We appealed this decision to the U.S. Court of Appeals for the Federal Circuit.  Qualcomm filed a counter-appeal on the issues of validity and damages.   On July 31, 2015, the appellate court issued its opinion, upholding the district court’s determination of non-infringement.  In addition, the appellate court overturned the district court’s decision on validity, ruling that ten of the eleven patent claims in the case were invalid.  We are currently evaluating our next steps in this case

 

ParkerVision vs. Qualcomm, HTC, and Samsung

In August 2014, we served a complaint in the United States District Court of the Middle District of Florida against Qualcomm, Qualcomm Atheros, Inc., HTC Corporation, HTC America, Inc., Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC (collectively “Defendants”) seeking unspecified damages and injunctive relief for infringement of eleven of our patents related to RF up-conversion, down-conversion, systems for control of multi-mode, multi-band communications, baseband innovations including control and system calibration, and wireless protocol conversion.  In November 2014, certain of the Defendants filed counterclaims of non-infringement and invalidity for all patents in the case.  Discovery in this case is ongoing with a claim construction hearing scheduled for August 12, 2015 and a trial start date scheduled for August 1, 2016. 

 

RPX and Farmwald vs. ParkerVision

In June 2014, RPX Corporation and Michael Farmwald (collectively, the “Petitioners”) filed petitions for Inter Partes review (“IPR”) with the Patent Trial and Appeal Board of the United States Patent and Trademark Office (“PTAB”) seeking to invalidate certain claims related to three of the four patents in our July 2011 district court case against Qualcomm.  In December 2014, the PTAB issued a decision to institute trial on certain claims included in the three petitions, but denied institution of one of the

10


 

challenged claims.  We filed our responses to the petitions in March 2015 and the Petitioners’ replies were filed on June 26, 2015.  Oral arguments are scheduled for August 27, 2015 and a decision from the PTAB is expected in December 2015.

 

In July 2014, the Petitioners filed an additional IPR petition seeking to invalidate certain claims of the fourth patent in the July 2011 district court case against Qualcomm (the “’342 Patent”).  In January 2015, the PTAB denied institution of trial for the ‘342 Patent.  

 

These IPRs could be affected by final disposition in the July 2011 patent infringement case against Qualcomm.

 

12.  Termination Benefits

 

On June 8, 2015, we implemented a reduction in staff in order to reduce our ongoing operating expenses, resulting in a one-time charge to operating expenses of approximately $313,000 for the three and six months ended June 30, 2015.   Accrued severance benefits consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

Accrued severance benefits, beginning of period

$

Severance costs incurred

 

313,000 

Costs paid or settled

 

(228,000)

Accrued severance benefits, end of period

$

85,000 

 

 

 

 

 

 

Approximately $46,000 of the accrued severance benefits were settled by the issuance of share-based compensation during the three months ended June 30, 2015.  Accrued severance benefits are included in other accrued expenses in the accompanying balance sheets.

 

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, 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 “expects”, “will likely result”, “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, 2014 (the “Annual Report”) 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.

 

 

11


 

Corporate Website

 

We webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Additionally, we announce investor information, including news and commentary about our business, financial performance and related matters, SEC filings, notices of investor events, and our press and earnings releases, in the investor relations section of our website (http://ir.parkervision.com). Investors and others can receive notifications of new information posted in the investor relations section in real time by signing up for email alerts and/or RSS feeds. Further corporate governance information, including our governance guidelines, board committee charters, and code of conduct, is also available in the investor relations section of our website under the heading “Corporate Governance.” The content of our website is not incorporated by reference into this quarterly report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.

 

Overview

 

We are in the business of innovating fundamental wireless technologies.   We design, develop and market our proprietary radio frequency (“RF”) technologies and products for use in semiconductor circuits for wireless communication products.   We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.

 

We have a three-part growth strategy that includes intellectual property licensing and/or product ventures, intellectual property enforcement, and product and component sales and design services.  Since 2005, we have generated no product or royalty revenue from our wireless technologies.  We have made significant investments in developing and protecting our technologies and products, the returns on which are dependent upon the generation of future revenues from licensing and/or product sales for realization. 

 

Liquidity and Capital Resources

As of June 30, 2015, we had working capital of approximately $1.9 million which represented a decrease of approximately $8.2 million from working capital at December 31, 2014.  This decrease in working capital is a result of the use of approximately $7.9 million to fund operations and approximately $0.5 million used for patents and fixed assets during the first half of 2015, partially offset by proceeds of $1.3 million from the sale of warrants.  

 

Cash used for operations in the first six months of 2015 decreased approximately $0.6 million from cash used for operations in the same period in 2014.  This decrease is primarily the result of the timing on payments of litigation related expenses incurred.

 

Our future business plans call for continued investment in patent prosecution and enforcement, product development and sales, marketing, and customer support for our technologies and products.  Our ability to generate revenues sufficient to offset costs is subject to successfully enforcing our intellectual property rights, securing new product and licensing customers for our technologies, and successfully supporting those customers in completing their product designs. 

 

In June 2015, we implemented a reduction in staff which will result in a 39% reduction in our recurring future payroll costs.   Also in June, we entered into a fully contingent funding arrangement for our ongoing patent infringement litigation against Qualcomm, HTC and Samsung which is expected to reduce our future litigation fees and expenses. 

 

Despite these cost reduction measures, we expect that revenue generated from patent enforcement actions,

12


 

technology licenses and/or the sale of products in 2015 will not be sufficient to cover our operational expenses for 2015, and that our expected continued losses and use of cash will be funded from available working capital.  Our current capital resources will not be sufficient to support our liquidity requirements through 2015 without the generation of sufficient revenues and/or further cost containment measures.  The implementation of further cost containment measures may jeopardize our future growth plans. 

We are currently exploring various funding opportunities including additional contingent financing arrangements.  We believe we will be able to raise additional capital through contingent financing or debt or equity financings, although we do not have any such arrangements currently in place.

 

The long-term continuation of our business plan beyond 2015 is dependent upon the generation of sufficient revenues from our technologies and/or 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 debt or equity financing, enter into additional contingent fee arrangements, and/or reduce operating costs.  Failure to generate sufficient revenues or raise additional capital through debt or equity financings or contingent financing arrangements could cause us to reduce our operating costs which 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 Six Months Ended June 30, 2015 and 2014

 

Revenue and Gross Margin

We reported no product or royalty revenue for the three and six month periods ended June 30, 2015 or 2014At June 30, 2015, we have deferred revenue of approximately $20,000 representing initial component product inventory shipped to a distributor.

 

Revenues from product sales will be recognized at the time of shipment, or when title and risk of loss pass to the customer and other criteria for revenue recognition are met, if later. Revenues from providing services will be recognized when performance obligations are satisfied. Revenues from litigation awards, including settlements, if any, will be recognized upon final disposition of the litigation, including the outcome of any settlement discussions and/or appeals.  Revenues from litigation awards and settlements, as well as certain other patent licensing activities may be reduced by contingent fees owed to others.

 

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 $546,000, or 24%, during the three months ended June 30, 2015 when compared to the same period in 2014.  This decrease is primarily due to a reduction in personnel and related expenses, including share-based compensation expense, of approximately $372,000 and a decrease in prototype production related expenses of approximately $169,000. 

 

Our research and development expenses decreased approximately $1,053,000, or 23%, during the six months ended June 30, 2015 when compared to the same period in 2014.  This decrease is primarily due to a reduction in personnel and related expenses, including share-based compensation expense, of

13


 

approximately $771,000 and a decrease in prototype production related expenses of approximately $292,000. 

 

The decrease in personnel and related expenses is primarily the result of a decrease in employee share-based compensation expense of approximately $342,000 and $611,000 for the three and six month periods, respectively.  This reduction is a result of a decrease in expense attribution for long-term equity incentive awards granted to engineering executives in prior years and an increase in forfeitures of unvested awards as a result of our June 2015 workforce reduction.   Our personnel and related expenses for the three and six months ended June 30, 2015 included approximately $184,000 in one-time termination charges related to our June 2015 workforce reduction which was offset by an overall decreases in wages and related personnel costs. 

   

Prototype production expenses vary from period to period based on the timing of various development projects.  We expect a significant percentage of our current working capital will continue to be invested in our research and product development activities.  

 

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.  Our marketing and selling expenses decreased approximately $398,000, or 50% during the three months ended June 30, 2015 when compared to the same period in 2014.  This decrease is primarily due to a reduction in outside professional fees of approximately $349,000 and a decrease in share-based compensation of approximately $61,000.

 

Our marketing and selling expenses decreased approximately $569,000, or 39% during the six months ended June 30, 2015 when compared to the same period in 2014.  This decrease is primarily due to a decrease in fees to outside professionals of approximately $483,000 and a decrease in share-based compensation expense of approximately $114,000.

 

The decrease in fees to outside professionals for the three and six month periods ended June 30, 2015 is a result of a change in fee structure for certain consultants from a fixed monthly retainer to commission-based fees.  The decrease in share-based compensation expense for the three and six month periods ended June 30, 2015 is the result of a decrease in expense attribution for long-term equity incentive awards granted to sales and marketing employees in prior years and an increase in forfeitures of unvested awards as a result of  our June 2015 workforce reduction.  

 

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. 

 

Our general and administrative expenses decreased approximately $97,000, or 3%, during the three months ended June 30, 2015 when compared to the same period in 2014, primarily as a result of a decrease in share-based compensation expense of approximately $676,000, partially offset by an increase in litigation related fees and expenses of approximately $423,000 and an increase in personnel costs, including one-time termination charges, of approximately $111,000.  Our general and administrative expenses increased approximately $574,000, or 10%, during the six months ended June 30, 2015 when compared to the same period in 2014, primarily as a result of an increase in litigation related fees and expenses of approximately $2,016,000 partially offset by a decrease in share-based compensation expense of approximately $1,658,000. 

 

The increase in litigation related fees and expenses for the three and six month periods ended June 30, 2015 is a result of increased patent related legal activities including those related to our appellate case against Qualcomm, our patent infringement action against Qualcomm, HTC and Samsung in the middle

14


 

district of Florida, and our defense of the IPR actions filed against us.  In June 2015, we entered into a fully contingent fee arrangement with McKool Smith for our ongoing litigation against Qualcomm, HTC, and Samsung. This arrangement will reduce our future litigation fees and expenses in this case which is expected to go to trial in August 2016.

 

The decrease in share-based compensation expense for the three and six month periods ended June 30, 2015 is the result of a decrease in the price of our common stock which is used to determine fair value for non-employee RSUs vesting during the periods, as well as reduced expense attribution related to executive long-term equity incentive awards from prior years.

 

Off-Balance Sheet Transactions, Arrangements and Other Relationships

As of June 30, 2015, we had outstanding warrants to purchase 7,051,378 shares of common stock that were issued in connection with the sale of equity securities.  The estimated grant date fair value of these warrants of $1,655,778 is included in shareholders’ equity in our balance sheets. 

 

The warrants outstanding include warrants to purchase 1,399,204 shares of our common stock that were sold in connection with our November 2010 sale of equity securities.  These warrants have an exercise price of $0.54 and expire on November 3, 2015.  The remaining warrants are comprised of three warrants, each for the purchase of up to 1,884,058 shares of our common stock at exercise prices of $1.50, $2.50 and $3.50, respectively that were issued to 1624 PV, LLC on January 15, 2015.  These warrants are exercisable through January 15, 2018. 

 

Contractual Obligations

There have been no material changes in our contractual obligations as set forth in our Annual Report.

 

Critical Accounting Policies

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, (“ASU 2014-15”)  to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures.  ASU 2014-15 is effective for interim and annual periods beginning after December 15, 2016 and earlier adoption is permitted.  We are currently assessing the impact of this update on future discussions of our liquidity position in our financial statements and have not early adopted ASU 2014-15.

 

There have been no other changes in critical accounting policies from those stated in our Annual Report. 

 

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk.    

 

For the three and six months ended June 30, 2015, there were no material changes from the market risk information disclosed under Item 7A of Part II of our Annual Report.

 

ITEM 4.  Controls and Procedures.  

 

Evaluation of Disclosure Controls and Procedures

As of June 30, 2015, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).   Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of June 30, 2015.  

 

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the last fiscal

15


 

quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1.  Legal Proceedings.

 

Reference is made to the section entitled “Legal Proceedings” in Note 11 to our unaudited financial statements included in this quarterly report for a discussion of current legal proceedings, which discussion is incorporated herein by reference

 

ITEM 1A.  Risk Factors.

 

There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report.  In addition to the information in this quarterly report, the risk factors disclosed in our Annual Report should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.   

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

ITEM 3. Defaults Upon Senior Securities.

 

None.

 

ITEM 4.  Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5.  Other Information. 

 

On August 10, 2015, we issued a press release announcing our results of operations and financial condition for the three and six months ended June 30, 2015.  The press release is attached hereto as Exhibit 99.1.

 

The foregoing information, including the exhibit related thereto, is furnished in response to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any disclosure document of the Registrant, except as shall be expressly set forth by specific reference in such document.

 

ITEM 6.  Exhibits. 

 

 

3.1

Articles of Incorporation, as amended (incorporated by reference from Exhibit 3.1 of Registration Statement No. 33-70588-A)

 

 

3.2

Amendment to Amended Articles of Incorporation dated March 6, 2000 (incorporated by reference from Exhibit 3.2 of Annual Report on Form 10-K for the year ended December 31, 1999)

 

 

3.3

Bylaws, as amended (incorporated by reference from Exhibit 3.2 of Annual Report on Form 10-K for the year ended December 31, 1998)

 

 

16


 

3.4

Amendment to Certificate of Incorporation, dated July 17, 2000 (incorporated by reference from Exhibit 3.1 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)

 

 

3.5

Certificate of Designations of the Preferences, Limitations, and Relative Rights of Series E Preferred Stock, dated November 21, 2005 (incorporated by reference from Exhibit 4.02 of Form 8-K filed November 21, 2005)

 

 

3.6

Amended and Restated Bylaws (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed August 14, 2007)

 

 

3.7

Articles of Amendment to Articles of Incorporation, dated October 3, 2012 (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed October 4, 2012)

 

 

3.8

Articles of Amendment to Articles of Incorporation, dated July 11, 2013 (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed July 12, 2013)

 

 

31.1

Section 302 Certification of Jeffrey L. Parker, CEO*

 

 

31.2

Section 302 Certification of Cynthia Poehlman, CFO*

 

 

32.1

Section 906 Certification*

 

 

99.1

Earnings Press Release*

 

 

101.INS

XBRL Instance Document*

 

 

101.SCH

XBRL Taxonomy Extension Schema*

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase*

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase*

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase*

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase*

 

*Filed herewith.

17


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ParkerVision, Inc.

Registrant

 

 

 

 

August 10, 2015

By: /s/Jeffrey L. Parker

 

Jeffrey L. Parker

 

Chairman and Chief Executive Officer

 

(Principal Executive Officer)

 

 

 

 

 

 

August 10, 2015

By: /s/Cynthia L. Poehlman

 

Cynthia L. Poehlman

 

Chief Financial Officer

 

(Principal Financial Officer and Principal

 

 Accounting Officer)

 

18


 

EXHIBIT INDEX

 

 

10.

 

31.1

Section 302 Certification of Jeffrey L. Parker, CEO

31.2

Section 302 Certification of Cynthia Poehlman, CFO

32.1

 

99.1

Section 906 Certification

 

Earnings Press Release

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

 

19