UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-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, 2007
o
TRANSITION
REPORT PURSUANT TO SECTION 13
OR
15(d)
OF
THE SECURITIES ACT OF 1934
For
the
transition period from ________to__________
Commission
file number 0-22904
PARKERVISION,
INC.
(Exact
name of registrant as specified in its charter)
|
|
59-2971472
|
|
|
(State
of Incorporation)
|
|
(I.R.S.
Employer ID No.)
|
7915
Baymeadows Way, Suite 400
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
COMMON
STOCK RIGHTS
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes o
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x
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
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K x.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large
accelerated filer o Accelerated
filer x Non-accelerated
filer o Smaller
reporting company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
Yes
o
No
x
As
of
June 29, 2007, the aggregate market value of the Issuer's Common Stock, $.01
par
value, held by non-affiliates of the Issuer was approximately $255,997,286
(based upon $11.95 share closing price on that date, as reported by The Nasdaq
Global Market).
As
of
March 6, 2008, 26,495,691 shares of the Issuer's Common Stock were
outstanding.
Table
of
Contents
| Forward Looking Statements |
4
|
|
|
PART
I
|
||
|
Item
1.
|
Business
|
4
|
|
Item
1A.
|
Risk
Factors
|
8
|
|
Item
1B.
|
Unresolved
Staff Comments
|
11
|
|
Item
2.
|
Properties
|
11
|
|
Item
3.
|
Legal
Proceedings
|
11
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
11
|
|
PART
II
|
||
|
Item
5.
|
Market
for the Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
11
|
|
Item
6.
|
Selected
Financial Data
|
13
|
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
21
|
|
Item
8.
|
Consolidated
Financial Statements and Supplementary Data
|
22
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
46
|
|
Item
9A.
|
Controls
and Procedures
|
46
|
|
Item
9B.
|
Other
Information
|
47
|
|
PART
III
|
||
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
47
|
|
Item
11.
|
Executive
Compensation
|
49
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
60
|
|
Item
13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
62
|
|
Item
14.
|
Principal
Accountant Fees and Services
|
63
|
|
|
||
|
PART
IV
|
||
|
Item
15.
|
Exhibits,
Financial Statement Schedules and Reports on Form 8-K
|
63
|
|
SIGNATURES
|
68
|
|
|
SCHEDULES
|
69
|
|
|
INDEX
TO EXHIBITS
|
70
|
|
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,
including, in particular, statements about our future plans, objectives and
expectations under the headings “Item 1. Business” and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
this report. When used in this Form 10-K and in future filings by ParkerVision,
Inc., with the Securities and Exchange Commission, 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” within the meaning of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance
on such forward-looking statements, each of which speaks only as of the date
made. Such statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. Examples of such risks and uncertainties
include the timely development and commercial acceptance of new products and
technologies, reliance on key business and sales relationships, and reliance
on
our intellectual property. 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.
PART
I
Item
1. Business
ParkerVision,
Inc. (the “Company” or “we”) was incorporated under the laws of the state of
Florida on August 22, 1989. We are in the business of designing, developing
and
licensing our proprietary d2p™ and d2d™ wireless radio frequency (“RF”)
technologies for use in semiconductor circuits for wireless radio applications.
Our primary business strategy is to license our technologies to chip suppliers
and/or mobile handset manufacturers for the incorporation of our technologies
into mobile handsets. In addition, we have, from time to time, explored
licensing and other opportunities outside the cellular industry to the extent
that the applications are synergistic with our current development
efforts.
Recent
Developments
Initial
Customer Agreements
In
2007,
we entered into agreements for the incorporation of our technologies into RF
products.
In
May
2007, we executed an Engineering Services Agreement and a Licensing Agreement
with ITT Corporation (“ITT”) for the design and use of our d2p technology in
applications worldwide. Under the agreements, we will be paid royalties on
a per
unit basis for products sold by ITT that incorporate our d2p technology. We
are
also providing engineering consulting and design services to ITT on a time
and
materials basis, as requested, for the development of products using our
technology.
In
December 2007, we entered into a Licensing and Engineering Services Agreement
with a mobile handset chip supplier for the design and use of our d2p and d2d
technologies in chipsets initially targeted for the 3G mobile handset market
worldwide. Under the terms of the agreement, we will be paid royalties on a
per
unit basis for chipsets sold which incorporate one or both of our RF
technologies.
Sale
of Equity Securities to Fund Operations
On
March
5, 2008, we completed the sale of an aggregate of 1,240,199 shares of our common
stock to a limited number of domestic institutional and other investors in
a
private placement transaction pursuant to an offering exemption under the
Securities Act of 1933. Such shares represent 4.7% of our outstanding common
stock on an after-issued basis. 1,110,999 shares were sold at a price of $7.50
per share, and 129,200 shares were sold to Mr. Jeffrey Parker, our chief
executive officer and chairman, at $7.74 per share. The net proceeds from this
transaction of approximately $9 million will be used for general working capital
purposes. We
will
register the common stock issued in the private offering for re-offer and
re-sale by the investors.
4
General
Development of Business
From
2003
through June of 2005, we manufactured and sold branded wireless networking
products that incorporated our d2d technology. Our product sales were primarily
through retail and internet retail distribution channels. All of our product
revenues through 2005 were generated from these retail products. In
June
2005, we exited our manufacturing and retail sales activities in pursuit of
our
longer-term business strategy of establishing relationships with original
equipment manufacturers (“OEMs”) for the incorporation of our technology into
their products. Our decision to exit the retail activities was precipitated
by
advances in our wireless technology resulting in increased interest from OEM
prospects, specifically in the mobile handset market. We determined that the
investment required to increase brand awareness, introduce new product
offerings, and expand the distribution channel for retail products, would
detract from our ability to capitalize on OEM opportunities.
As
of
December 31, 2005, we had substantially completed our retail exit activities.
Those activities included the sale of our remaining finished product
inventories, including those reclaimed from our retail and distribution channel
partners, and liquidation of our remaining raw materials inventory, our
manufacturing and prototype assets and other property and equipment utilized
in
the retail business.
In
the
second half of 2005, we began educating prospective customers about the benefits
of our technologies, with a focus on our d2p transmit technology. In 2006,
we
completed our first d2p integrated circuit (“IC”) which embodied many of the
advancements of our technology and enabled us to begin demonstrating partially
integrated prototypes. Throughout 2006 and 2007, we continued to further advance
our prototype ICs while cultivating potential customer relationships. Our
sales-related activities in 2006 and 2007 included prototype demonstrations
of
our increasingly integrated d2p platform, support of in-depth technical
due-diligence by prospective customers, analysis of prospective customer product
plans, delivery of initial proposals and terms, and, ultimately, negotiations
of
proposed business relationships.
Our
initial target customer base was limited to top tier mobile handset
manufacturers. However, in 2006 and increasingly in 2007, mobile handset
manufacturers were shifting RF innovation and developments to their chipset
providers. Accordingly, we expanded our target customer base to include not
only
the mobile handset manufacturers, but also their component suppliers. In
addition, we expanded our market awareness campaign to include network providers
who are significant influencers to the OEMs in the mobile handset industry.
Although
our primary target market is the mobile handset industry, we have explored
potential relationships outside this target market to the extent that the
requirements of the prospective customers are in concert with the needs of
our
primary target market. This exploration resulted in our first license agreement,
with ITT Corporation in May 2007.
To
date,
we have generated no royalty revenue from licensing of our wireless RF
technologies. 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 and expand our market
opportunities through additional product offerings with our current customers
and/or the addition of new customers such that we are able to secure a
reasonable share of the market.
We
believe our technology has substantial advantages over competing technologies,
especially in the third generation, or 3G, mobile handset market and generations
that are likely to evolve beyond 3G, such as 4G mobile handset standards and
applications. Current industry studies indicate that over 0.5 billion 3G
handsets are expected to ship in the year 2009, which represents approximately
40 percent of the total mobile handset market.
Technology
and Products
Our
wireless technologies, collectively referred to as Energy Signal Processing
or
ESP™, represent unique, proprietary methods for processing RF waveforms in
wireless applications. The technology applies to the
5
transmit
(baseband data to an RF carrier signal) and receive (RF carrier signal to
baseband data) functions of a radio transceiver. The transmit portion of the
technology is called Direct2Power™, or d2p, and enables the transformation of a
digital baseband signal to an RF carrier waveform, at the desired power output
level, in a single unified operation. The receiver portion of the technology
is
called Direct2Data™, or d2d, and enables the direct conversion of an RF carrier
to baseband data signal. Although our primary sales efforts have been focused
on
commercialization of our d2p technology solutions, our first customer in the
mobile handset industry has licensed both the d2p and d2d solutions.
We
have
completed several engineering prototypes of our d2p-based ICs targeted at mobile
handset applications. These ICs were produced using a Silicon Germanium (“SiGe”)
process through a fabrication relationship with IBM Microelectronics (“IBM”).
These ICs are utilized to verify that our technology can be highly integrated
in
silicon and to demonstrate the benefits of the technology to OEM target
customers. The portion of the IC that embodies the core RF technology has been
highly integrated in prototype ICs. We anticipate that OEM customers will engage
us to customize the implementation of the core technology based on their
specific interface and product requirements. Our current prototypes support
multi-band (meaning multiple frequencies) and multi-mode (meaning multiple
cellular standards and corresponding modulation formats) functionality. Our
ICs
support multiple bands of cellular and PCS frequencies and support the current
and emerging cellular standards including GSM/EDGE, CDMA, W-CDMA, and HSUPA.
We
are also able to demonstrate 802.16e WiMax standards using PCS frequencies
with
our current ICs.
Our
d2d
(receiver) technology was first introduced in the form of transceiver ICs for
the wireless local area networking (“WLAN”) market in 2002. In 2003, we began
marketing ICs to OEMs and original design manufacturers (“ODM”s) who manufacture
and sell WLAN products or application modules that incorporate WLAN
capabilities. In order to mitigate the barriers to entry in the WLAN
marketplace, we also initiated a business strategy of developing our own
d2d-based WLAN products for marketing to end-users.
From
2003
to 2005, we produced WLAN products for retail distribution. In June 2005, we
ceased production and development efforts for our WLAN end-user products and
exited our retail business activities in order to focus exclusively on OEM
opportunities, particularly with regard to our transmit technology
implementation which we believe has broad adoption potential in the mobile
handset market.
Our
unique technologies process the RF waveform in a more optimal manner than
existing technologies, thereby allowing OEMs to create handsets that have
extended battery life, more easily incorporate multiple air interface standards
and frequencies in smaller form factors, and reduce manufacturing costs. Our
technologies provide such attractive benefits, in part, because of the unique
integrated circuit architecture which enables efficient digital circuit
processing, eliminating many of the limitations of legacy analog processing.
Marketing
and Sales
Our
marketing and sales activities are currently focused on developing and
capitalizing on relationships in the mobile handset industry. Although we
believe our direct customers are likely to be the chipset suppliers in this
industry, we continue to cultivate our relationships with the mobile handset
manufacturers who are significant influencers to their chipset suppliers.
Our
sales
and sales support activities include prototype demonstrations of both
semi-integrated and highly integrated circuits that showcase the benefits of
the
technology; support of detailed technology due-diligence discussions and
testing; analysis of potential customer product roadmaps and integration
alternatives; and negotiations of specific terms of potential business
relationships.
We
believe the sales cycle, from the initial customer meeting to the consummation
of a business arrangement, is generally 18-24 months. The length of the sales
cycle is a result of many factors, including the unique nature of our
technology; intense technology evaluation and due-diligence required based
on
the complex nature of radio frequency technology, in general, and the cellular
specifications, in particular; our lack of tenure in the cellular industry;
and
the variety of licensing implementations and integration decisions that
6
must
be
evaluated by the customer in order to assess the specific value proposition
for
their needs. We believe the sales cycle will be significantly shortened as
our
technologies gain adoption in this market.
We
executed our first two customer contracts in 2007. We believe additional
customer design wins will occur and, furthermore, we believe that the rate
of
adoption of our technology will increase as we move toward completion of
products with our existing customers. Future sales may be influenced by the
terms negotiated with our customers and our ability to expand internal resources
to support multiple customers.
Competition
We
operate in a highly competitive industry against companies with substantially
greater financial, technical, and sales and marketing resources. Our
technologies, which are currently being marketed in the mobile handset industry,
face competition from incumbent providers of transceivers and power amplifiers
including companies such as RF Microdevices, Anadigics, Skyworks, ST
Microelectronics, Qualcomm, and Freescale, among others. Each of our
competitors, however, also has the potential of becoming a licensee of our
technologies. We also compete against RF engineering groups within the research
and development organizations of our target customers. To date, we are unaware
of any competing or emerging RF technologies that provide all the simultaneous
benefits that our technology enables.
We
believe we can gain adoption, and therefore compete, based on the performance
and cost advantages enabled by our unique circuit architecture, as supported
by
a solid and defensible intellectual property portfolio. Our intellectual
property offering is capable of being compliant with mobile standards-based
3G
requirements and can accept the same baseband data input as traditional or
future offerings. In addition, we believe the improved power efficiencies
enabled by our technology provide a solution to an existing problem in
applications for 3G standards and beyond that the mobile handset industry is
seeking to solve.
Production
and Supply
Our
current business strategy is focused on licensing our intellectual property.
As
a result, we expect that production capacity risk will shift to our customers.
We currently have a fabrication relationship with IBM for the production of
our
prototype ICs on a SiGe process. We believe IBM has sufficient capacity to
meet
our foreseeable needs. In addition, our ICs can be produced using different
materials and processes, if necessary, to satisfy capacity requirements and/or
customer preferences.
Patents
and Trademarks
We
consider our intellectual property, including patents, patent applications,
trademarks, and trade secrets to be significant to our competitive positioning.
We have a program to file applications for and obtain patents, copyrights,
and
trademarks in the United States and in selected foreign countries where we
believe filing for such protection is appropriate to establish and maintain
our
proprietary rights in our technology and products. As of December 31, 2007,
we
have obtained 59 U.S. and 54 foreign patents related to our RF technologies
and
have 98 patent applications pending in the United States and other countries.
Our patents have been issuing at a rate of approximately four to six new patents
each quarter. Since December 31, 2007, we have been granted four additional
U.S
patents and one additional foreign patent. We estimate the economic lives of
our
patents to be fifteen to twenty years.
Research
and Development
For
the
years ended December 31, 2007, 2006 and 2005, we spent approximately $10.7
million, $9.5 million, and $10.3 million, respectively, on company-sponsored
research and development activities. Our research and development efforts have
been devoted to the development and advancement of RF technologies, including
the development of prototype ICs for proof of concept purposes.
7
Employees
As
of
December 31, 2007, we had 53 full-time employees, of which 32 are employed
in
engineering research and development, 9 in sales and marketing, and 12 in
executive management, finance and administration. Our employees are not
represented by a labor union. We consider our employee relations
satisfactory.
Available
Information and Access to Reports
We
file
our annual report on Form 10-K and quarterly reports on Forms 10-Q, including
amendments, as well as our proxy and other reports electronically with the
Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site
(http://www.sec.gov) where these reports may be obtained at no charge.
Copies of any materials filed with the SEC may also be obtained from the SEC’s
Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information
on
the operation of the SEC Public Reference Room may be obtained by calling the
SEC at 1-800-SEC-0330. Copies of these reports may also be obtained via the
Company’s website (http://www.parkervision.com) via the link “SEC filings”. This
provides a direct link to our reports on the SEC Internet site. We will provide
copies of this annual report on Form 10-K and the quarterly reports on Forms
10-Q, including amendments, filed during the current fiscal year upon written
request to Investor Relations, 7915 Baymeadows Way, Suite 400, Jacksonville,
Florida, 32256. These reports will be provided at no charge. In addition,
exhibits may be obtained at a cost of $.25 per page plus $5.00 postage and
handling.
Item
1A. Risk Factors
In
addition to other information in this Annual Report on Form 10-K, the following
risk factors 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. As a result of the risk factors set forth
below, actual results could differ materially from those projected in any
forward-looking statements.
We
have had a history of losses which may ultimately compromise our ability to
implement our
business
plan and continue in operation.
We
have
had losses in each year since our inception in 1989, and continue to have an
accumulated deficit which, at December 31, 2007, was $167.6 million. The net
loss for 2007 was $18.2 million. To date, our technologies and products have
not
produced revenues sufficient to cover operating, research and development and
overhead costs. We also will continue to make expenditures on marketing,
research and development, pursuit of patent protection for our intellectual
property and operational costs for fulfillment of any contracts that we achieve
for the sale of our products or technologies. We expect that our revenues in
the
near term will not bring the company to profitability. If we are not able to
generate sufficient revenues or we have insufficient capital resources, we
will
not be able to implement our business plan and investors will suffer a loss
in
their investment. This may result in a change in our business
strategies.
We
expect to need additional capital in the future, which if we are unable to
raise
will result in our not being able to implement our business plan as currently
formulated.
Because
we have had net losses and, to date, have not generated positive cash flow
from
operations, we have funded our operating losses from the sale of equity
securities from time to time and the sale of our video division in 2004. We
anticipate that our business plan will continue to require significant
expenditures for research and development, patent protection, sales and
marketing and general operations. Our current capital resources, including
cash
and cash equivalents at December 31, 2007 of $13.4 million and the net proceeds
of our March 5, 2008 private placement transaction of approximately $9 million,
are expected to sustain operations through the first quarter of 2009, if not
longer. Thereafter, unless we increase revenues to a level that they cover
operating expenses or we reduce costs, we will require additional capital to
fund these expenses. Financing, if any, may be in the form of loans or
additional sales of equity securities. A loan or the sale of preferred stock
may
result in the imposition of operational limitations and other covenants and
payment obligations, any of which may be burdensome to us. The sale of equity
securities will result in dilution to the current stockholders’ ownership. The
long-term continuation of our business plan is dependent upon the generation
of
sufficient revenues from the sale of our products, additional funding or
reducing
8
expenses
or a combination of the foregoing. The failure to generate sufficient revenues,
raise capital or reduce expenses could have a material adverse effect on our
ability to achieve our long-term business objectives.
Our
industry is subject to rapid technological changes which if we are unable to
match or surpass, will result in a loss of competitive advantage and market
opportunity.
Because
of the rapid technological development that regularly occurs in the
microelectronics industry, we must continually devote substantial resources
to
developing and improving our technology and introducing new product offerings.
For example, in fiscal years 2007 and 2006, we spent approximately $10.7 million
and $9.5 million, respectively, on research and development, and we expect
to
continue to spend a significant amount in this area in the future. These efforts
and expenditures are necessary to establish and increase market share and,
ultimately, to grow revenues. If another company offers better products or
our
product development lags, a competitive position or market window opportunity
may be lost, and therefore our revenues or revenue potential may be adversely
affected.
If
our products are not commercially accepted, our developmental investment will
be
lost and our future business continuation will be
impaired.
There
can
be no assurance that our research and development will produce commercially
viable technologies and products. If existing or new technologies and products
are not commercially accepted, the funds expended will not be recoverable,
and
our competitive and financial position will be adversely affected. In addition,
perception of our business prospects will be impaired with an adverse impact
on
our ability to do business and to attract capital and employees.
If
our patents and intellectual property do not provide us with the anticipated
market protections and competitive position, our business and prospects will
be
impaired.
We
rely
on our intellectual property, including patents and patent applications, to
provide competitive advantage and protect us from theft of our intellectual
property. We believe that many of our patents are for entirely new technologies.
If the patents are not issued or issued patents are later shown not to be as
broad as currently believed, or are otherwise challenged such that some or
all
of the protection is lost, we will suffer adverse effects from the loss of
competitive advantage and our ability to offer unique products and technologies.
In addition, there would be an adverse impact on our financial condition and
business prospects.
If
we cannot demonstrate that our technologies and products can compete in the
marketplace and are better than current competitive solutions, then we will
not
be able to generate the sales we need to continue our business and our prospects
will be impaired.
We
expect
to face competition from chip suppliers such as RF MicroDevices, Anadigics,
Skyworks, ST Microelectronics, Qualcomm, and Freescale, among others. Our
technology may also face competition from other emerging approaches or new
technological advances which are under development and have not yet emerged.
If
our technologies and products are not established in the market place as
improvements over current, traditional chip solutions in wireless
communications, our business prospects and financial condition will be adversely
affected.
We
rely, in large part, on key business and sales relationships for the successful
commercialization of our products, which if not developed or maintained, will
have an adverse impact on achieving market awareness and acceptance and will
result in a loss of business opportunity.
To
achieve a wide market awareness and acceptance of our products, as part of
our
business strategy, we will attempt to enter into a variety of business
relationships with other companies which will incorporate our intellectual
property into their products and/or market products based on our technologies.
The successful commercialization of our products will depend in part on our
ability to meet obligations under contracts with respect to the products and
related development requirements. The failure of the business relationships
will limit the commercialization of our products which will have an adverse
impact on our business development and our ability to generate revenues and
recover development expenses.
9
We
rely, in large part, on the ability of key customers to successfully develop
and
sell products incorporating our technologies, the failure of which will have
an
adverse impact on our business opportunities.
The
successful commercialization of our products will depend, in part, on the
success and timing of our customer’s product development and sales activities
which may be impacted by factors outside of our control. Delays in or failure
of
our customers’ product development or sales activities will hinder the
commercialization of our products which will have an adverse impact on our
ability to generate revenues and recover development expenses.
We
are highly dependent on Mr. Jeffrey Parker as our chief executive officer
whose
services, if lost, would have an adverse impact on our leadership, industry
perception, and investor perception about our
future.
Because
of Mr. Parker’s position in the company and the respect he has garnered in both
the industry in which we operate and the investment community, the loss of
the
services of Mr. Parker might be seen as an impediment to the execution of our
business plan. If Mr. Parker were no longer available to the company, investors
may experience an adverse impact on their investment. We do not currently have
an employment agreement with Mr. Parker. We maintain key-employee life insurance
for our benefit on Mr. Parker.
If
we are unable to attract or retain highly skilled employees we will not be
able
to execute our research and development plans or provide the highly technical
services that our products require.
Our
business is very specialized, and therefore it is dependent on having skilled
and specialized employees to conduct our research, development and customer
support activities. The inability to obtain or retain these specialized
employees will have an adverse impact on our business development because
customers will not obtain the information or services expected which may prevent
us from successfully implementing our current business plans.
The
outstanding options and warrants may affect the market price and liquidity
of
the common stock.
At
December 31, 2007, we had 25,182,892 shares of common stock outstanding and
had
5,789,926 exercisable options and warrants for the purchase of shares of common
stock, assuming no terminations or forfeitures of such options and warrants.
On
December 31, 2008 and 2009, respectively, there will be 5,593,646 and 5,631,169
currently exercisable options and warrants (assuming no new grants, exercises,
terminations or forfeitures). All of the underlying common stock of these
securities is registered for sale to the holder or for public resale by the
holder. The amount of common stock available for the sales may have an adverse
impact on our ability to raise capital and may affect the price and liquidity
of
the common stock in the public market. In addition, the issuance of these shares
of common stock will have a dilutive effect on current stockholders’
ownership.
Provisions
in the certificate of incorporation and by-laws could have effects that conflict
with the interest of stockholders.
Some
provisions in our certificate of incorporation and by-laws could make it more
difficult for a third party to acquire control. For example, the board of
directors has the ability to issue preferred stock without stockholder approval,
and there are pre-notification provisions for director nominations and
submissions of proposals from stockholders to a vote by all the stockholders
under the by-laws. Florida law also has anti-takeover provisions in its
corporate statute.
We
have a shareholder protection rights plan that may delay or discourage someone
from making an offer to purchase the company without prior consultation with
the
board of directors and management which may conflict with the interests of
some
of the stockholders.
On
November 17, 2005, the board of directors adopted a shareholder protection
rights plan which called for the issuance, on November 29, 2005, as a dividend,
rights to acquire fractional shares of preferred stock. The rights are attached
to the shares of common stock and transfer with them. In the future the rights
may become exchangeable for shares of preferred stock with various provisions
that may discourage a takeover bid. Additionally, the rights have what are
known
as “flip-in” and “flip-over” provisions that could make any acquisition of the
company more costly. The principal objective of the plan is to cause someone
interested in acquiring the company to negotiate with the board of directors
rather than launch an unsolicited bid. This
10
plan
may
limit, prevent, or discourage a takeover offer that some stockholders may find
more advantageous than a negotiated transaction. A negotiated transaction may
not be in the best interests of the stockholders.
Item
1B. Unresolved Staff Comments.
None.
Item
2. Properties
Our
headquarters are located in a 14,000 square foot leased facility in
Jacksonville, Florida. We have an additional leased facility in Lake Mary,
Florida primarily for engineering design activities. We believe our properties
are in good condition and suitable for the conduct of our business.
Refer
to
“Lease Commitments” in Note 11 to the Consolidated Financial Statements included
in Item 8 for information regarding our outstanding lease obligations.
Item
3. Legal Proceedings
We
are
subject to legal proceedings and claims arising in the ordinary course of
business. Based upon the advice of outside legal counsel, we believe that the
final disposition of such matters will not have a material adverse effect on
our
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, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Market
Information
Our
common stock is traded under the symbol PRKR on
the
Nasdaq Global 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.
|
2007
|
2006
|
2005
|
|||||||||||||||||
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
||||||||||||||
|
1st
Quarter
|
$
|
13.98
|
$
|
9.28
|
$
|
10.91
|
$
|
7.61
|
$
|
13.27
|
$
|
6.61
|
|||||||
|
2nd
Quarter
|
13.75
|
10.15
|
12.00
|
9.02
|
8.50
|
3.70
|
|||||||||||||
|
3rd
Quarter
|
16.00
|
10.94
|
9.63
|
5.30
|
10.24
|
4.72
|
|||||||||||||
|
4th
Quarter
|
17.20
|
7.00
|
11.98
|
6.53
|
9.50
|
4.85
|
|||||||||||||
Holders
As
of
February 25, 2008, there were 164 holders of record. We believe there are
approximately 3,500 beneficial holders of our common stock.
11
Dividends
To
date,
we have not paid any dividends on our common stock. The payment of dividends
in
the future is at the discretion of the board of directors and will depend upon
our ability to generate earnings, our capital requirements and financial
condition, and other relevant factors. We do not intend to declare any dividends
in the foreseeable future, but instead intend to retain all earnings, if any,
for use in the business.
Sales
of Unregistered Securities
On
November 15, 2007, we granted 63,750 options to purchase common stock to
officers and other employees that vest over three years and 2,281 options to
an
employee that were immediately vested. The options have an exercise price of
$10.36 per share, expire seven years from the grant date and are exempt from
registration under section 4(2). We will not receive any consideration for
the
options until the recipient exercises the option.
Issuer
Repurchase of Equity Securities
None.
Performance
Graph
The
following graph shows a five-year comparison of cumulative total shareholder
returns for our company, the Nasdaq U.S. Stock Market Index, the Nasdaq
Electronic Components Index and Nasdaq Telecommunications Index for the five
years ending December 31, 2007. The total shareholder returns assumes the
investment on December 31, 2002 of $100 in our common stock, the Nasdaq U.S.
Stock Market Index, the Nasdaq Electronic Components Index, and Nasdaq
Telecommunications Index at the beginning of the period, with immediate
reinvestment of all dividends.
12
Item
6. Selected Financial Data
The
following table sets forth our consolidated financial data as of the dates
and
for the periods indicated. The data has been derived from our audited
consolidated financial statements. The selected financial data should be read
in
conjunction with our consolidated financial statements and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”. The
selected financial data for the statements of operations for December 31, 2004
and December 31, 2003 has been restated to reflect the effects of discontinued
operations.
|
For
the years ended December 31,
|
||||||||||||||||
|
(in
thousands, except per share amounts)
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||
|
Consolidated
Statement of Operations Data:
|
||||||||||||||||
|
Revenues,
net
|
$
|
284
|
$
|
0
|
$
|
996
|
$
|
441
|
$
|
23
|
||||||
|
Gross
margin
|
32
|
0
|
(2,041
|
)
|
(2,854
|
)
|
(7
|
)
|
||||||||
|
Operating
expenses
|
19,122
|
16,866
|
21,362
|
19,951
|
19,104
|
|||||||||||
|
Interest
and other income
|
876
|
1,051
|
304
|
217
|
476
|
|||||||||||
|
Loss
from continuing operations
|
(18,213
|
)
|
(15,816
|
)
|
(23,099
|
)
|
(22,588
|
)
|
(18,635
|
)
|
||||||
|
Gain
(loss) from discontinued operations
|
0
|
0
|
0
|
7,773
|
(3,380
|
)
|
||||||||||
|
Net
loss
|
(18,213
|
)
|
(15,816
|
)
|
(23,099
|
)
|
(14,815
|
)
|
(22,015
|
)
|
||||||
|
Basic
and diluted net loss per common share
|
||||||||||||||||
|
Continuing
operations
|
(0.74
|
)
|
(0.68
|
)
|
(1.14
|
)
|
(1.25
|
)
|
(1.21
|
)
|
||||||
|
Discontinued
operations
|
n/a
|
n/a
|
n/a
|
0.43
|
(0.22
|
)
|
||||||||||
|
Total
basic and diluted net loss per common share
|
(0.74
|
)
|
(0.68
|
)
|
(1.14
|
)
|
(0.82
|
)
|
(1.43
|
)
|
||||||
|
Consolidated
Balance Sheet Data:
|
||||||||||||||||
|
Total
assets
|
$
|
26,577
|
$
|
26,675
|
$
|
23,832
|
$
|
28,081
|
$
|
42,483
|
||||||
|
Shareholders’
equity
|
24,414
|
25,183
|
22,400
|
24,758
|
39,399
|
|||||||||||
|
Working
capital
|
12,611
|
13,313
|
10,833
|
10,471
|
23,225
|
|||||||||||
Item
7. Management's Discussion and Analysis of Financial Condition and Results
of
Operations
Executive
Overview
We
are in
the business of designing, developing and licensing our proprietary d2p and
d2d
wireless radio frequency (“RF”) technologies for use in semiconductor circuits
for wireless radio applications. Our primary business strategy is to license
our
technologies to chip suppliers and/or mobile handset manufacturers for the
incorporation of our technologies into mobile handsets. In addition, we have,
from time to time, explored licensing and other opportunities outside the
cellular industry to the extent that the applications are synergistic with
our
current development efforts.
In
2007,
we entered into the first agreements for the incorporation of our technologies
into RF products. In May 2007, we executed an Engineering Services Agreement
and
a Licensing Agreement with ITT for the design and use of our d2p technology
in
applications worldwide. Under the agreements, we will be paid royalties on
a per
unit basis for products sold by ITT that incorporate our d2p technology. We
are
also providing engineering consulting and design services to ITT on a time
and
materials basis, as requested, for the development of products using our
technology.
In
December 2007, we entered into a Licensing and Engineering Services Agreement
with a mobile handset chip supplier for the design and use of our d2p and d2d
technologies in chipsets initially targeted for the 3G mobile handset market
worldwide. Under the terms of the agreement, we will be paid royalties on a
per
unit
13
basis
for
chipsets sold which incorporate one or both of our RF technologies.
To
date,
we have generated no royalty revenue from licensing of our wireless RF
technologies and only limited revenue from engineering design services. 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 and expand our market
opportunities through additional product offerings with our current customers
and/or the addition of new customers. Although design cycles will vary from
customer to customer, we believe the timeframe from consummation of the business
arrangement to recognition of royalty revenue from product shipments will range
from 12-24 months.
We
believe our technology has substantial advantages over competing technologies,
especially in the third generation, or 3G, mobile handset market and generations
that are likely to evolve beyond 3G, such as 4G mobile handset standards and
applications. We have made significant investments in developing our
technologies and products, the returns on which are dependent upon the
generation of future revenues for realization. Since we have not yet generated
revenues sufficient to offset our operating expenses, we have used the proceeds
largely from the sale of equity securities to fund our operations.
We
intend
to continue to use our working capital to support future marketing, sales,
research and development and general operations. No assurance can be given
that
such expenditures will result in revenues, new products, or technological
advances or that we have adequate capital to complete our products or gain
market acceptance before requiring additional capital.
Exit
from Retail Business Activities
In
June
2005, we exited our manufacturing and retail sales activities in pursuit of
our
longer-term business strategy of establishing relationships with original
equipment manufacturers (“OEMs”) for the incorporation of our technology into
their products. Our decision to exit the retail activities was precipitated
by
advances in our wireless technology resulting in increased interest from OEM
prospects, specifically in the mobile handset market. We determined that the
investment required to increase brand awareness, introduce new product
offerings, and expand the distribution channel for retail products, would
detract from our ability to capitalize on OEM opportunities.
Exiting
the retail business resulted in charges to our 2005 operating results of
approximately $4.7 million. As of December 31, 2005, we had substantially
completed our retail exit activities. Those activities included the sale of
our
remaining finished product inventories, including those reclaimed from our
retail and distribution channel partners, and liquidation of our remaining
raw
materials inventory, our manufacturing and prototype assets and other property
and equipment utilized in the retail business.
Critical
Accounting Policies
We
believe that the following are the critical accounting policies affecting the
preparation of our consolidated financial statements:
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 volatility, risk-free interest rate, forfeiture rate and estimated lives
of
share-based awards used in the estimate of the fair market value of share-based
compensation, the assessment of recoverability of long-lived assets and
amortization period for intangible and long-lived assets, and the valuation
allowance for deferred taxes. 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.
14
Intangible
Assets
Patents,
copyrights and other intangible assets are amortized using the straight-line
method over their estimated period of benefit, ranging from three to twenty
years. Management evaluates the recoverability of intangible assets periodically
and takes into account events or circumstances that warrant revised estimates
of
useful lives or that indicate impairment exists.
Accounting
for Stock Based Compensation
Effective
January 1, 2006, we adopted the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” (“FAS 123R”)
which establishes accounting for equity instruments exchanged for employee
services. Under the provisions of FAS 123R, share-based compensation cost is
measured at the grant date, based on the calculated fair value of the award,
and
is recognized as an expense on a straight-line basis over the employee’s
requisite service period (generally the vesting period of the equity grant).
In
March 2005, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 107 (“SAB 107”) relating to FAS 123R. We have applied the
provisions of SAB 107 in our adoption of FAS 123R.
Prior
to
January 1, 2006, we accounted for share-based compensation to employees in
accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting
for Stock Issued to Employees,” and related interpretations. We also followed
the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based
Compensation”, as amended by SFAS 148, “Accounting for Stock-Based Compensation
- Transition and Disclosure”. We elected to adopt the modified prospective
transition method as provided by FAS 123R and, accordingly, financial statement
amounts for the prior periods have not been retroactively adjusted to reflect
the fair value method of expensing share-based compensation. Under the modified
prospective method, share-based expense recognized after adoption includes:
(a) share-based expense for all awards granted prior to, but not yet vested
as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123, as amended by SFAS
148 and (b) share-based expense for all awards granted or modified
subsequent to January 1, 2006, based on the grant-date fair value estimated
in accordance with the provisions of FAS 123R. Further, as required under
FAS123R, we estimate forfeitures for options granted which are not expected
to
vest. Changes in these inputs and assumptions can materially affect the measure
of estimated fair value of our stock-based compensation expense.
In
November 2005, the FASB issued FASB Staff Position (“FSP”) FAS
No. 123R-3, Transition Election Related to Accounting for the Tax Effects
of Share-Based Payment Awards, (“FSP FAS 123R-3”). FSP FAS 123R-3 provides a
practical exception when a company transitions to the accounting requirements
in
FAS123R. FAS123R requires a company to calculate the pool of excess tax benefits
available to absorb tax deficiencies recognized subsequent to adopting FAS123R
(termed the “APIC Pool”), assuming the company had been following the
recognition provisions prescribed by SFAS No. 123. We have elected to use the
shortcut method under FSP FAS 123R-3 to calculate our APIC Pool.
Revenue
Recognition
We
account for service revenue under the provisions of Staff Accounting Bulletin
No. 104 (“SAB 104”), “Revenue Recognition in Financial Statements” and AICPA
Statement of Position No. 81-1 (“SOP 81-1”), “Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.” Under the provisions
of SAB 104 and SOP 81-1, we recognize revenue when there is persuasive evidence
of an arrangement, services have been rendered, the fee is fixed or
determinable, and collection of the resulting receivable is reasonably assured.
We use the percentage-of-completion method of accounting for cost
reimbursement-type contracts which specify a certain billable fee amount.
Revenues are recognized as costs are incurred assuming that collection is
reasonably assured. Our cost of sales includes the direct labor costs of
engineering staff providing services under these contracts, as well as indirect
costs including depreciation and amortization and allocated facilities
costs.
Revenue
from product sales is generally recognized at the time the product is shipped,
provided that
15
persuasive
evidence of an arrangement exists, title and risk of loss has transferred to
the
customer, the sales price is fixed or determinable and collection of the
receivable is reasonably assured. We did not recognize any product revenue
in
2007 or 2006. Our 2005 product revenue relates primarily to products sold
through retail distribution channels, with limited sales direct to end users
through our own website and direct value added resellers.
Income
Taxes
The
provision for income taxes is based on loss before taxes as reported in the
accompanying consolidated statements of operations. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
tax
assets and liabilities are determined based on differences between the financial
statement carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are established to reduce deferred tax assets
when, based on available objective evidence, it is more likely than not that
the
benefit of such assets will not be realized.
In
addition, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes - an Interpretation of FASB Statement No. 109”, (“FIN 48”) on
January 1, 2007, as more fully discussed in Note 7 to the consolidated financial
statements.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 157, “Fair Value Measurements” (“SFAS 157”).
This statement defines fair value as used in numerous accounting pronouncements,
establishes a framework for measuring fair value in generally accepted
accounting principles (“GAAP”) and expands disclosure related to the use of fair
value measures in financial statements. SFAS 157 does not expand the use of
fair
value measures in financial statements, but standardizes its definition and
guidance in GAAP. SFAS 157 is effective for fiscal years beginning after
November 15, 2008 for nonfinancial assets and liabilities. We will
adopt the provisions of SFAS 157 on January 1, 2009.
We have
evaluated SFAS 157 and do not anticipate that it will have an impact on our
financial statements when adopted.
In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 159, “Fair Value Option for Financial Assets
and Financial Liabilities” (“SFAS 159”). This statement permits entities to
elect to measure many financial instruments and certain other items at fair
value and also amends SFAS 115, “Accounting for Certain Investments in Debt and
Equity Securities”. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. We will adopt the provisions of SFAS 159 on January 1, 2008.
We have evaluated SFAS 159 and do not anticipate that it will have an impact
on
our financial statements when adopted.
Results
of Operations for Each of the Years Ended December 31, 2007, 2006 and 2005
Revenues
Revenue
for the year ended December 31, 2007 of approximately $284,000 represented
revenue from services provided to ITT under the engineering services agreement
entered into in May 2007. These services included analysis and evaluation
of
architectural design alternatives for incorporation of our d2p technology
into
RF circuits based on various product specifications provided by
ITT.
ITT
is
utilizing that information to establish their product development plans for
incorporation of the d2p technology. We anticipate that ITT will select a
product development program that utilizes their internal resources, as needed,
to design circuits based on our existing commercial prototype designs. As
such,
we currently do not anticipate any significant engineering services revenue
from
ITT during their initial product design cycle. We believe utilization of
our
commercial prototype designs will enable a faster product launch for ITT
than
would be expected if they had selected a program that involved a fully
customized d2p design. We also continue to be engaged with ITT in reviewing
various longer term product applications for our technology.
Based
on
the established royalty rates and other contract terms, as well as our
understanding of ITT’s product plans, we currently estimate that we will achieve
cumulative royalties under our agreement with ITT of approximately $25 million.
16
We
also
anticipate that royalties from our mobile handset chip customer will range
from
approximately $5 million to $10 million in the first full year of shipments
depending upon the customer’s product mix and unit volume as well as the timing
of incorporation of the d2d receiver technology into products. We also believe
the opportunity exists to significantly expand our royalty revenue from this
customer based on the expected growth of the market in which their products
are
targeted, additional product applications for our technology which are
contemplated in the agreement and our customer’s ability to capture greater
share of market for their products. We believe the initial ICs incorporating
our
technology will be completed in late 2008. We
will
collect royalties upon the sale of chipsets by our customer to the mobile
handset providers who will then incorporate the chipset into mobile
products.
We
believe we will achieve additional design wins in the mobile handset market
which will expand our future revenue opportunities both for royalties and
engineering services.
We
had no
revenues for the year ended December 31, 2006 and our 2005 product revenue
of
approximately $996,000 represented revenue from sales of wireless consumer
products through retail channels. Revenue for the period ended December 31,
2005
was net of an allowance (recovery) for sales returns of approximately $(80,000).
Gross revenue was also reduced for price protection programs, customer rebates
and cooperative marketing costs deemed to be sales incentives under Emerging
Issues Task Force, (EITF) Issue 01-09, to derive net revenue. Revenue for the
year ended December 31, 2005 included cooperative marketing costs of
approximately $30,000.
Gross
Margin
The
gross
margins for products and services for the years ended December 31, 2007 and
2005
were as follows:
|
2007
|
|
2005
|
|||||
|
Engineering
services
|
$
|
32,361
|
$
|
0
|
|||
|
Products
|
0
|
(2,040,823
|
)
|
||||
|
Total
|
$
|
32,361
|
$
|
(2,040,823
|
)
|
||
Our
gross
margin in 2007 is approximately 11% of service revenue and represents margin
on
services provided to ITT. Cost of sales for engineering services includes the
direct labor costs of engineering staff, as well as depreciation, amortization
and allocated facilities costs. Indirect costs are generally allocated to cost
of sales based on a percentage of the labor hours incurred for customer design
support. Allocated indirect costs represent approximately 38-40% of the total
cost of sales. We expect that future margin on engineering services will vary
based on the experience level of the engineers providing services, the operating
costs of the research and development organization as a whole, and the number
of
service agreements over which the indirect costs are allocated.
Our
product margin in 2005 reflects a write down of inventory to net realizable
value of approximately $2.3 million. This write down was a result of our exit
from retail activities in the second quarter of 2005, resulting in a mark down
of remaining product inventory to estimated wholesale values.
Research
and Development Expenses
Our
research and development expenses increased by approximately $1.2 million,
or
12%, from 2006 to 2007, and decreased by approximately $0.8 million, or 7%
from
2005 to 2006.
The
increase in research and development expenses from 2006 to 2007 was primarily
due to increases in personnel costs, design consulting fees, equipment rental,
and prototype chip production costs, offset
17
somewhat
by decreases in depreciation expense. Personnel and related costs increased
approximately $640,000 due to the addition of personnel, compensation increases
for existing engineering staff and increases in performance bonuses earned
in
2007 over 2006. Outside engineering design consulting increased approximately
$550,000 from 2006 to 2007 due to increased use of outside design services
to
supplement in-house engineering resources, offset by the expiration of a
stock-based consulting agreement which reduced stock-based compensation expense.
Equipment rental expense increased approximately $90,000 from 2006 to 2007
due
to increased rental of test and development equipment under operating leases
allowing a reduction in capital expenditures for required equipment. Prototype
chip production costs increased approximately $70,000 from 2006 to 2007. We
maintain a fairly regular cycle of prototype chip runs; however, the fabrication
costs vary based on the materials specified and the number of variants requested
on each run. These increases were somewhat offset by a decrease in depreciation
expense of approximately $80,000 from 2006 to 2007 as certain engineering assets
became fully depreciated.
The
decrease in research and development expenses from 2005 to 2006 was a result
of
cost reductions following the 2005 retail exit including a reduction in retail
product development personnel and related costs of approximately $1.8 million
and a reduction in depreciation and amortization of retail related assets of
approximately $0.9 million. These decreases were offset by increases in expenses
for the use of outside design firms of approximately $1.0 million, increases
in
employee stock compensation expense due the adoption of “FAS123R” of
approximately $0.7 million, and increases in prototype costs of approximately
$220,000 stemming from increases in the number of prototype chip production
runs.
The
markets for our products and technologies are characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
Our ability to successfully develop and introduce, on a timely basis, new and
enhanced products and technologies will be a significant factor in our ability
to grow and remain competitive. Although the percentage of revenues invested
in
our research and development programs may vary from period to period, we are
committed to continue investing in our technology development. We anticipate
that we will use a substantial portion of our working capital for research
and
development activities in 2008.
Marketing
and Selling Expenses
Marketing
and selling expenses increased by approximately $0.6 million or 27%, from 2006
to 2007 and decreased by approximately $1.0 million, or 33%, from 2005 to 2006.
The
increase in marketing and selling expenses from 2006 to 2007 was primarily
due
to increases in personnel costs, outside consulting and other professional
fees
and employee stock-based compensation expense. Personnel costs increased
approximately $230,000 due to increases in personnel late in 2006, compensation
increases for existing employees and increases in performance bonuses earned
from 2006 to 2007. Outside consulting and other professional fees increased
approximately $280,000 from 2006 to 2007 due to the use of consultants for
expansion of network carrier and other potential customer relationships and
legal fees incurred in relation to initial licensing agreements. Employee
related stock-based compensation expense increased approximately $60,000 due
to
additional stock based awards for sales and marketing employees.
The
decrease in marketing and selling expenses from 2005 to 2006 was primarily
due
to cost reductions in personnel and related costs of approximately $670,000
and
reduced retail promotional costs of approximately $540,000 following the 2005
exit from retail business activities. These cost reductions were partially
offset by an increase in employee stock compensation expense of approximately
$320,000 following the adoption of “FAS123R.”
We
are
committed to continuing our investment in marketing and selling efforts in
order
to continue to increase market awareness and penetration of our products and
technologies, although we do not anticipate any significant increases in overall
sales and marketing expenses in 2008.
18
General
and Administrative Expenses
General
and administrative expenses consist primarily of executive, finance and
administrative personnel costs and costs incurred for insurance, shareholder
relations and outside professional services. Our general and administrative
expenses increased by approximately $0.5 million, or 9%, from 2006 to 2007
and
decreased by approximately $0.8 million or 13% from 2005 to 2006.
The
increase in general and administrative expenses from 2006 to 2007 is due to
increases in personnel costs and employee stock-based compensation, offset
partially by decreases in insurance costs. Personnel costs increased
approximately $340,000 from 2006 to 2007 primarily due to an increase of
approximately $290,000 in performance bonuses earned in 2007 over 2006. These
bonuses were largely paid through the issuance of stock awards to our chief
executive officer and chief financial officer in early 2008. Employee
stock-based compensation expense increased approximately $250,000 from 2006
to
2007 due largely to the fair value expense related to long term incentive awards
for our executive officers in 2006 and 2007. The cost of our directors’ and
officers’ liability insurance decreased by approximately $110,000 from 2006 to
2007 due to general market conditions. In addition, consulting and other
professional fees, including stock-based consulting fees, decreased
approximately $50,000 from 2006 to 2007. This decrease is primarily the result
of increases in accounting and consulting fees related to our financial
accounting system conversion in 2007 offset by a decrease in stock-based
consulting fees primarily from a consulting agreement that expired in 2006.
The
reduction in general and administrative costs from 2005 to 2006 is due to a
reduction in personnel costs of approximately $470,000 stemming from staff
reductions as well as the movement of certain senior management personnel to
different areas of supervision. We had a reduction in bad debt expense of
approximately $140,000 following the exit from retail, a reduction in
share-based consulting fees of approximately $680,000, and a reduction in
professional fees of approximately $310,000 from both legal and accounting
fees.
These reductions were partially offset by increases in employee and director
stock compensation expense of approximately $860,000 following the adoption
of
“FAS123R.”
Impairment
Loss and Loss (Gain) on Disposal of Equipment
For
the
years ended December 31, 2007 and 2006, we recognized an insignificant loss
and
gain, respectively, on the loss and/or disposal of assets.
For
2005,
we recognized impairment charges on certain long-lived assets related to the
exit of our retail activities. These charges include impairment of prepaid
license fees of approximately $660,000, impairment of other intangible assets
of
approximately $580,000 and impairment of fixed assets, primarily the
manufacturing and prototype facility assets, of approximately $630,000.
Interest
Income and Other
Interest
income and other consist of interest earned on our investments, net gains
recognized on the sale of investments, and other miscellaneous income and
expense. Interest income and other decreased approximately $0.2 million from
2006 to 2007 and increased approximately $0.7 million from 2005 to 2006. The
decrease in interest income and other from 2006 to 2007 is primarily due to
a
reduction in miscellaneous income of approximately $110,000. The increase in
interest and other income from 2005 to 2006 is primarily due to higher interest
rates and higher average cash balances in 2006.
Loss
and Loss per Common Share
Our
net
loss increased by approximately $2.4 million or $0.06 per common share from
2006
to 2007, and decreased by approximately $7.3 million or $0.46 per common share
from 2005 to 2006. The increase in net loss from 2006 to 2007 is primarily
due
to a $2.3 million or 13% increase in operating expenses. The decrease in net
loss from 2005 to 2006 is primarily due to a $4.5 million decrease in operating
expenses from 2005 to 2006 as a result of our exit from retail business
activities in 2005, as well as the $2.3 million
19
inventory
impairment charge incurred in 2005.
Liquidity
and Capital Resources
At
December 31, 2007, we had working capital of approximately $12.6 million
including approximately $13.4 million in cash and cash equivalents. For the
year
ended December 31, 2007, our cash and cash equivalents increased by $0.2
million. This increase is a result of approximately $8.4 million in proceeds
from a February 2007 sale of equity securities and approximately $6.7 million
received from the exercise of approximately 800,000 options and warrants in
2007, offset by the use of approximately $13.5 million in cash for operating
activities and approximately $1.4 million for the purchase of property and
equipment and for payment of patent costs in 2007.
For
the
year ended December 31, 2006, our cash and cash equivalents increased
approximately $3.0 million as a result of $16.2 million in proceeds from the
sale of equity securities, $0.2 million received from the exercise of options
and warrants, and $0.3 million in proceeds from the maturity of investments,
offset by $11.4 million of cash used for operations and an additional $2.4
million used for the purchase of property and equipment and for payment of
patent costs.
For
the
year ended December 31, 2005, our cash and cash equivalents increased
approximately $3.8 million as a result of $20.1 million in proceeds from the
sale of equity securities, $0.4 million received from the exercise of options
and warrants, and $1.0 million in proceeds from the maturity of investments,
offset by $15.7 million of cash used for operations and an additional $2.0
million used for the purchase of property and equipment and for payment of
patent costs.
At
December 31, 2007, we were not subject to any significant commitments to make
additional capital expenditures.
Our
future business plans call for continued investment in sales, marketing,
customer support and product development for our technologies and products.
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 and our ability to expand our
market opportunities through additional product offerings with our current
customers and/or the addition of new customers such that we are able to secure
a
reasonable share of the market. We do not expect that revenue for 2008 will
be
sufficient to cover our operational expenses for 2008. The expected continued
losses and use of cash will continue to be funded from available working
capital.
On
March
5, 2008, we completed the sale of 1,240,199 shares of common stock in a private
placement transaction for net proceeds of approximately $9.0 million. We plan
to
use these proceeds, together with the $13.4 million in cash and cash equivalents
at December 31, 2007, to fund our future business plans. We believe that our
current capital resources together with the proceeds of the March 2008 equity
financing will be sufficient to support our liquidity requirements at least
through the first quarter of 2009. The long-term continuation of our business
plans is dependent upon generation of sufficient revenues from our technologies
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 reduce certain discretionary spending. Management believes
certain operating costs could be reduced if working capital decreases
significantly and additional funding is not available. In addition, we currently
have no outstanding long-term debt obligations. Failure to generate sufficient
revenues, raise additional capital and/or reduce certain discretionary spending
could have a material adverse effect on our ability to achieve our intended
long-term business objectives.
Off-Balance
Sheet Transactions, Arrangements and Other Relationships; Contractual
Obligations
As
of
December 31, 2007, we have outstanding warrants to purchase 1,814,528 shares
of
common stock that were issued in connection with the sale of equity securities
in various private placement transactions in 2000, 2001, 2005 and 2006. These
warrants have exercise prices ranging from $8.50 to $56.66 per share with a
weighted average exercise price of $31.27 and a weighted average remaining
contractual life of 3.4 years.
20
The
estimated fair value of these warrants at their date of issuance of $17,492,097
is included in shareholders’ equity in our consolidated balance sheets. During
the year ended December 31, 2007, warrants to purchase 641,208 shares of common
stock were exercised at a weighted average exercise price of $8.64, resulting
in
proceeds of approximately $5.5 million. Refer to “Non Plan Options/Warrants” in
Note 8 to the consolidated financial statements included in Item 8 for
information regarding the outstanding warrants.
Our
contractual
obligations and commercial commitments
at
December 31, 2007 were as follows (see “Lease Commitments” in Note 11 to the
consolidated financial statements included in Item 8):
|
Payments
due by period
|
||||||||||||||||
|
Contractual
Obligations:
|
Total
|
|
|
1
year
or
less
|
|
|
2-3
years
|
|
|
4
- 5
years
|
|
|
After
5
years
|
|||
|
Operating
leases
|
$
|
1,979,000
|
$
|
650,000
|
$
|
1,087,000
|
$
|
242,000
|
$
|
0
|
||||||
Item
7A. Quantitative and Qualitative Disclosures about Market
Risk.
None.
21
Item
8. Consolidated Financial Statements and Supplementary
Data
Index
to
Consolidated Financial Statements
|
Page
|
|
|
REPORT
OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
|
23
|
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
|
Consolidated
Balance Sheets - December 31, 2007 and 2006
|
25
|
|
Consolidated
Statements of Operations - for the years ended December 31, 2007,
2006 and
2005
|
26
|
|
Consolidated
Statements of Shareholders’ Equity - for the years ended December 31,
2007, 2006 and 2005
|
27
|
|
Consolidated
Statements of Cash Flows - for the years ended December 31, 2007,
2006 and
2005
|
29
|
|
Notes
to Consolidated Financial Statements - December 31, 2007, 2006 and
2005
|
30
|
|
FINANCIAL
STATEMENT SCHEDULE:
|
|
|
Schedule
II –
Valuation
and Qualifying Accounts
|
69
|
|
Schedules
other than those listed have been omitted since they are either not
required, not applicable or the information is otherwise
included.
|
22
Report
of Independent Registered Certified Public Accounting Firm
To
the
Board of Directors and Shareholders of ParkerVision, Inc.:
In
our
opinion, the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of
ParkerVision, Inc. and its subsidiary at December 31, 2007 and December 31,
2006, and the results of their operations and their cash flows for each of
the
three years in the period ended December 31, 2007 in conformity with accounting
principles generally accepted in the United States of America. In addition,
in
our opinion, the 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. Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal
Control - Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). The Company’s management is responsible for these financial statements
and financial statement schedule, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in Management’s Report on Internal
Control over Financial Reporting included under Item 9A. Our responsibility
is
to express opinions on these financial statements, on the financial statement
schedule, and on the Company’s internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting
was
maintained in all material respects. Our audits of the financial statements
included 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. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing
and
evaluating the design and operating effectiveness of internal control based
on
the assessed risk. Our audits also included performing such other procedures
as
we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
As
discussed in Note 7 to the consolidated financial statements, the Company
changed the manner in which it accounts uncertain tax positions in 2007. As
discussed in Note 8 to the consolidated financial statements, the Company
changed the manner in which it accounts for share-based compensation in
2006.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of
the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use,
or
disposition of the company’s assets that could have a material effect on
the
23
financial
statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
PricewaterhouseCoopers
LLP
Jacksonville,
Florida
March
17,
2008
24
PARKERVISION,
INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2007 AND 2006
|
2007
|
2006
|
||||||
|
CURRENT
ASSETS:
|
|||||||
|
Cash
and cash equivalents
|
$
|
13,400,832
|
$
|
13,225,528
|
|||
|
Prepaid
expenses
|
957,252
|
1,025,132
|
|||||
|
Other
current assets
|
71,700
|
121,903
|
|||||
|
Total
current assets
|
14,429,784
|
14,372,563
|
|||||
|
PROPERTY
AND EQUIPMENT, net
|
1,827,880
|
2,094,300
|
|||||
|
OTHER
ASSETS, net
|
10,318,893
|
10,208,484
|
|||||
|
Total
assets
|
$
|
26,576,557
|
$
|
26,675,347
|
|||
|
CURRENT
LIABILITIES:
|
|||||||
|
Accounts
payable
|
$
|
393,225
|
$
|
382,489
|
|||
|
Accrued
expenses:
|
|||||||
|
Salaries
and wages
|
691,249
|
328,817
|
|||||
|
Professional
fees
|
360,713
|
231,372
|
|||||
|
Other
accrued expenses
|
373,184
|
116,713
|
|||||
|
Total
current liabilities
|
1,818,371
|
1,059,391
|
|||||
|
DEFERRED
RENT
|
343,747
|
433,340
|
|||||
|
Total
liabilities
|
2,162,118
|
1,492,731
|
|||||
|
COMMITMENTS
AND CONTINGENCIES
(Notes
8, 9 and 11)
|
|||||||
|
SHAREHOLDERS'
EQUITY:
|
|||||||
|
Common
stock, $.01 par value, 100,000,000 shares authorized,
25,182,892 and 23,387,566 shares issued
and outstanding at December 31, 2007 and 2006,
respectively
|
251,829
|
233,876
|
|||||
|
Warrants
outstanding
|
17,492,097
|
20,290,878
|
|||||
|
Additional
paid-in capital
|
174,282,736
|
154,056,663
|
|||||
|
Accumulated
deficit
|
(167,612,223
|
)
|
(149,398,801
|
)
|
|||
|
Total
shareholders' equity
|
24,414,439
|
25,182,616
|
|||||
|
Total
liabilities and shareholders' equity
|
$
|
26,576,557
|
$
|
26,675,347
|
|||
The
accompanying notes are an integral part of these consolidated financial
statements.
25
PARKERVISION,
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
|
2007
|
2006
|
2005
|
||||||||
|
Product
revenue
|
$
|
0
|
$
|
0
|
$
|
995,991
|
||||
|
Engineering
services revenue
|
283,675
|
0
|
0
|
|||||||
|
Net
revenues
|
283,675
|
0
|
995,991
|
|||||||
|
Cost
of sales
|
251,314
|
0
|
786,228
|
|||||||
|
Write
down of inventory to net realizable value
|
0
|
0
|
2,250,586
|
|||||||
|
Gross
margin
|
32,361
|
0
|
(2,040,823
|
)
|
||||||
|
Research
and development expenses
|
10,700,181
|
9,521,194
|
10,284,305
|
|||||||
|
Marketing
and selling expenses
|
2,692,887
|
2,117,827
|
3,141,187
|
|||||||
|
General
and administrative expenses
|
5,711,276
|
5,232,652
|
6,037,796
|
|||||||
|
Impairment
loss and loss (gain) on disposal of equipment
|
17,860
|
(5,191
|
)
|
1,899,066
|
||||||
|
Total
operating expenses
|
19,122,204
|
16,866,482
|
21,362,354
|
|||||||
|
Interest
income and other
|
876,421
|
1,050,824
|
303,729
|
|||||||
|
Net
loss
|
(18,213,422
|
)
|
(15,815,658
|
)
|
(23,099,448
|
)
|
||||
|
Unrealized
gain (loss) on investment securities
|
0
|
1,006
|
(579
|
)
|
||||||
|
Comprehensive
loss
|
$
|
(18,213,422
|
)
|
$
|
(15,814,652
|
)
|
$
|
(23,100,027
|
)
|
|
|
Basic
and diluted net loss per common share
|
$
|
(0.74
|
)
|
$
|
(0.68
|
)
|
$
|
(1.14
|
)
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
26
PARKERVISION,
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR
THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
|
2007
|
2006
|
2005
|
||||||||
|
Common
shares – beginning of year
|
23,387,566
|
20,958,765
|
18,006,324
|
|||||||
|
Issuance
of common stock upon exercise of options and warrants
|
802,885
|
39,250
|
63,900
|
|||||||
|
Issuance
of restricted common stock as employee compensation
|
0
|
5,089
|
0
|
|||||||
|
Issuance
of common stock in private offering
|
992,441
|
2,373,335
|
2,880,000
|
|||||||
|
Issuance
of common stock as payment for services
|
0
|
11,127
|
8,541
|
|||||||
|
Common
shares – end of year
|
25,182,892
|
23,387,566
|
20,958,765
|
|||||||
|
Par
value of common stock – beginning of year
|
$
|
233,876
|
$
|
209,588
|
$
|
180,063
|
||||
|
Issuance
of common stock upon exercise of options and warrants
|
8,029
|
393
|
640
|
|||||||
|
Issuance
of restricted common stock as employee compensation
|
0
|
51
|
0
|
|||||||
|
Issuance
of common stock in private offering
|
9,924
|
23,733
|
28,800
|
|||||||
|
Issuance
of common stock as payment for services
|
0
|
111
|
85
|
|||||||
|
Par
value of common stock – end of year
|
$
|
251,829
|
$
|
233,876
|
$
|
209,588
|
||||
|
Warrants
outstanding – beginning of year
|
$
|
20,290,878
|
$
|
17,693,482
|
$
|
14,573,705
|
||||
|
Issuance
of warrants in connection with private offering
|
0
|
2,597,396
|
3,119,777
|
|||||||
|
Exercise
of warrants
|
(2,798,781
|
)
|
0
|
0
|
||||||
|
Warrants
outstanding – end of year
|
$
|
17,492,097
|
$
|
20,290,878
|
$
|
17,693,482
|
||||
|
Additional
paid-in capital – beginning of year
|
$
|
154,056,663
|
$
|
138,080,663
|
$
|
120,488,205
|
||||
|
Issuance
of common stock upon exercise of options and warrants
|
9,534,984
|
239,642
|
425,539
|
|||||||
|
Issuance
of restricted common stock as employee compensation
|
0
|
50,228
|
0
|
|||||||
|
Issuance
of common stock in private offering
|
8,390,324
|
13,625,721
|
16,967,923
|
|||||||
|
Issuance
of common stock as payment for services
|
0
|
164,313
|
198,996
|
|||||||
|
Stock-based
compensation expense
|
2,300,765
|
1,896,096
|
0
|
|||||||
|
Additional
paid-in capital – end of year
|
$
|
174,282,736
|
$
|
154,056,663
|
$
|
138,080,663
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
27
PARKERVISION,
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR
THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
|
2007
|
2006
|
2005
|
||||||||
|
Accumulated
other comprehensive loss – beginning of
year
|
$
|
0
|
$
|
(1,006
|
)
|
$
|
(427
|
)
|
||
|
Change
in unrealized gain (loss) on investments
|
0
|
1,006
|
(579
|
)
|
||||||
|
Accumulated
other comprehensive loss – end of year
|
$
|
0
|
$
|
0
|
$
|
(1,006
|
)
|
|||
|
Accumulated
deficit – beginning of year
|
$
|
(149,398,801
|
)
|
$
|
(133,583,143
|
)
|
$
|
(110,483,695
|
)
|
|
|
Net
loss
|
(18,213,422
|
)
|
(15,815,658
|
)
|
(23,099,448
|
)
|
||||
|
Accumulated
deficit – end of year
|
$
|
(167,612,223
|
)
|
$
|
(149,398,801
|
)
|
$
|
(133,583,143
|
)
|
|
|
Total
shareholders’ equity – beginning of year
|
$
|
25,182,616
|
$
|
22,399,584
|
$
|
24,757,851
|
||||
|
Issuance
of common stock upon exercise of options and warrants
|
6,744,232
|
240,035
|
426,179
|
|||||||
|
Issuance
of restricted common stock as employee compensation
|
0
|
50,279
|
0
|
|||||||
|
Issuance
of common stock and warrants in private offering
|
8,400,248
|
16,246,850
|
20,116,500
|
|||||||
|
Issuance
of common stock as payment for services
|
0
|
164,424
|
199,081
|
|||||||
|
Stock-based
compensation expense
|
2,300,765
|
1,896,096
|
0
|
|||||||
|
Comprehensive
loss
|
(18,213,422
|
)
|
(15,814,652
|
)
|
(23,100,027
|
)
|
||||
|
Total
shareholders’ equity – end of year
|
$
|
24,414,439
|
$
|
25,182,616
|
$
|
22,399,584
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
28
PARKERVISION,
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE
YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
|
2007
|
2006
|
2005
|
||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
|
Net
loss
|
$
|
(18,213,422
|
)
|
$
|
(15,815,658
|
)
|
$
|
(23,099,448
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
|
Depreciation
and amortization
|
1,649,014
|
1,690,497
|
2,460,324
|
|||||||
|
Amortization
of premium on investments
|
0
|
1,561
|
27,437
|
|||||||
|
Provision
for obsolete inventories
|
0
|
0
|
67,940
|
|||||||
|
Write-down
of inventory to net realizable value
|
0
|
0
|
2,250,586
|
|||||||
|
Impairment
loss on other assets
|
0
|
0
|
1,245,792
|
|||||||
|
Stock
compensation
|
2,327,522
|
2,350,853
|
940,783
|
|||||||
|
Loss
(gain) on sale of equipment
|
17,860
|
(5,191
|
)
|
653,702
|
||||||
|
Changes
in operating assets and liabilities:
|
||||||||||
|
Accounts
receivable, net
|
0
|
14,854
|
295,546
|
|||||||
|
Inventories
|
0
|
0
|
307,237
|
|||||||
|
Prepaid
and other assets
|
8,212
|
150,630
|
1,073,908
|
|||||||
|
Accounts
payable and accrued expenses
|
750,663
|
(348,400
|
)
|
(1,483,338
|
)
|
|||||
|
Deferred
revenue
|
0
|
0
|
(407,403
|
)
|
||||||
|
Deferred
rent
|
(81,276
|
)
|
515,751
|
0
|
||||||
|
Total
adjustments
|
4,671,995
|
4,370,555
|
7,432,514
|
|||||||
|
Net
cash used in operating activities
|
(13,541,427
|
)
|
(11,445,103
|
)
|
(15,666,934
|
)
|
||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
|
Purchase
of investments available for sale
|
0
|
0
|
(250,000
|
)
|
||||||
|
Proceeds
from maturity/sale of investments
|
0
|
295,000
|
1,290,000
|
|||||||
|
Proceeds
from sale of property and equipment
|
0
|
36,867
|
273,874
|
|||||||
|
Purchase
of property and equipment
|
(469,916
|
)
|
(1,087,889
|
)
|
(744,043
|
)
|
||||
|
Payment
for patent costs
|
(957,833
|
)
|
(1,333,868
|
)
|
(1,606,842
|
)
|
||||
|
Net
cash used in investing activities
|
(1,427,749
|
)
|
(2,089,890
|
)
|
(1,037,011
|
)
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
|
Net
proceeds from issuance of common stock in private
offering
|
8,400,248
|
16,246,850
|
20,116,500
|
|||||||
|
Proceeds
from exercise of options and warrants
|
6,744,232
|
240,036
|
426,179
|
|||||||
|
Net
cash provided by financing activities
|
15,144,480
|
16,486,886
|
20,542,679
|
|||||||
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
175,304
|
2,951,893
|
3,838,734
|
|||||||
|
CASH
AND CASH EQUIVALENTS, beginning of year
|
13,225,528
|
10,273,635
|
6,434,901
|
|||||||
|
CASH
AND CASH EQUIVALENTS, end of year
|
$
|
13,400,832
|
$
|
13,225,528
|
$
|
10,273,635
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
29
PARKERVISION,
INC. AND SUBSIDIARY
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007, 2006 and 2005
1. THE
COMPANY AND NATURE OF BUSINESS
ParkerVision,
Inc. (the "Company”, “ParkerVision”, or “we”) was incorporated under the laws of
the state of Florida on August 22, 1989 and operates in a single segment -
wireless technologies and products.
In
May
2007, we executed an Engineering Services Agreement and a Licensing Agreement
with ITT Corporation (“ITT”) for the design and use of our d2p technology in
applications worldwide. Under the agreements, we will be paid royalties on
a per
unit basis for products sold by ITT that incorporate our d2p technology. We
are
also providing engineering consulting and design services to ITT on a time
and
materials basis, to the extent necessary, for the development of products using
our technology.
In
December 2007, we entered into a Licensing and Engineering Services Agreement
with a mobile handset chip supplier for the design and use of our d2p and d2d
technologies in chipsets initially targeted for the 3G mobile handset market
worldwide. Under the terms of the agreement, we will be paid royalties on a
per
unit basis for chipsets sold which incorporate one or both of our RF
technologies.
2.
LIQUIDITY
AND CAPITAL RESOURCES
We
operate in a highly competitive industry with rapidly changing and evolving
technologies and an increasing number of market entrants and our potential
competitors have substantially greater financial, technical and other resources.
We have made significant investments in developing our technologies and
products, the returns on which are dependent upon the generation of future
revenues for realization.
We
have
incurred losses from operations and negative cash flows in every year since
inception and have utilized the proceeds from the sale of our equity securities
to fund operations. For the year ended December 31, 2007, we incurred a net
loss
of approximately $18.2 million and negative cash flows from operations of
approximately $13.5 million. At December 31, 2007, we had an accumulated deficit
of approximately $167.6 million and working capital of approximately $12.6
million.
We
do not
expect that revenues in 2008 will be sufficient to offset the expenses from
continued investment in product development and marketing activities. Therefore,
we expect operating losses and negative cash flows to continue in 2008 and
possibly beyond.
On
March
5, 2008, we completed the sale of an aggregate of 1,240,199 shares of our common
stock to a limited number of domestic institutional and other investors in
a
private placement transaction pursuant to an offering exemption under the
Securities Act of 1933. The shares represent 4.7% of our outstanding common
stock on an after-issued basis. 1,110,999 shares were sold at a price of $7.50
per share, and 129,200 shares were sold to Mr. Jeffrey Parker, our chief
executive officer and chairman, at $7.74 per share. The net proceeds from this
transaction of approximately $9 million will be used for general working capital
purposes.
The
long-term continuation of our business plan 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 reduce
certain discretionary spending. Management believes certain operating costs
could be reduced if working capital decreases significantly and additional
funding is not available. In addition, we currently have no outstanding
long-term debt obligations. Failure to generate sufficient revenues, raise
additional capital and/or reduce certain discretionary spending could have
a
material adverse effect on our ability to meet our future liquidity needs and
achieve our intended long-term business objectives.
30
3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Consolidation
ParkerVision
formed a wholly owned subsidiary, D2D, LLC on October 2, 2000. The consolidated
financial statements include the accounts of ParkerVision, Inc. and D2D, LLC,
after elimination of all significant inter-company transactions and balances.
Basis
of Presentation
Certain
reclassifications have been made to the 2006 and 2005 consolidated financial
statements in order to conform to the 2007 presentation.
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 volatility, risk-free interest rate, forfeiture rate and estimated lives
of
share-based awards used in the estimate of the fair market value of share-based
compensation, the assessment of recoverability of long-lived assets and
amortization period for intangible and long-lived assets, and the valuation
allowance for deferred taxes. Actual results could differ from the estimates
made. Management periodically evaluates estimates used in the preparation of
the
consolidated financial statements for continued reasonableness. Appropriate
adjustments, if any, to the estimates used are made prospectively based upon
such periodic evaluation.
Cash
and Cash Equivalents
For
purposes of reporting cash flows, we consider cash and cash equivalents to
include cash on hand, interest-bearing deposits, overnight repurchase agreements
and investments with original maturities of three months or less when
purchased.
Property
and Equipment
Property
and equipment are stated at cost, less accumulated depreciation. Depreciation
is
determined using the straight-line method over the following estimated useful
lives:
|
Manufacturing
and office equipment
|
5-7
years
|
|
|
Leasehold
improvements
|
Remaining
life of lease
|
|
|
Aircraft
|
20
years
|
|
|
Furniture
and fixtures
|
7
years
|
|
|
Computer
equipment and software
|
3-5
years
|
The
cost
and accumulated depreciation of assets sold or retired are removed from their
respective accounts, and any resulting net gain or loss is recognized in the
accompanying consolidated statements of operations. The carrying value of
long-lived assets is reviewed on a regular basis for the existence of facts,
both internally and externally, that may suggest impairment. Recoverability
of
assets to be held and used is measured by comparing the carrying amount of
an
asset to the estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of the assets exceeds its estimated
undiscounted future net cash flows, an impairment charge is recognized in the
amount by which the carrying amount of the asset exceeds the fair value of
the
assets.
Intangible
Assets
Patents,
copyrights and other intangible assets are amortized using the straight-line
method over their estimated period of benefit, ranging from three to twenty
years. Management evaluates the recoverability of intangible assets periodically
and takes into account events or circumstances that warrant revised estimates
of
useful lives or that indicate impairment exists.
31
Accounting
for Stock Based Compensation
Effective
January 1, 2006, we adopted the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” (“FAS 123R”)
which establishes accounting for equity instruments exchanged for employee
services. Under the provisions of FAS 123R, share-based compensation cost is
measured at the grant date, based on the calculated fair value of the award,
and
is recognized as an expense on a straight-line basis over the employee’s
requisite service period (generally the vesting period of the equity grant).
In
March 2005, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 107 (“SAB 107”) relating to FAS 123R. We have applied the
provisions of SAB 107 in our adoption of FAS 123R.
Prior
to
January 1, 2006, we accounted for share-based compensation to employees in
accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting
for Stock Issued to Employees,” and related interpretations. We also followed
the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based
Compensation”, as amended by SFAS 148, “Accounting for Stock-Based
Compensation – Transition and Disclosure”. We elected to
adopt the modified prospective transition method as provided by FAS 123R and,
accordingly, financial statement amounts for the prior periods have not been
retroactively adjusted to reflect the fair value method of expensing share-based
compensation. Under the modified prospective method, share-based expense
recognized after adoption includes: (a) share-based expense for all awards
granted prior to, but not yet vested as of January 1, 2006, based on the
grant date fair value estimated in accordance with the original provisions
of
SFAS No. 123, as amended by SFAS 148 and (b) share-based expense for
all awards granted or modified subsequent to January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of FAS 123R.
Further, as required under FAS123R, we estimate forfeitures for options granted
which are not expected to vest. Changes in these inputs and assumptions can
materially affect the measure of estimated fair value of our stock-based
compensation expense.
In
November 2005, the FASB issued FASB Staff Position (“FSP”) FAS
No. 123R-3, Transition Election Related to Accounting for the Tax Effects
of Share-Based Payment Awards, (“FSP FAS 123R-3”). FSP FAS 123R-3 provides a
practical exception when a company transitions to the accounting requirements
in
FAS123R. FAS123R requires a company to calculate the pool of excess tax benefits
available to absorb tax deficiencies recognized subsequent to adopting FAS123R
(termed the “APIC Pool”), assuming the company had been following the
recognition provisions prescribed by SFAS No. 123. We have elected to use the
shortcut method under FSP FAS 123R-3 to calculate our APIC Pool.
Revenue
Recognition
We
account for service revenue under the provisions of Staff Accounting Bulletin
No. 104 (“SAB 104”), “Revenue Recognition in Financial Statements” and AICPA
Statement of Position No. 81-1 (“SOP 81-1”), “Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.” Under the provisions
of SAB 104 and SOP 81-1, we recognize revenue when there is persuasive evidence
of an arrangement, services have been rendered, the fee is fixed or
determinable, and collection of the resulting receivable is reasonably assured.
We use the percentage-of-completion method of accounting for cost
reimbursement-type contracts which specify a certain billable fee amount.
Revenues are recognized as costs are incurred assuming that collection is
reasonably assured. Our cost of sales includes the direct labor costs of
engineering staff providing services under these contracts, as well as indirect
costs including depreciation and amortization and allocated facilities
costs.
Revenue
from product sales is generally recognized at the time the product is shipped,
provided that persuasive evidence of an arrangement exists, title and risk
of
loss has transferred to the customer, the sales price is fixed or determinable
and collection of the receivable is reasonably assured. We did not recognize
any
product revenue in 2007 or 2006. Our 2005 product revenue relates primarily
to
products sold through retail distribution channels, with limited sales direct
to
end users through our own website and direct value added resellers.
In
addition to reserves for sales returns, 2005 gross product revenue was reduced
for price protection programs, customer rebates and cooperative marketing
expenses deemed to be sales incentives to derive net
32
revenue.
Revenue for the period ended December 31, 2005 was reduced for cooperative
marketing costs in the amount of $29,932.
Research
and Development Expenses
Research
and development costs are expensed as incurred and include salaries and
benefits, costs paid to third party contractors, prototype expenses, maintenance
costs for software development tools, depreciation, amortization, and a portion
of facilities costs.
Advertising
Costs
Advertising
costs are charged to operations when incurred. We incurred no advertising costs
for the period ended December 31, 2007. We incurred advertising costs of $1,893
and $107,495, for the years ended December 31, 2006 and 2005, respectively.
Loss
per Common Share
Basic
loss per common share is determined based on the weighted-average number of
common shares outstanding during each year. Diluted loss per common share is
the
same as basic loss per common share as all potential common shares are excluded
from the calculation, as their effect is anti-dilutive. The weighted-average
number of common shares outstanding for the years ended December 31, 2007,
2006
and 2005, was 24,620,727, 23,130,036, and 20,327,750, respectively. Options
and
warrants to purchase 6,631,255, 7,680,326, and 7,016,572, shares of common
stock
that were outstanding at December 31, 2007, 2006 and 2005 respectively, were
excluded from the computation of diluted earnings per share as the effect of
these options and warrants would have been anti-dilutive.
Other
Comprehensive Loss
Other
comprehensive loss is comprised of net unrealized losses (gains) on investments
available-for-sale which are included, net of tax, in accumulated other
comprehensive (loss) income in the consolidated statements of shareholders’
equity.
Leases
Our
facilities are leased under operating leases. For those leases that contain
rent
escalations or rent concessions, we record the total rent payable during the
lease term on a straight-line basis over the term of the leases with the
difference between the rents paid and the straight-line rent recorded as a
deferred rent liability in the accompanying consolidated balance
sheets.
Consolidated
Statements of Cash Flows
On
May
31, 2006, we issued options, valued at approximately $63,000, under the terms
of
the 2000 Performance Equity Plan as consideration for professional services
(see
Note 8).
In
March
2006, we recorded leasehold improvements of $437,314 with a corresponding entry
to deferred rent, reflecting a tenant improvement allowance under the lease
agreement for our new corporate location (see Note 11). The increase in deferred
rent is included as a cash inflow in net cash used for operating activities
and
the related increase in leasehold improvements is included as a cash outflow
in
net cash used for investing activities in the accompanying consolidated
statements of cash flows.
In
connection with the private placement of 2,373,355 shares of our common stock
on
February 3, 2006, we issued warrants to purchase 593,335 shares of common stock.
These warrants were recorded at their relative fair value of approximately
$2.6
million (see Note 9).
We
issued
5,092 shares of our common stock valued at approximately $53,000 on April 3,
2006, 6,035 shares of our common stock valued at approximately $53,000 on
January 3, 2006 and 8,541 shares of our common stock valued at approximately
$53,000 on October 3, 2005 as consideration for engineering consulting services
(see Note 9).
In
connection with the private placement of 2,880,000 shares of our common stock
on
March 10, 2005, we
33
issued
warrants to purchase 720,000 shares of common stock. These warrants were
recorded at their estimated fair value of approximately $3.1 million (see Note
9).
On
April
12, 2005, we issued options, valued at approximately $146,000, under the terms
of the 2000 Performance Equity Plan as consideration for professional services
(see Note 8).
Income
Taxes
The
provision for income taxes is based on loss before taxes as reported in the
accompanying consolidated statements of operations. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
tax
assets and liabilities are determined based on differences between the financial
statement carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are established to reduce deferred tax assets
when, based on available objective evidence, it is more likely than not that
the
benefit of such assets will not be realized. In
addition, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – an Interpretation of FASB Statement No.
109”, (“FIN 48”) on January 1, 2007, as more fully discussed in Note 7.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board issued SFAS No. 157,
“Fair Value Measurements” (“SFAS 157”). This statement defines fair value as
used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles (“GAAP”) and
expands disclosure related to the use of fair value measures in financial
statements. SFAS 157 does not expand the use of fair value measures in financial
statements, but standardizes its definition and guidance in GAAP. SFAS 157
is
effective for fiscal years beginning after November 15, 2008 for nonfinancial
assets and liabilities. We will adopt the provisions of SFAS 157 on January
1,
2009. We have evaluated SFAS 157 and do not anticipate that it will have an
impact on our financial statements when adopted.
In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 159, “Fair Value Option for Financial Assets
and Financial Liabilities” (SFAS 159). This statement permits entities to elect
to measure many financial instruments and certain other items at fair value
and
also amends SFAS 115, “Accounting for Certain Investments in Debt and Equity
Securities”. SFAS 159 is effective for fiscal years beginning after November 15,
2007. We will adopt the provisions of SFAS 159 on January 1, 2008. We have
evaluated SFAS 159 and do not anticipate that it will have an impact on our
financial statements when adopted.
4.
PREPAID
EXPENSES
Prepaid
expenses consisted of the following at December 31, 2007 and 2006:
|
2007
|
2006
|
||||||
|
Prepaid
insurance
|
$
|
473,552
|
$
|
558,356
|
|||
|
Other
prepaid expenses
|
483,700
|
466,776
|
|||||
|
$
|
957,252
|
$
|
1,025,132
|
||||
34
5.
PROPERTY
AND EQUIPMENT, NET
Property
and equipment, at cost, consisted of the following at December 31, 2007 and
2006:
|
2007
|
2006
|
||||||
|
Equipment
and software
|
$
|
8,559,427
|
$
|
8,249,267
|
|||
|
Leasehold
improvements
|
778,117
|
762,076
|
|||||
|
Aircraft
|
231,250
|
340,000
|
|||||
|
Furniture
and fixtures
|
494,561
|
502,643
|
|||||
|
10,063,355
|
9,853,986
|
||||||
|
Less
accumulated depreciation and amortization
|
(8,235,475
|
)
|
(7,759,686
|
)
|
|||
|
$
|
1,827,880
|
$
|
2,094,300
|
||||
Depreciation
expense related to property and equipment was $718,476, $829,797, and
$1,321,477, in 2007, 2006, and 2005, respectively. In 2005, we recognized
impairment charges on certain long-lived assets related to our retail
activities. These charges include impairment of fixed assets, primarily the
manufacturing and prototype facility assets, of approximately $626,000. These
impairment charges are included as impairment loss in the consolidated statement
of operations.
6.
OTHER
ASSETS
Other
assets consisted of the following at December 31, 2007 and 2006:
|
2007
|
||||||||||
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Value
|
||||||
|
Patents
and copyrights
|
$
|
14,383,987
|
$
|
4,538,265
|
$
|
9,845,722
|
||||
|
Prepaid
licensing fees
|
705,000
|
705,000
|
0
|
|||||||
|
Deposits
and other
|
473,171
|
0
|
473,171
|
|||||||
|
$
|
15,562,158
|
$
|
5,243,265
|
$
|
10,318,893
|
|||||
|
|
2006
|
|||||||||
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Value
|
||||
|
Patents
and copyrights
|
$
|
13,426,154
|
$
|
3,706,477
|
$
|
9,719,677
|
||||
|
Prepaid
licensing fees
|
705,000
|
606,250
|
98,750
|
|||||||
|
Deposits
and other
|
390,057
|
0
|
390,057
|
|||||||
|
$
|
14,521,211
|
$
|
4,312,727
|
$
|
10,208,484
|
|||||
Patent
costs represent legal and filing costs incurred to obtain patents and trademarks
for product concepts and methodologies that we have developed. Capitalized
patent costs are being amortized over the estimated lives of the related
patents, ranging from fifteen to twenty years.
In
2005,
we recognized impairment charges on certain long-lived assets related to our
retail activities. These charges include impairment of prepaid license fees
of
approximately $662,000, and impairment of other intangible assets of
approximately $584,000. These impairment charges are included as impairment
loss
in the consolidated statement of operations.
35
Amortization
expense for the years ended December 31, 2007, 2006 and 2005 is as
follows:
|
Amortization Expense
|
|||||||||||||
|
Weighted
average estimated life
(in
years)
|
2007
|
2006
|
2005
|
||||||||||
|
Patents
and copyrights
|
17
|
$
|
831,788
|
$
|
669,700
|
$
|
574,324
|
||||||
|
Prepaid
licensing fees
|
4
|
98,750
|
191,000
|
424,333
|
|||||||||
|
Other
intangibles
|
3
|
0
|
0
|
140,190
|
|||||||||
|
Total
amortization
|
$
|
930,538
|
$
|
860,700
|
$
|
1,138,847
|
|||||||
Future
estimated amortization expenses for other assets that have remaining unamortized
amounts as of December 31, 2007 were as follows:
|
2008
|
$
|
838,000
|
||
|
2009
|
$
|
836,000
|
||
|
2010
|
$
|
836,000
|
||
|
2011
|
$
|
836,000
|
||
|
2012
|
$
|
811,000
|
7.
INCOME
TAXES AND TAX STATUS
A
reconciliation between the provision for income taxes and the expected tax
benefit using the federal statutory rate of 34% for the years ended December
31,
2007, 2006 and 2005 is as follows:
|
2007
|
2006
|
2005
|
||||||||
|
Tax
benefit at statutory rate
|
$
|
(6,192,563
|
)
|
$
|
(5,377,324
|
)
|
$
|
(7,853,812
|
)
|
|
|
State
tax benefit
|
(637,470
|
)
|
(553,548
|
)
|
(808,481
|
)
|
||||
|
Increase
in valuation allowance
|
6,276,369
|
6,340,888
|
9,454,464
|
|||||||
|
Research
and development credit
|
118,540
|
(597,550
|
)
|
(642,769
|
)
|
|||||
|
Other
|
435,124
|
187,534
|
(149,402
|
)
|
||||||
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||
Our
deferred tax assets and liabilities relate to the following sources and
differences between financial accounting and the tax bases of our assets and
liabilities at December 31, 2007 and 2006:
|
2007
|
2006
|
||||||
|
Gross
deferred tax assets:
|
|||||||
|
Net
operating loss carryforward
|
$
|
59,224,977
|
$
|
55,237,796
|
|||
|
Research
and development credit
|
9,887,793
|
10,077,457
|
|||||
|
Patents
and other
|
1,144,800
|
1,202,489
|
|||||
|
Stock
compensation
|
1,274,557
|
588,358
|
|||||
|
Accrued
liabilities
|
58,915
|
50,100
|
|||||
|
71,591,042
|
67,156,200
|
||||||
|
Less
valuation allowance
|
(71,476,474
|
)
|
(67,042,100
|
)
|
|||
|
114,568
|
114,100
|
||||||
|
Gross
deferred tax liabilities:
|
|||||||
|
Fixed
assets
|
114,568
|
114,100
|
|||||
|
|
114,568
|
114,100
|
|||||
|
Net
deferred tax asset
|
$
|
0
|
$
|
0
|
|||
36
No
current or deferred tax provision or benefit was recorded for 2007, 2006 and
2005 as a result of current losses and full deferred tax valuation allowances
for all periods.
We
have
recorded a valuation allowance to state our deferred tax assets at their
estimated net realizable value due to the uncertainty related to realization
of
these assets through future taxable income. At December 31, 2007, we had net
operating loss (“NOL”) and research and development (“R&D”) tax credit
carry-forwards for income tax purposes of $162,162,477 and $11,147,475,
respectively, which expire in varying amounts from 2008 through 2027. The NOL
carryforward for income tax purposes includes $576,903 related to windfall
tax
benefits from the exercise of stock-based compensation awards for which a
benefit will be recorded in APIC when realized. Our ability to benefit from
the
NOL and R&D tax credit carry-forwards could be limited under certain
provisions of the Internal Revenue Code if ownership of ParkerVision changes
by
more than 50%, as defined.
Uncertain
Tax Positions
Effective
January 1, 2007, we adopted the provisions of FIN 48. FIN 48 prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return. This interpretation also provides guidance on recognition and
classification of income tax assets and liabilities, accounting for interest
and
penalties associated with tax positions, accounting for income taxes in interim
periods and income tax disclosures. We file income tax returns in
the U.S. federal jurisdiction and various state jurisdictions. We have
identified our Federal and Florida tax returns as our only major jurisdictions,
as defined. The periods subject to examination for those returns are the
1993 through 2007 tax years.
The
application of FIN 48 would have resulted in a decrease to retained earnings,
net of tax effect, of $1.4 million, except that the decrease was fully offset
by
a corresponding reduction of our valuation allowance. Additionally, as a
result of the implementation of FIN 48, we decreased a deferred tax asset and
its associated valuation allowance by approximately $1.8 million, net of tax
effect. Approximately $0.5 million, net of tax effect, of the unrecognized
tax benefit is related to disqualifying dispositions of incentive stock options
which would be recorded as an adjustment to equity rather than a decrease in
retained earnings, if reversed.
At
December 31, 2007, we had an unrecognized tax benefit of approximately $2.6
million. Future changes in the unrecognized tax benefit will have no
impact on the effective tax rate due to the existence of a valuation
allowance.
A
reconciliation of the amount recorded for unrecognized tax benefits for the
year
ended December 31, 2007 is as follows:
|
Year Ended
December 31, 2007
|
||||
|
Unrecognized
tax benefits –
beginning
of year
|
$
|
1,841,995
|
||
|
Gross
increases – tax positions in prior period
|
787,301
|
|||
|
Gross
increases – current period tax positions
|
0
|
|||
|
Settlements
|
0
|
|||
|
Lapse
of statute of limitations
|
0
|
|||
|
Unrecognized
tax benefits – end of year
|
$
|
2,629,296
|
||
We
plan
to conduct a study within the next twelve months of possible limitations to
our
NOL and R&D credit carryforwards under Section 382 of the Internal Revenue
Code of 1986 as more fully discussed below. It is reasonably
possible that the total amount of unrecognized tax benefits will increase as
a
result of this study, although we are unable to estimate a range of potential
increases to our unrecognized tax benefits at this time. Utilization of the
NOL
and R&D credit carryforwards may be subject to a substantial annual
limitation due to the ownership change limitations that have occurred previously
or that could occur in the future provided by
37
Section
382 of the Internal Revenue Code of 1986. These ownership changes may
limit the amount of NOL and R&D credit carryforwards that can be utilized
annually to offset future taxable income and tax, respectively. In
general, an ownership change, as defined by Section 382, results from
transactions increasing the ownership of certain shareholders or public groups
in the stock of a corporation by more than 50 percentage points over a
three-year period. We have raised capital through the issuance of capital
stock on several occasions which, combined with the purchasing shareholders’
subsequent disposition of those shares, may have resulted in a change of control
as defined by Section 382, or could result in a change of control in the future
upon subsequent disposition. We have not currently completed a study to
assess whether a change of control has occurred or whether there have been
multiple changes of control since the Company’s formation due to the significant
complexity and cost associated with such study and that there could be
additional changes in control in the future. If we have experienced a
change of control at any time since the Company’s formation, utilization of our
NOL and R&D credit carryforwards would be subject to an annual limitation
under Section 382 which is determined first by multiplying the value of our
stock at the time of the ownership change by the applicable long-term tax-exempt
rate, and then could be subject to additional adjustments, as required.
Any limitation may result in the expiration of a portion of the NOL or R&D
credit carryforwards before utilization. Further, until a study is
completed and any limitation known, no amounts are being presented as an
uncertain tax position under FIN 48.
Our
policy is that we recognize interest and penalties accrued on any unrecognized
tax benefits as a component of our income tax expense. As of the date of
adoption of FIN 48, we did not have any accrued interest or penalties associated
with any unrecognized tax benefits. For the years ended December 31, 2007,
2006, and 2005, we did not incur any income tax related interest income, expense
or penalties.
8.
STOCK
OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION PLANS:
The
following table presents share-based compensation expense included in our
consolidated statements of operations for the years ended December 31, 2007,
2006 and 2005, respectively:
|
Year ended December 31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Cost
of sales
|
$
|
20,627
|
$
|
-
|
$
|
-
|
||||
|
Research
and development expense
|
701,042
|
819,366
|
53,333
|
|||||||
|
Sales
and marketing expense
|
423,675
|
336,241
|
-
|
|||||||
|
General
and administrative expense
|
1,182,178
|
1,195,246
|
887,450
|
|||||||
|
Total
share-based expense
|
$
|
2,327,522
|
$
|
2,350,853
|
$
|
940,783
|
||||
We
did
not recognize compensation expense for employee stock option awards for the
year
ended December 31, 2005 when the exercise price of the employee stock award
equaled the market price of the underlying stock on the date of grant. We did
recognize compensation expense for non-employee share-based awards of $940,783
for the year ended December 31, 2005.
We
did
not capitalize any expense related to share-based payments. We estimate the
fair
value of each option award on the date of the grant using the Black-Scholes
option valuation model. Estimates of fair value are not intended to predict
actual future events or the value ultimately realized by persons who receive
equity awards. Key input assumptions used to estimate the fair value of stock
options include the exercise price of the award, the expected option term,
expected volatility of our stock over the option’s expected term, the risk-free
interest rate over the option’s expected term, and our expected annual dividend
yield.
The
fair
value of each option grant for the years ended December 31, 2007, 2006, and
2005
respectively, was estimated on the grant date using the Black-Scholes
option-pricing model with the following assumptions:
38
|
Year ended December 31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Expected
option term (1)
|
4 to 7 years
|
4.25 to 7 years
|
3 to 10 years
|
|||||||
|
Expected
volatility factor (2)
|
65.8% to 74.0%
|
|
69.4% to 80.3%
|
|
76.4% to 85.6%
|
|
||||
|
Risk-free
interest rate (3)
|
3.6% to 5.0%
|
|
4.2% to 5.2%
|
|
3.7% to 4.5%
|
|
||||
|
Expected
annual dividend yield
|
0%
|
|
0%
|
|
0%
|
|
||||
|
(1)
|
The
expected term was determined based on historical activity for grants
with
similar terms and for similar groups of employees and represents
the
period of time that options are expected to be outstanding. For employee
options, groups of employees with similar historical exercise behavior
are
considered separately for valuation purposes. For directors and named
executive officers, the contractual term is used as the expected
term
based on historical behavior. In cases where there was not sufficient
historical information for grants with similar terms, the simplified
or
“plain-vanilla” method of estimating option life was utilized.
|
|
(2)
|
The
stock volatility for each grant is measured using the weighted average
of
historical daily price changes of our common stock over the most
recent
period equal to the expected option life of the grant.
|
|
(3)
|
The
risk-free interest rate for periods equal to the expected term of
the
share option is based on the U.S. Treasury yield curve in effect
at the
time of the grant.
|
We
had
previously adopted the provisions of SFAS No. 123, as amended by SFAS No. 148,
through disclosure only. The following table illustrates the effect on the
net
loss and loss per share for the year ended December 31, 2005, as if we had
applied the fair value recognition provisions of SFAS No. 123, as amended by
SFAS No. 148, to stock-based employee compensation.
|
Year Ended
December 31, 2005
|
||||
|
Net
loss, as reported
|
$
|
(23,099,448
|
)
|
|
|
Stock-based
compensation expense that would have been included
in reported net loss if the fair value provisions of SFAS
No. 123 had been applied to all awards
|
(8,302,921
|
)
|
||
|
Proforma
net loss
|
$
|
(31,402,369
|
)
|
|
|
Basic
and diluted net loss per common share:
|
||||
|
As
reported
|
$
|
(1.14
|
)
|
|
|
Proforma
|
$
|
(1.54
|
)
|
|
Stock
Incentive Plans
1993
Stock Plan
We
adopted a stock plan in September 1993 (the “1993 Plan”). As of September 10,
2003, the Company was no longer able to issue grants under the 1993 Plan. The
1993 Plan, as amended, provided for the grant of options and other stock awards
to employees, directors and consultants, not to exceed 3,500,000 shares of
common stock. Options granted to employees and consultants under the 1993 Plan
vested for periods up to ten years and are exercisable for a period of five
years from the date the options vest. Options granted to directors under the
1993 Plan were exercisable immediately and expire ten years from the date of
grant.
2000
Performance Equity Plan
We
adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan
provides for the grant of options and other stock awards to employees, directors
and consultants, not to exceed 5,000,000 shares of common stock. The plan
provides for benefits in the form of incentive stock options, nonqualified
stock
options, stock appreciation rights, restricted share awards, stock bonuses
and
various stock benefits or cash. Options granted to employees and consultants
under the 2000 Plan generally vest over periods up to five years and are
exercisable for a period of up to five years from the date the options become
vested. Options
39
granted
to directors under the 2000 Plan are generally exercisable within one year
and
expire seven to ten years from the date of grant. Options to purchase 693,238
shares of common stock were available for future grants under the 2000 Plan
at
December 31, 2007.
The
following table presents a summary of option activity under the 1993 and 2000
Plans for the years ended December 31, 2007, 2006 and 2005,
respectively:
|
2007
|
2006
|
2005
|
|||||||||||||||||
|
Shares
|
Wtd.
Avg.
Ex.
Price
|
Shares
|
Wtd.
Avg.
Ex.
Price
|
Shares
|
Wtd.
Avg.
Ex.
Price
|
||||||||||||||
|
|
|
|
|
|
|||||||||||||||
|
Outstanding
at beginning of year
|
5,109,590
|
$
|
20.38
|
5,039,171
|
$
|
21.51
|
5,363,202
|
$
|
21.24
|
||||||||||
|
Granted
|
378,955
|
11.26
|
705,407
|
8.84
|
493,770
|
6.85
|
|||||||||||||
|
Exercised
|
(163,958
|
)
|
7.52
|
(39,250
|
)
|
10.14
|
(63,900
|
)
|
6.67
|
||||||||||
|
Forfeited
|
(67,117
|
)
|
9.11
|
(110,544
|
)
|
9.19
|
(376,855
|
)
|
9.38
|
||||||||||
|
Expired
|
(555,743
|
)
|
17.96
|
(485,194
|
)
|
19.12
|
(377,046
|
)
|
13.31
|
||||||||||
|
Outstanding
at end
of year
|
4,701,727
|
$
|
20.54
|
5,109,590
|
$
|
20.38
|
5,039,171
|
$
|
21.51
|
||||||||||
|
Exercisable
at end
of year
|
3,860,398
|
$
|
23.00
|
4,181,537
|
$
|
23.20
|
4,363,273
|
$
|
23.64
|
||||||||||
The
aggregate intrinsic value of options exercised under the 1993 and 2000 Plans
during 2007, 2006, and 2005 was $806,528, $157,910, and $127,300, respectively.
As of December 31, 2007, there was $4,017,918 of total unrecognized compensation
cost, net of estimated forfeitures, related to nonvested share-based
compensation awards granted under the 1993 and 2000 Plans. That cost is expected
to be recognized over a weighted-average period of 1.96 years.
A
summary
of the status of nonvested share options as of December 31, 2007, and changes
during the year ended December 31, 2007 is presented below:
|
Nonvested
Shares
|
|||||||
|
Shares
|
Weighted-Average
Grant-Date
Fair Value
|
||||||
|
Nonvested
at January 1, 2007
|
928,053
|
$
|
4.82
|
||||
|
Granted
|
378,955
|
7.55
|
|||||
|
Vested
|
(398,562
|
)
|
5.06
|
||||
|
Forfeited
|
(67,117
|
)
|
8.96
|
||||
|
Nonvested
at December 31, 2007
|
841,329
|
$
|
6.48
|
||||
The
weighted average fair value of shares granted during the years ended December
31, 2007, 2006 and 2005 was $7.55, $5.41 and $4.62, respectively. The total
fair
value of shares vested during the years ended December 31, 2007, 2006, and
2005
was $2,014,874, $2,107,390, and $9,438,918, respectively.
The
options outstanding under the 2000 Plan include a grant to an outside consultant
in July 2006 for the purchase of up to 63,750 shares of its common stock at
an
exercise price of $9.10 per share. These options were granted as performance
incentives in connection with a consulting agreement with a thirty-month term.
The number of options that will vest and the date on which they will vest are
dependent upon the completion of specific performance conditions. Vested
options, if any, will remain exercisable for four years from the date of grant.
The consulting arrangement may be terminated by us for any reason with thirty
days notice, and upon such termination, any unvested shares shall be forfeited.
As the number of shares that will ultimately vest is indeterminable at the
date
of grant, management must adjust the options to their estimated fair value
at
each interim reporting date until vesting occurs. Fair value is estimated at
each interim reporting
40
date
using the Black-Scholes option pricing model and then amortized on a straight
line basis over the estimated remaining requisite service period. At December
31, 2007 and 2006, the total estimated fair value of these options was
approximately $102,600 and $94,950, respectively. For the years ended December
31, 2007 and 2006, approximately $42,570 and $18,990 of expense related to
these
options was recognized in the consolidated statement of operations.
The
options granted under the 2000 Plan also include a grant to an outside
consultant on May 31, 2006 for the purchase of an aggregate of 10,000 shares
of
its common stock at an exercise price of $10.20 per share for consulting
services to be provided over a one year period. The total fair value of these
options of approximately $63,000 was estimated as of the date of grant using
the
Black-Scholes option pricing model and was amortized to expense in consolidated
statement of operations over the one-year term of the agreement.
On
April
12, 2005, we granted stock options to an outside consultant under the 2000
Plan
in connection with a consulting agreement to purchase an aggregate of 40,000
shares of its common stock at an exercise price of $10 per share. These options
expire thirty-six months from the date they become vested. The first 20,000
options vested ratably over fifteen months. The remaining 20,000 options vested
if certain market conditions were met. These market conditions were not met
and
the options were cancelled unvested in 2006. The total fair value of these
options of approximately $146,000 was estimated as of the date of grant using
the Black-Scholes option pricing model and was amortized to expense in the
consolidated statement of operations over the term of the contract. For the
years ended December 31, 2006 and 2005, approximately $58,550 and $87,450 was
amortized to expense related to this contract, respectively.
Non-Plan
Options/Warrants
We
have
granted options and warrants outside the 1993 and 2000 Plans for employment
inducements, non-employee consulting services, and for underwriting and other
services in connection with securities offerings. Non-plan options and warrants
are generally granted with exercise prices equal to or above fair market value
of the underlying shares at the date of grant.
A
summary
of non-plan option and warrant activity as of December 31, 2007, 2006 and 2005,
and changes during the years then ended is presented below:
|
2007
|
2006
|
2005
|
|||||||||||||||||
|
|
Shares
|
Wtd.
Avg.
Ex.
Price
|
Shares
|
Wtd.
Avg.
Ex.
Price
|
Shares
|
Wtd.
Avg.
Ex. Price
|
|||||||||||||
|
Outstanding
at beginning of year
|
2,570,736
|
$
|
25.26
|
1,977,401
|
$
|
30.29
|
1,257,401
|
$
|
42.49
|
||||||||||
|
Granted
|
-
|
-
|
593,335
|
8.50
|
720,000
|
9.00
|
|||||||||||||
|
Exercised
|
(641,208
|
)
|
8.64
|
-
|
-
|
-
|
-
|
||||||||||||
|
Forfeited
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Expired
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Outstanding
at end
of year
|
1,929,528
|
$
|
30.79
|
2,570,736
|
$
|
25.26
|
1,977,401
|
$
|
30.29
|
||||||||||
|
Exercisable
at end
of year
|
1,929,528
|
$
|
30.79
|
2,570,736
|
$
|
25.26
|
1,977,401
|
$
|
30.29
|
||||||||||
Of
the
non-plan options and warrants outstanding and exercisable at December 31, 2007,
warrants representing 1,814,528 shares were issued in connection with the sale
of equity securities in various private placement transactions in 2000, 2001,
2005 and 2006. The estimated fair value of these warrants at the time of
issuance of $17,492,097 is included in shareholders’ equity in the consolidated
balance sheets. The remaining 115,000 share options outstanding and exercisable
at December 31, 2007 represent options granted to employees and directors in
1999. The aggregate intrinsic value of non-plan options and warrants exercised
in 2007 was $2,805,211.
41
The
options outstanding at December 31, 2007 under all plans, including the non-plan
options and warrants, have exercise price ranges, weighted average contractual
lives, and weighted average exercise prices as follows:
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||
|
Range of
Exercise
Prices
|
Number
Outstanding
at December
31, 2007
|
Wtd.
Avg. Remaining Contractual
Life
|
Wtd.
Avg.
Exercise
Price
|
Number
Exercisable at December 31, 2007
|
Wtd.
Avg.
Exercise
Price
|
Wtd. Avg.
Remaining Contractual
Life
|
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
|
$4.22-$6.33
|
660,500
|
5.89
|
$
|
5.46
|
510,609
|
$
|
5.50
|
5.80
|
|||||||||||
|
$6.90-$10.35
|
1,935,006
|
4.70
|
8.78
|
1,558,041
|
5.72
|
4.22
|
|||||||||||||
|
$10.36-$15.54
|
447,438
|
5.21
|
12.45
|
132,965
|
14.62
|
1.93
|
|||||||||||||
|
$17.50-$26.25
|
1,068,910
|
2.29
|
21.83
|
1,068,910
|
21.83
|
2.29
|
|||||||||||||
|
$26.75-$40.13
|
1,109,926
|
3.05
|
32.37
|
1,109,926
|
32.37
|
3.05
|
|||||||||||||
|
$41.00-$61.50
|
1,409,475
|
3.12
|
50.07
|
1,409,475
|
50.07
|
3.12
|
|||||||||||||
|
|
6,631,255
|
3.86
|
$
|
23.53
|
5,789,926
|
$
|
25.59
|
3.46
|
|||||||||||
Upon
exercise of options and warrants under all plans, we issue new registered shares
of our common stock. Cash received from option and warrant exercises under
all
share-based payment arrangements for the year ended December 31, 2007 was
$6,744,232. No tax benefit was realized for the tax deductions from exercise
of
the share-based payment arrangements for the year ended December 31, 2007 as
the
benefits were fully offset by a valuation allowance (see note 7).
9.
STOCK
AUTHORIZATION AND ISSUANCE
Preferred
Stock
ParkerVision
has 15,000,000 shares of preferred stock authorized for issuance at the
direction of the board of directors. As of December 31, 2007, we had no
outstanding preferred stock.
On
November 17, 2005, the board of directors designated 100,000 shares of
authorized preferred stock as the Series E Preferred Stock in conjunction with
its adoption of a Shareholder Protection Rights Agreement (Note
10).
Common
Stock and Warrants
On
March
5, 2008, we completed the sale of an aggregate of 1,240,199 shares of our common
stock to a limited number of domestic institutional and other investors in
a
private placement transaction pursuant to an offering exemption under the
Securities Act of 1933. Such shares represent 4.7% of our outstanding common
stock on an after-issued basis. 1,110,999 shares were sold at a price of $7.50
per share, and 129,200 shares were sold to Mr. Jeffrey Parker, our chief
executive officer and chairman, at $7.74 per share. The net proceeds from this
transaction of approximately $9 million will be used for general working capital
purposes.
The
common stock issued in the private offering will be registered by ParkerVision
for re-offer and re-sale by the investors. We have committed to file the
registration statement within 30 days of closing and to cause the registration
statement to become effective on or prior to the earlier of (i) the fifth
trading day following the date that we are notified by the SEC that the
registration statement will not be reviewed or is no longer subject to review,
or (ii) 120 days after the closing date. If the Common Stock is not registered
for resale within those time periods, we will pay liquidated damages in the
amount of one percent of the amount invested for each 30-day period (pro rated)
until the filing or effectiveness of the registration statement, up to a maximum
of ten percent of the gross proceeds, or $933,250.
42
On
February 23, 2007, we completed the sale of an aggregate of 992,441 shares
of
our common stock to a limited number of domestic institutional
and other investors in a private placement transaction pursuant to offering
exemptions under the Securities Act of 1933. The shares, which represented
4.1%
of our outstanding common stock on an after-issued basis, were sold at a price
of $8.50 per share, for net proceeds of approximately $8.4 million. The net
proceeds from this transaction were used for general working capital purposes.
On
February 3, 2006, we completed the sale of an aggregate of 2,373,335 shares
of
common stock to a limited number of institutional and other investors in a
private placement transaction pursuant to offering exemptions under the
Securities Act of 1933. The shares, which represented 10.2% of our outstanding
common stock on an after-issued basis, were sold at a price of $7.50 per share,
for net proceeds of approximately $16.2 million. Warrants to purchase an
additional 593,335 shares of common stock were issued in connection with the
transaction for no additional consideration. The warrants were immediately
exercisable at an exercise price of $8.50 per share and expire on February
3,
2011. The warrants may be redeemed by ParkerVision after February 3, 2008,
at
$.01 per warrant, provided that the shares underlying the warrants are
registered for resale and the common stock traded at a volume weighted-average
price equal to or greater than 200% of the then exercise price for a prescribed
period of time. The estimated fair value of the warrants of $2,597,396 was
classified as equity on the issuance date.
On
September 19, 2005, we entered into a consulting agreement with an independent
engineering consultant to perform services over a one year period. Total
consideration for the services in the amount of $160,000 was payable to the
consultant in cash or in shares of our common stock at our sole option. We
issued 11,127 and 8,541 shares of our common stock in 2006 and 2005,
respectively in settlement of this obligation. The shares were issued under
the
2000 Plan.
On
March
14, 2005, ParkerVision consummated the sale of an aggregate of 2,880,000 shares
of common stock to a limited number of institutional and other investors in
a
private placement transaction pursuant to offering exemptions under the
Securities Act of 1933. The shares, which represented 14% of the Company’s
outstanding common stock on an after-issued basis, were sold at a price of
$7.50
per share, for net proceeds of approximately $20.1 million. Warrants to purchase
an additional 720,000 shares of common stock were issued in connection with
the
transaction for no additional consideration. The warrants were immediately
exercisable at an exercise price of $9.00 per share and expire on March 10,
2010. The warrants may be redeemed by ParkerVision, at $.01 per warrant,
provided that the shares underlying the warrants are registered for resale
and
the common stock trades at a volume weighted-average price equal to or greater
than 200% of the then exercise price for a prescribed period of time. The
estimated fair value of the warrants of $3,119,777 was classified as equity
on
the issuance date.
10.
SHAREHOLDER
PROTECTION RIGHTS AGREEMENT
On
November 21, 2005, we adopted a Shareholder Protection Rights Agreement (“Rights
Agreement”) which calls for the issuance, on November 29, 2005, as a dividend,
rights to acquire fractional shares of Series E Preferred Stock. We did not
assign any value to the dividend as the value of these rights is not believed
to
be objectively determinable. The principal objective of the Rights Agreement
is
to cause someone interested in acquiring us to negotiate with our Board of
Directors rather than launch an unsolicited or hostile bid. The Rights Agreement
subjects a potential acquirer to substantial voting and economic dilution.
Each
share of Common Stock issued in the future by ParkerVision will include an
attached right.
The
rights initially are not exercisable and trade with the Common Stock of
ParkerVision. In the future, the rights may become exchangeable for shares
of
Series E Preferred Stock with various provisions that may discourage a takeover
bid. Additionally, the rights have what are known as “flip-in” and “flip-over”
provisions that could make any acquisition of us more costly to the potential
acquirer. The rights may separate from the Common Stock following the
acquisition of 15% or more of the outstanding shares of Common Stock by an
acquiring person. Upon separation, the holder of the rights may exercise their
right at an exercise price of $45 per right (the “Exercise Price”), subject to
adjustment and payable in cash.
43
Upon
payment of the exercise price, the holder of the right will receive from us
that
number of shares of Common Stock having an aggregate market price equal to
twice
the Exercise Price, as adjusted. The Rights Agreement also has a flip over
provision allowing the holder to purchase that number of shares of common/voting
equity of a successor entity, if we are not the surviving corporation in a
business combination, at an aggregate market price equal to twice the Exercise
Price.
We
have
the right to substitute for any of our shares of Common Stock that we are
obligated to issue, shares of Series E Preferred Stock at a ratio of one
ten-thousandth of a share of Series E Preferred Stock for each share of Common
Stock. The Series E Preferred Stock, if and when issued, will have quarterly
cumulative dividend rights payable when and as declared by the board of
directors, liquidation, dissolution and winding up preferences, voting rights
and will rank junior to other securities of ParkerVision unless otherwise
determined by the board of directors.
The
rights may be redeemed upon approval of the board of directors at a redemption
price of $0.01. The Rights Agreement expires on November 21, 2015.
11.
COMMITMENTS
AND CONTINGENCIES
Lease
Commitments
We
entered into a lease agreement for our new headquarters facility in
Jacksonville, Florida, pursuant to a non-cancelable lease agreement effective
June 1, 2006. The lease provides for a straight-lined monthly rental payment
of
$15,806 through October 31, 2011 with an option for renewal. The lease provides
for a tenant improvement allowance of approximately $437,000 which has been
recorded in the accompanying balance sheet as leasehold improvements with a
corresponding entry to deferred rent. The leasehold improvements will be
depreciated over the lease term. Deferred rent will be amortized as a reduction
to lease expense over the lease term.
We
also
lease office space in Lake Mary, Florida for our wireless design center. The
lease term, as amended, was renewed in September 2005 and provides for a
straight-lined monthly rental payment of approximately $20,296 through December
2010.
In
addition to sales tax payable on base rental amounts, certain leases obligate
us
to pay pro-rated annual operating expenses for the properties. Rent expense
for
properties, net of sublease income, for the years ended December 31, 2007,
2006,
and 2005 was $517,188, $510,014, and $688,258, respectively.
In
addition, we lease certain equipment, primarily for research and development
activities, under non-cancelable operating leases with lease terms through
August 2009. Equipment rent expense for the years ended December 31, 2007,
2006
and 2005 was $220,169, $122,650 and $47,051, respectively.
Future
minimum lease payments under all non-cancelable operating leases that have
initial or remaining terms in excess of one year as of December 31, 2007 were
as
follows:
|
2008
|
$
|
650,000
|
||
|
2009
|
562,000
|
|||
|
2010
|
525,000
|
|||
|
2011
|
242,000
|
|||
|
|
$
|
1,979,000
|
Legal
Proceedings
We
are
subject to legal proceedings and claims which arise in the ordinary course
of
our business. We believe, based upon advice from outside legal counsel, that
the
final disposition of such matters will not have a material adverse effect on
its
financial position, results of operations or liquidity.
44
12.
RELATED-PARTY
TRANSACTIONS
We
paid
approximately $1,129,000, $1,532,000, and $1,921,000 in 2007, 2006, and 2005,
respectively, for patent-related legal services to a law firm, of which Robert
Sterne, one of our directors since September 2006, is a partner.
Through
June 2006, we leased our headquarters facility from the Chairman and Chief
Executive Officer of the Company and Barbara Parker, a related party. The lease
provided annual base rental payments of approximately $280,000. We did not
incur
any losses related to early termination of this lease.
13.
CONCENTRATIONS
OF CREDIT RISK
Financial
instruments that potentially subject us to a concentration of credit risk
principally consist of cash and cash equivalents. At December 31, 2007, we
had
cash balances on deposit with banks that exceeded the balance insured by the
F.D.I.C. We maintain our cash investments with what management believes to
be
quality financial institutions and limit the amount of credit exposure to any
one institution.
14.
COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITY
In
June
2005, we formally announced our decision to exit our retail business activities
and terminated 44 employees whose roles were related to these activities. For
the year ended December 31, 2005, we paid approximately $575,000 in termination
benefits which are included in the consolidated statement of operations.
In
addition to termination benefits, we recognized impairment charges on certain
long-lived assets related to our retail activities. These charges include
impairment of prepaid license fees of approximately $662,000, impairment of
other intangible assets of approximately $584,000 and impairment of fixed
assets, primarily the manufacturing and prototype facility assets, of
approximately $626,000. These impairment charges are included as impairment
loss
in the consolidated statement of operations.
We
also
reduced the carrying value of our inventories to their estimated realizable
value at June 30, 2005, resulting in a charge of approximately $2.25 million
which was included as a separate component of cost of goods sold in the
consolidated statement of operations.
During
the second half of 2005, we reclaimed unsold product inventory from the
distribution channel, liquidated our raw materials and finished product
inventory through wholesale channels and liquidated our manufacturing and
prototype facility assets and other property and equipment utilized in the
retail business activities. This process was substantially completed as of
December 31, 2005.
16.
QUARTERLY
FINANCIAL DATA (UNAUDITED)
The
quarterly financial data presented below is in thousands except for per share
data:
|
For
the three months ended
|
For the year
ended
|
|||||||||||||||
|
March 31,
2007
|
June 30,
2007
|
September
30,
2007
|
December 31,
2007
|
December 31,
2007
|
||||||||||||
|
Revenues
|
$
|
0
|
$
|
90
|
$
|
194
|
$
|
0
|
$
|
284
|
||||||
|
Gross
margin
|
0
|
13
|
19
|
0
|
32
|
|||||||||||
|
Net
loss
|
(4,468
|
)
|
(4,416
|
)
|
(4,656
|
)
|
(4,673
|
)
|
(18,213
|
)
|
||||||
|
Basic
and diluted net loss per
common share
|
$
|
(0.19
|
)
|
$
|
(0.18
|
)
|
$
|
(0.19
|
)
|
$
|
(0.19
|
)
|
$
|
(0.74
|
)
|
|
45
|
For the three months ended
|
For the year
ended
|
|||||||||||||||
|
March 31,
2006
|
June 30,
2006
|
September 30,
2006
|
December 31,
2006
|
December 31,
2006
|
||||||||||||
|
Revenues
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
|
Gross
margin
|
0
|
0
|
0
|
0
|
0
|
|||||||||||
|
Net
loss
|
(4,344
|
)
|
(4,319
|
)
|
(3,787
|
)
|
(3,366
|
)
|
(15,816
|
)
|
||||||
|
Basic
and diluted net loss per
common share
|
$
|
(0.19
|
)
|
$
|
(0.18
|
)
|
$
|
(0.16
|
)
|
$
|
(0.14
|
)
|
$
|
(0.68
|
)
|
|
Item
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Our
management has established disclosure controls and procedures to ensure that
material information relating to the Company, including its consolidated
subsidiary, is made known to the officers who certify the Company’s financial
reports and to other members of senior management and the Board of Directors.
An
evaluation of the effectiveness of the Company’s disclosure controls and
procedures as of December 31, 2007 was made under the supervision and with
the
participation of the Company’s senior management, including the chief executive
officer and chief financial officer. Based on that evaluation, they concluded
that the Company’s disclosure controls and procedures are effective as of the
end of the period covered by this report.
Management’s
Annual Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f). Under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the criteria established in Internal
Control - Integrated Framework issued
by
the Committee of Sponsoring Organizations of the Treadway Commission. Based
on
our evaluation under the criteria established in Internal
Control - Integrated Framework, our
management concluded that our internal control over financial reporting was
effective as of December 31, 2007.
Attestation
Report of the Independent Registered Public Accounting Firm
The
independent registered public accounting firm of PricewaterhouseCoopers LLP
has
attested to, and reported on, the effectiveness of our internal control over
financial reporting. Their report is included in “Report of Independent
Certified Public Accounting Firm” included in Item 8.
Changes
in Internal Control Over Financial Reporting
For
the
three month period ended December 31, 2007, there has been no change in our
internal control over financial reporting that has materially affected, or
is
reasonably likely to materially affect, our internal control over financial
reporting.
46
Item
9B. Other Information.
None.
PART
III
Item
10. Directors, Executive Officers and Corporate
Governance.
Our
directors and executive officers are listed below:
|
Name
|
|
Age
|
|
Position
|
|
Jeffrey
L. Parker
|
51
|
Chairman
of the Board and Chief Executive Officer
|
||
|
Cynthia
Poehlman
|
41
|
Chief
Financial Officer and Corporate Secretary
|
||
|
David
F. Sorrells
|
49
|
Chief
Technical Officer and Director
|
||
|
William
Hightower
|
64
|
|
Director
|
|
|
John
Metcalf
|
57
|
Director
|
||
|
Todd
Parker
|
43
|
Director
|
||
|
William
L. Sammons
|
87
|
Director
|
||
|
Robert
G. Sterne
|
56
|
Director
|
||
|
Nam
P. Suh
|
71
|
Director
|
||
|
Papken
S. der Torossian
|
69
|
Director
|
Jeffrey
L. Parker
has been
chairman of the board and our chief executive officer since our inception in
August 1989 and our president from April 1993 to June 1998. From March 1983
to
August 1989, Mr. Parker served as executive vice president for Parker
Electronics, Inc., a joint venture partner with Carrier Corporation performing
research development, manufacturing and sales and marketing for the heating,
ventilation and air conditioning industry.
Cynthia
Poehlman
has been
our chief financial officer since June 2004 and our Corporate Secretary since
August 2007. From March 1994 to June 2004, Ms. Poehlman was our controller
and
our chief accounting officer.
David
F. Sorrells
has been
our chief technical officer since September 1996 and has been a director since
January 1997. From June 1990 to September 1996, Mr. Sorrells served as our
engineering manager.
William
A. Hightower
has been
a director since March 1999. From September 2003 to his retirement in November
2004, Mr. Hightower was the president of the company. Mr. Hightower was the
president and chief operating officer and a director of Silicon Valley Group,
Inc. (“SVGI”), from August 1997 until his retirement in May 2001. SVGI is a
publicly held company which designs and builds semiconductor capital equipment
tools for chip manufacturers. From January 1996 to August 1997, Mr. Hightower
served as chairman and chief executive officer of CADNET Corporation, a
developer of network software solutions for the architectural industry. From
August 1989 to January 1996, Mr. Hightower was the president and chief executive
officer of Telematics International, Inc.
John
Metcalf
has been
a director since June 2004. Since November 2002, Mr. Metcalf has been a CFO
Partner with Tatum LLC, the largest executive services and consulting firm
in
the United States. Mr. Metcalf has 18 years experience as a CFO, most recently
at ESI, a provider of high-technology manufacturing equipment to the global
electronics market. Prior to ESI, Mr. Metcalf served as CFO for Siltronic,
WaferTech, Siltec Corporation, and OKI Semiconductor. Mr. Metcalf began his
career at AMD, where he worked for eleven
47
years
in
a number of finance managerial positions including Director and Controller
of
North American Operations. Mr.
Metcalf also currently serves on the Board of Directors and is Chairman of
the
Audit Committee for Microfield Group, Inc.
Todd
Parker
has been
a director since our inception and was a vice president of ours from inception
to June 1997 and from July 2002 to August 2006. Mr. Parker acted as a
consultant to us from June 1997 through November 1997 and from September 2001
to
July 2002. On July 31, 2002, Mr. Parker was appointed president of the Video
Business Unit of the company until that division was sold in May 2004 when
he
took a position as Vice President for Corporate Development. Following the
exit
from retail business activities in June 2005, Mr. Parker took the position
as
our Vice President of Product Operations until his retirement in August 2006.
From January 1985 to August 1989, Mr. Parker served as general manager of
manufacturing for Parker Electronics.
William
L. Sammons
has been
a director since October 1993. From 1981 until his retirement in 1985, Mr.
Sammons was president of the North American Operations of Carrier
Corporation.
Nam
P. Suh
has been
a director since December 2003. Mr. Suh was inaugurated as President of Korea
Advanced Institute of Science and Technology (KAIST) in July 2006. In 2008,
he
retired from MIT where he has been a member of the faculty since 1970. At MIT,
Mr. Suh held many positions including director of the MIT Laboratory for
Manufacturing and Productivity, head of the department of Mechanical Engineering
(1991-2001) director of the MIT Manufacturing Institute and director of the
Park
Center for Complex Systems. In 1984, Mr. Suh was appointed the Assistant
Director for Engineering of the National Science Foundation by President Ronald
Reagan and confirmed by the U.S. Senate. Mr. Suh is a widely published author
of
approximately 300 articles and seven books on topics related to tribology,
manufacturing, plastics and design. Mr. Suh has approximately 50 United States
patents and many foreign patents, some of which relate to plastics, polymers
and
design. He is the recipient of six honorary doctorates from six universities
in
four continents. Mr. Suh also serves on the board of directors of Integrated
Device Technology, Inc.
Robert
G. Sterne has
been
a director since September 2006. Since 1978, Mr. Sterne has been a partner
of
the law firm of Sterne, Kessler, Goldstein & Fox PLLC, specializing in
patent and other intellectual property law. Mr. Sterne provides legal services
to us as one of our patent and intellectual property attorneys. Mr. Sterne
served as a director of ParkerVision from February 2000 to June 2003.
Papken
S. der Torossian
has been
a director since June 2003. Mr. der Torossian was chief executive officer of
SVGI from 1986 until 2001. Prior to his joining SVGI, he was president and
chief
executive officer of ECS Microsystems, a communications and PC company that
was
acquired by AMPEX Corporation where he stayed on as a manager for a year. From
1976 to 1981 Mr. der Torossian was president of the Santa Cruz Division of
Plantronics where he also served as vice president of the Telephone Products
Group. Previous to that he spent four years at Spectra-Physics and twelve years
with Hewlett-Packard in a variety of management positions. From March 2003
until
May 2007, Mr. der Torossian served as chairman of the board of directors of
Therma-Wave, Inc., a company engaged in the manufacture and sale of process
control metrology systems used in manufacturing semiconductors. Since September
2005, Mr. der Torossian has served as Executive Chairman of Vistel Semiconductor
Systems, Inc, a private company. Vistel Semiconductor Systems, Inc. is one
of
the portfolio companies of Golden Gate Capital, a private equity firm where
Mr.
der Torossian serves as advisor for semiconductor related activities. Since
August 2007, Mr. der Torossian has served as a director and a member of the
Compensation Committee and Nominating and Governance Committees of Atmel
Corporation, a public company.
Family
Relationships
Messrs.
Jeffrey and Todd Parker are brothers.
48
Audit
Committee and Financial Expert
We
have
an audit committee that is comprised of independent directors and is governed
by
a board-approved charter. The charter, among other things, contains the
committee’s membership requirements and responsibilities. The members of the
audit committee are Messrs. John Metcalf, William L. Sammons and Papken der
Torossian. Mr. Metcalf serves as chairman of the audit committee.
The
board
of directors made a qualitative assessment of each member of the audit committee
of the board of directors to determine their level of financial knowledge and
experience based on a number of factors and has determined that each member
is a
financial expert within the meaning of all applicable rules. This determination
was made with reference to the rules of Nasdaq and the SEC. The board of
directors considered each of the members’ ability to understand generally
accepted accounting principles and financial statements, their ability to assess
the general application of generally accepted accounting principles in
connection with our financial statements, including estimates, accruals and
reserves, their experience in analyzing or evaluating financial statements
of
similar breadth and complexity as our financial statements, their understanding
of internal controls and procedures for financial reporting and their
understanding of the audit committee functions.
Shareholder
Proposals and Nominations
There
have been no material changes to the procedures by which security holders may
recommend nominees to our board of directors.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
directors and persons who beneficially own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the SEC and the National Association of Securities Dealers,
Inc.
Officers, directors and ten percent shareholders are charged by SEC regulation
to furnish us with copies of all Section 16(a) forms they file. Based solely
upon our review of the copies of such forms received by us, or written
representations from certain reporting persons that no Forms 5 were required
for
those persons, we believe that, during the fiscal year ended December 31,
2007, all filing requirements applicable to the company executive officers,
directors and ten percent shareholders were fulfilled.
Code
of Ethics
The
board
of directors has adopted a code of ethics that is designed to deter wrongdoing
and to promote ethical conduct and full, fair, accurate, timely and
understandable reports that the company files or submits to the SEC and others.
A copy of the code of ethics may be found on the company’s website at
www.parkervision.com.
Item
11. Executive Compensation
Compensation
Committee Interlocks and Insider Participation
The
members of our compensation committee, all of whom are independent directors,
are Messrs. William L. Sammons, Nam P. Suh and Papken der Torossian. Mr. Suh
serves as chairman of the compensation committee.
49
Compensation
Committee Report
The
Compensation Committee of the Board of Directors (the “Committee”) oversees our
company’s compensation programs on behalf of the Board. In fulfilling its
oversight responsibilities, the Compensation Committee reviewed and discussed
with management the Compensation Discussion and Analysis set forth in this
Form
10-K. Based upon the review and discussions referred to above, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Form 10-K.
Submitted
by the Compensation Committee:
Nam
Suh
(Chair)
William
Sammons
Papken
der Torossian
Compensation
Discussion and Analysis
Overview
of Compensation Program
Our
compensation program is designed to support our business objectives by
structuring compensation packages to retain, reward, motivate and attract
employees who possess the required technical and entrepreneurial skills and
talent. The overall objectives of the business are to continue innovative
technological advances of our wireless technologies, achieve technical and
commercial acceptance of our wireless technologies, and, in doing so, to create
significant shareholder value. The Committee is responsible for establishing
and
reviewing the compensation policies for our executives and ensuring that our
executives are compensated in a manner consistent with those policies. The
compensation of our executives is designed to reward the achievement of both
quantitative and qualitative performance goals which specifically relate to
the
objectives of the business both short and long term.
There
are
three primary components of our compensation plan: (1) base salaries, (2) annual
performance incentives, and (3) long-term incentives. These components are
the
same for all of our employees. The amount of each component is scaled according
to the level of business responsibilities of each individual. Each component
of
the compensation program, and the manner in which the Committee determined
each
component for our 2007 fiscal year, are discussed in detail below. In addition,
we provide standard employee benefits that include health benefits, life
insurance, and tax-qualified savings plans. We did not provide any special
employee benefits or perquisites in 2007 for executives other than supplemental
life insurance policies for the benefit of Messrs. Jeffrey Parker and David
Sorrells and an automotive allowance for Mr. Jeffrey Parker. We do not have
pension or other retirement benefits or any type of nonqualified deferred
compensation programs for our executives or other employees.
Comparative
Benchmarking
In
establishing our current executive compensation policies, programs and awards,
the Committee has engaged Frederic W. Cook & Co., Inc. (“Cook”) annually
since 2005 to assist with the compilation of comparative benchmark data and
to
provide recommendations. Cook recommended a comparative peer group (“Peer
Group”) based on (i) companies generally in the wireless communications or
communications equipment industries, (ii) companies that are broadly similarly
sized in terms of market capitalization value, (iii) companies with similar
growth and performance potential and/or (iv) companies that are considered
competitors of ours in either the labor or capital markets. Financial metrics
for each of these companies was gathered including most recent four quarters
revenue, most recent four quarters operating income, most recent year employee
count and market capitalization. Market capitalization was considered the most
relevant data point in selecting the Peer Group.
As
a
result of changes in our business activities over the past several years, Cook
recommended, and the Committee accepted, changes to our Peer Group. These
changes generally included selecting companies more similarly matched in terms
of size, market valuation, and industry. We expect that it will be necessary
as
50
the
business evolves to update the Peer Group periodically in order to maintain
a
list of relatively comparable companies for compensation evaluation purposes.
However, we anticipate that the Committee will continue to apply consistent
criteria in its selection of the Peer Group.
The
current Peer Group, as recommended by Cook and approved by the Committee
includes the following fourteen companies, listed in order of market
capitalization (highest to lowest) as of June 30, 2007: Symmetricom Inc, Digi
International Inc., EMS Technologies Inc., Oplink Communications Inc., Anaren
Inc., Packeteer Inc., Network Equipment Technologies Inc., PCTEL, Inc., Radyne
Corporation, Carrier Access Corporation (subsequently acquired by privately-held
Turin Networks, Inc.), Airspan Networks Inc., EFJ Inc., Endwave Corporation,
and
Vyyo Inc. The range of market capitalization values for the Peer Group was
from
$123 million to $390 million at June 30, 2007. In relation to the Peer Group,
we
ranked sixth in terms of market capitalization at June 30, 2007.
The
Committee reviewed the compensation programs for the Peer Group as a general
indicator of relevant market conditions. The data from this Peer Group was
considered in determining the proportions of base pay, annual incentive pay
and
long-term compensation value for our executives. All of the components of
compensation were generally targeted at the market median or 50th
percentile of the market.
Compensation
Elements
Base
Pay - Base
salaries and related benefits are designed to provide basic economic security
for our employees. Our base salaries are established at a level that is
consistent with competitive practices in a technological, innovative and
fast-moving industry in order to help retain and recruit our highly skilled
workforce. Overall, base salaries are targeted at the median base salaries
for
the Peer Group in order to allow us to compete in the market for exceptional
employees without placing an undue emphasis on fixed compensation. The base
salary for our CTO, Mr. Sorrells, falls at or above the 75th
percentile of the Peer Group. Our business objectives are heavily reliant upon
technical innovation and we compete for technical talent with multi-national
organizations with significantly greater financial resources and superior
employee benefits. As such, the Committee has determined that targeting the
75th
percentile or above for highly technical positions is appropriate.
Annual
Performance Incentives –
Annual
performance incentives are specifically designed to link a meaningful portion
of
the executive’s pay to accomplishment of specific short-term objectives that are
necessary for successful execution of our longer-term business plan.
The
annual incentive plan for all employees, including executives, provides for
cash
awards that are determined at the end of each fiscal year immediately following
the performance measurement period. The target award depends upon the
achievement of corporate goals, the individual’s level of responsibility, the
individual’s personal performance for the period, and the individual’s
achievement of specific individual goals that support the overall corporate
goals.
The
incentive award target for executives is determined by the Committee and is
defined as a percentage of base salary. In 2006, the Committee approved a formal
performance incentive plan with target annual incentive compensation equal
to
75% of base salary for the Chief Executive Officer and 50% of base salary for
other named executive officers. The plan did not establish a minimum achievement
level, nor did it allow for upside opportunity for above-target performance.
The
target percentages were determined based on the median of annual bonuses earned
by the original Peer Group. The Committee compared these targets against the
revised Peer Group in 2007 and determined that the target annual cash
compensation for 2007 for our executives is generally at the median when
compared to Peer Group target amounts. The Committee may exercise its discretion
in reducing or increasing the size of an executive annual incentive award,
although to date, the Committee has not done so.
51
For
2007,
the Committee approved the following annual incentive awards for its named
executive officers:
|
Name and Position
|
Value of Award Earned ($)
|
|||
|
Jeffrey
Parker, Chief Executive Officer
|
$
|
225,000
|
||
|
Cindy
Poehlman, Chief Financial Officer
|
$
|
69,200
|
||
|
David
Sorrells, Chief Technology Officer
|
$
|
100,000
|
||
The
awards for 2007 were based on the Committee’s assessment of both corporate goals
and individual achievement. The corporate goals included (i) sales goals, as
measured by design wins with target customers; (ii) customer support goals,
as
measured by performance against specified customer statements of work, (iii)
technology goals, as measured by integrated circuit design achievements against
specified marketing requirements documents, and (iii) financial goals, as
measured by performance against operating expense and cash flow budgets. With
regard to individual achievements, the Committee considered Mr. Parker’s ability
to guide and develop the senior management team in both technological innovation
and sales execution, as well as the progress made in developing business
relationships in the highly-competitive mobile handset industry. With regard
to
Ms. Poehlman, the Committee considered her initiative in implementing process
changes which increased the strength of financial reporting controls thereby
continuing to ensure a high level of integrity in the financial reporting
process, her growing role with regard to shareholder relations and her
additional role as Corporate Secretary. With regard to Mr. Sorrells, the
Committee considered Mr. Sorrells’ significant level of technical achievement,
including his work with the patent office in filing new patents, his ability
to
guide the intellectual property team in securing issuance of the first d2p
patent, his individual contribution to the development program with ITT and
his
significant level of contribution to support the technological aspects of
business dealings with target customers. Furthermore, the Committee also took
into consideration that Mr. Sorrells had 200,000 share options, with an exercise
price of $15.13, expire unexercised in the preceding eighteen month period.
Although
the annual performance incentive award is intended to be a cash-based award,
the
Committee allowed executives to elect payment of all or a portion of their
award
in equity in order to preserve cash for other business purposes. Mr. Parker
elected to receive his full award, net of tax withholdings, in shares of common
stock. Ms. Poehlman elected to receive one-third of her award in cash with
the
balance paid, net of tax withholdings, in shares of common stock. Mr. Sorrells
elected to receive his full award in cash. The share-based awards were priced
at
$11.17 per share, the closing market price of our common stock on the date
the
award was approved by the Committee. The awards are reflected in column (e)
of
the Summary Compensation Table below. The equity portion of the awards are
also
reflected in columns (c) and (g) of the Grants of Plan Based Awards Table below.
Long
Term Incentives
- Long
term incentives are specifically designed to align employee and shareholder
interests by rewarding performance that enhances shareholder value. Equity-based
awards are used for long-term incentives in order to link employee’s
compensation to the value of our common stock. Stock options have been used
as
the primary vehicle for equity compensation for all employees, including
executives. Stock options are granted at market and have no value without
appreciation of the market price of our stock. Therefore, stock options are
considered a strong motivator for enhancing shareholder value through corporate
accomplishments.
In
determining long-term equity incentive award size, the Committee used a
Shareholder Value Transfer (“SVT”) Allocation methodology. SVT refers to the
aggregate value or expense of grants as a percent of a company’s total market
capitalization. The Committee considered data compiled by Cook regarding the
average SVT rate and allocation percentages for the Peer Group. For 2007, the
Committee targeted the 75th
percentile of the Peer Group data rather than the median based on the large
number of out-of-the-money share options held by the named executive officers,
many of which had or were expected to soon expire
52
unexercised.
The Committee approved aggregate awards of 185,000 shares for its named
executive officers and 70,000 share options for other senior management
employees as long-term incentive awards. Consistent with our equity grant
practices as discussed below, these awards were granted and priced in four
equal
installments on pre-determined quarterly grant dates, beginning February 15,
2007. The options granted for named executives, and all other employees, vest
over three years, with the first one-third vesting one year following the grant
date and the remaining two-thirds vesting in monthly increments thereafter.
The
Committee continues to evaluate the appropriate mix of long-term pay elements
in
comparison to the market and in line with our strategy. Recently the Committee
has considered our historical stock option awards and their failure to provide
the intended long-term incentive based on the significant volatility of our
stock, general market conditions and the substantial number of out-of-the-money
options expected to expire unexercised. Based on these and other factors, the
Committee anticipates shifting towards a blend of stock options and restricted
stock or restricted share unit awards in the future in order to continue to
ensure that our long-term incentive programs produce the intended results.
Equity
Grant Practices
Grants
in
connection with new hires and job promotions are made on the 15th
day of
the month following the new employee’s hire date and/or the effective date of
the job promotion. All other employee equity grants are made on one of four
pre-determined quarterly dates, whichever date most closely follows the date
that all terms of the grant are approved by the Committee or its delegate.
The
preset quarterly dates are February 15th,
May
15th,
August
15th
and
November 15th,
or, if
the 15th
falls on
a non-trading day, the first trading day following such date. In addition,
long-term equity grants made to executives and senior managers will be granted
in four equal amounts on the four preset quarterly dates following the date
a
determination is made by the Committee as to the aggregate award. The intent
of
this grant policy is to (a) eliminate the need to evaluate potential grant
dates
in light of pending and/or recently disclosed material events and (b) to attempt
to mitigate the effect of significant price volatility when a single date is
utilized for annual equity awards.
Stock
options are granted with an exercise price equal to the closing market value
of
our common stock on the grant date. In 2000, in connection with an employment
agreement for our chief executive officer, options were granted at a premium
to
the closing market price. Options are never granted with exercise prices below
market value on the date of grant.
Role
of Executive Officers in Determining Executive Pay
The
Committee makes all compensation decisions for all elements of compensation
for
the CEO and other named executive officers and approves recommendations
regarding equity awards for all employees. Our chief executive officer, chief
financial officer and human resource management personnel make recommendations
to the Committee annually with regard to overall pay strategy including program
designs, annual incentive plan design, and long-term incentive plan design
for
management employees. Our chief executive officer evaluates the performance
of
the other executive officers annually and makes recommendations regarding their
compensation to the Committee for its consideration and determination. Human
resource management provides the Committee with market information regarding
executive officers’ base pay and annual performance incentives as requested.
Executives do not determine any element or component of their own pay package
or
total compensation amount.
Executive
and Director Stock Ownership Requirements
We
currently do not have a policy with regard to minimum stock ownership for our
executives or non-employee directors.
Summary
Compensation Table
The
following table summarizes the total compensation paid to or earned by each
of
our named executive
53
officers
who served as executive officers during all or a portion of the year ended
December 31, 2007 and 2006.
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
||||||
|
Name
and
Principal
Position
|
Year
|
|
Salary
($)
|
|
Option
Awards
(1)
($)
|
|
Non-equity
Incentive Plan Compensation(2)
($)
|
|
All
other
($)
|
|
Total
($)
|
||||||||
|
Jeffrey
Parker,
Chief
|
2007
|
$
|
325,000
|
$
|
381,096
|
$
|
225,000
|
(3)
|
$
|
14,365
|
(4)
|
$
|
945,461
|
||||||
|
Executive
Officer
&
Chairman
of
the
Board
|
2006
|
325,000
|
92,863
|
50,279
|
(5)
|
4,520
|
(6)
|
472,662
|
|||||||||||
|
Cynthia
Poehlman,
Chief
Financial
|
2007
|
200,000
|
262,653
|
69,200
|
(7)
|
2,000
|
(8)
|
533,853
|
|||||||||||
|
Officer
and
Corporate
Secretary
|
2006
|
200,000
|
188,636
|
21,250
|
-
|
409,886
|
|||||||||||||
|
David
Sorrells,
Chief
|
2007
|
275,625
|
228,701
|
100,000
|
2,100
|
(6)
|
606,426
|
||||||||||||
|
Technology
Officer
|
2006
|
272,850
|
238,037
|
25,840
|
2,100
|
(6)
|
538,827
|
||||||||||||
|
(1)
|
The
amounts reported in column (d) represent the dollar amount of compensation
cost recognized in 2007 and 2006 in accordance with FAS123R, excluding
forfeiture estimates. Refer to Note 8 of the Consolidated Financial
Statements included in Item 8 for the assumptions made in the valuation
of
stock options.
|
|
(2)
|
The
amounts reported in column (e) represent the dollar amount of compensation
cost related to awards under non-equity incentive plans. Unless otherwise
specified, all amounts reported in this column were determined and
paid in
the year reported. In certain cases, the named executive elected
to forego
his or her cash compensation in lieu of an equity award of equal
dollar
value. In these cases, the award value remains in this column but
will be
separately footnoted as to the amount of award distributed in equity.
Any
equity award included in this column will also be reflected in the
Grants
of Plan-Based Awards Table below.
|
|
(3)
|
In
2007, our chief executive officer elected to forego a $225,000 cash
performance incentive award in lieu of a stock award of 14,466 shares
of
common stock paid in 2008. The value of the stock award, net of $63,415
in
tax withholdings, is $161,585 based on the closing market price of
our
common stock on the grant date. Refer to columns (c) and (g) of the
Grants
of Plan-Based Awards Table below.
|
|
(4)
|
This
amount includes the dollar value of premiums paid by us for life
insurance
for the benefit of Mr. Parker in the amount of $4,980, the gross
value of
Mr. Parker’s automobile allowance of $7,385, and an employer matching
contribution to a 401k plan of
$2,000.
|
|
(5)
|
In
2006, our chief executive officer elected to forego a $50,279 cash
performance incentive award in lieu of a stock award of 5,089 shares
of
common stock.
|
|
(6)
|
This
amount represents the dollar value of premiums paid, or payable,
for life
insurance for the benefit of the executive.
|
|
(7)
|
In
2007, our chief financial offer elected to forego a portion of her
cash
performance incentive award in lieu of a stock award of 2,795 shares
of
common stock. The value of the stock award, net of $15,135 in tax
withholdings, is $31,220 based on the closing market price of our
common
stock on the grant date. Refer to columns (c) and (g) of the Grants
of
Plan-Based Awards Table below. Both the cash and equity portions
of this
award were paid in 2008.
|
|
(8)
|
Amount
represents an employer matching contribution to a 401k plan.
|
54
Grants
of Plan-Based Awards
The
following table summarizes each grant of an award made in 2007 to the executive
officers who served as executive officers during all or a portion of
2007.
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
||||||
|
Name
|
Grant Date
|
|
Estimated
Future
Payouts
Under Non-Equity
Incentive
Plan Awards
($)
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or Units
(#)
|
|
All Other
Option Awards: Number of Securities Underlying
Options (1)
(#)
|
|
Exercise or
Base Price
of Option
Awards
($/Share)
|
|
Full Grant Date
Fair Value of Equity Award
($)
|
||||||||
|
|
2/15/2007
|
-
|
-
|
37,500
|
$
|
9.89
|
$
|
257,361
|
|||||||||||
|
Jeffrey
Parker
|
5/15/2007
|
-
|
-
|
37,500
|
$
|
10.82
|
$
|
283,306
|
|||||||||||
|
|
8/15/2007
|
-
|
-
|
37,500
|
$
|
12.30
|
$
|
318,555
|
|||||||||||
|
|
11/15/2007
|
-
|
-
|
37,500
|
$
|
10.36
|
$
|
264,002
|
|||||||||||
|
|
2/1/2008
|
$
|
225,000
|
(2)
|
-
|
-
|
$
|
11.17
|
$
|
161,585
|
|||||||||
|
|
2/15/2007
|
-
|
-
|
8,750
|
$
|
9.89
|
$
|
60,051
|
|||||||||||
|
Cynthia
Poehlman
|
5/15/2007
|
-
|
-
|
8,750
|
$
|
10.82
|
$
|
66,105
|
|||||||||||
|
|
8/15/2007
|
-
|
-
|
8,750
|
$
|
12.30
|
$
|
74,329
|
|||||||||||
|
11/15/2007
|
-
|
-
|
8,750
|
$
|
10.36
|
$
|
61,600
|
||||||||||||
|
|
2/1/2008
|
$
|
46,355
|
(3)
|
-
|
-
|
$
|
11.17
|
$
|
31,220
|
|||||||||
|
(1)
|
Represents
a long term equity incentive award for 2007 distributed in four equal
installments in accordance with equity grant practices. Each award
vests
over three years and expires seven years from the date of grant.
|
|
(2)
|
Represents
the aggregate value of Mr. Parker’s 2007 incentive award as reported in
column (e) of the Summary Compensation Table above. Mr. Parker elected
to
forgo a cash award in lieu of an award of 14,466 shares of our common
stock valued at $161,585, which is net of tax withholdings of $63,415.
This award was paid on February 1,
2008.
|
|
(3)
|
Represents
the aggregate value of the portion of Ms. Poehlman’s 2007 incentive award
as included in column (e) of the Summary Compensation Table above
for
which Ms. Poehlman elected to accept a stock award of 2,795 shares
of our
common stock in lieu of cash. The stock award has a value of $31,220,
which is net of tax withholdings of $15,135. This award was paid
on
February 1, 2008.
|
Employment
and Other Agreements
As
of
December 31, 2007, we had no employment agreements in place. We have non-compete
arrangements in place with all of our employees. The non-compete agreements
provide for restrictions on (i) employment or consultation with competing
companies or customers, (ii) recruiting or hiring employees for a competing
company and (iii) soliciting or accepting business from our customers.
In
2007,
the Committee approved a change-in-control severance policy for the benefit
of
its named executives and other senior management employees. This policy provides
for compensation to covered employees if they are terminated in connection
with
a change-of-control event. The compensation to be paid under this policy
includes (a) a multiple of base salary, as determined on an individual basis
by
the Committee; (b) an amount in lieu of annual bonus or incentive compensation;
(c) continuation of group health benefits and (d)
55
acceleration
of any unvested and outstanding performance-based equity awards. Amounts to
be
paid to each executive in the event of a change in control are included in
the
tables under “Potential Payments upon Termination or Change in Control”
below.
Outstanding
Equity Awards at Fiscal Year End
The
following table summarizes the outstanding equity awards as of December 31,
2007
for each executive officer who served as an executive officer during all or
a
portion of 2007.
|
Option
Awards
|
||||||||||||||||
|
Name
|
Number of Securities
Underlying Unexercised Options (#) Exercisable
|
Number of
Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration Date
|
|||||||||||
|
12,500
|
-
|
-
|
$
|
19.00
|
3/10/2008
|
|||||||||||
|
350,000
|
-
|
-
|
$
|
41.00
|
9/07/2010
|
|||||||||||
|
150,000
|
-
|
-
|
$
|
61.50
|
10/01/2010
|
|||||||||||
|
15,000
|
-
|
-
|
$
|
19.99
|
2/26/2012
|
|||||||||||
|
Jeffrey Parker
|
75,000
|
-
|
-
|
$
|
5.77
|
8/09/2012
|
||||||||||
|
10,908
|
-
|
-
|
$
|
8.91
|
12/20/2012
|
|||||||||||
|
7,583
|
-
|
-
|
$
|
9.80
|
5/03/2013
|
|||||||||||
|
35,000
|
55,000
|
(1)
|
-
|
$
|
8.81
|
10/12/2013
|
||||||||||
|
|
- |
37,500
|
(1)
|
-
|
$
|
9.89
|
02/15/2014
|
|||||||||
|
|
- |
37,500
|
(1)
|
-
|
$
|
10.82
|
05/15/2014
|
|||||||||
|
|
- |
37,500
|
(1)
|
-
|
$
|
12.30
|
08/15/2014
|
|||||||||
|
|
- |
37,500
|
(1)
|
-
|
$
|
10.36
|
11/15/2014
|
|||||||||
|
7,500
|
-
|
-
|
$
|
15.13
|
5/15/2008
|
|||||||||||
|
4,500
|
-
|
-
|
$
|
23.13
|
5/16/2008
|
|||||||||||
|
9,500
|
-
|
-
|
$
|
15.13
|
5/15/2009
|
|||||||||||
|
5,000
|
-
|
-
|
$
|
23.13
|
5/16/2009
|
|||||||||||
|
30,000
|
-
|
-
|
$
|
41.50
|
12/31/2009
|
|||||||||||
|
Cynthia Poehlman
|
12,000
|
-
|
-
|
$
|
20.00
|
1/15/2011
|
||||||||||
|
19,444
|
5,556
|
(1)
|
-
|
$
|
5.77
|
8/09/2012
|
||||||||||
|
4,563
|
-
|
-
|
$
|
8.91
|
12/20/2012
|
|||||||||||
|
3,205
|
-
|
-
|
$
|
9.80
|
5/03/2013
|
|||||||||||
|
9,722
|
15,278
|
(1)
|
-
|
$
|
8.81
|
10/12/2013
|
||||||||||
|
90,000
|
60,000
|
(2)
|
-
|
$
|
5.70
|
6/25/2014
|
||||||||||
|
|
- |
8,750
|
(1)
|
-
|
$
|
9.89
|
02/15/2014
|
|||||||||
|
|
- |
8,750
|
(1)
|
-
|
$
|
10.82
|
05/15/2014
|
|||||||||
|
|
- |
8,750
|
(1)
|
-
|
$
|
12.30
|
08/15/2014
|
|||||||||
|
|
- |
8,750
|
(1)
|
-
|
$
|
10.36
|
11/15/2014
|
|||||||||
56
|
Option
Awards
|
||||||||||||||||
|
Name
|
Number of Securities
Underlying Unexercised Options (#) Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration Date
|
|||||||||||
|
162,000
|
-
|
-
|
$
|
28.25
|
2/15/2008
|
|||||||||||
|
12,500
|
-
|
-
|
$
|
19.00
|
3/10/2008
|
|||||||||||
|
David Sorrells
|
50,000
|
-
|
-
|
$
|
15.13
|
5/15/2008
|
||||||||||
|
100,000
|
-
|
-
|
$
|
23.13
|
12/11/2008
|
|||||||||||
|
200,000
|
-
|
-
|
$
|
48.00
|
12/31/2010
|
|||||||||||
|
18,444
|
7,556
|
(1)
|
-
|
$
|
5.77
|
8/9/2012
|
||||||||||
|
125,000
|
-
|
-
|
$
|
9.00
|
11/21/2012
|
|||||||||||
|
4,988
|
-
|
-
|
$
|
8.91
|
12/20/2012
|
|||||||||||
|
3,898
|
-
|
-
|
$
|
9.80
|
5/3/2013
|
|||||||||||
|
14,777
|
23,223
|
(1)
|
-
|
$
|
8.81
|
10/12/2013
|
||||||||||
|
(1)
|
Options
vest over the first three years of the seven year option term, with
33%
vesting one year following the grant date and the remaining 66% vesting
in
monthly increments for 24 months thereafter.
|
|
(2)
|
Options
vest at a rate of 20% per year for the first five years of the ten-year
option term.
|
Option
Exercises and Stock Vested
The
following table summarizes the option exercises and vesting of stock awards
for
the fiscal year ended December 31, 2007 for each executive officer who served
as
an executive officer during all or a portion of 2007.
|
Option
Awards
|
|||||||
|
Name
|
Number
of shares acquired on exercise (#)
|
Value
realized on exercise ($)
|
|||||
|
Jeffrey
Parker
|
-
|
-
|
|||||
|
Cynthia
Poehlman
|
-
|
-
|
|||||
|
David
Sorrells
|
9,000
|
$
|
81,486
|
||||
Potential
Payments upon Termination or Change in Control
Payments
Made Upon Termination - When
an
executive officer’s employment is terminated for any reason, other than for
cause, he or she is entitled to receive his or her base salary through the
date
of termination and any earned but unused vacation pay. When an executive
officer’s employment is terminated for cause, he or she is only entitled to his
or her base salary through the date of termination.
Payments
Made Upon Death or Disability - In
the
event of the death or disability of a named executive officer, in addition
to
the benefits listed under “Payments Made upon Termination” above, named
executive officers, or their designated beneficiaries, will receive automatic
acceleration of fifty percent of any unvested options in accordance with the
terms of their individual option agreements. In addition upon death, the
beneficiaries of Messrs. Parker and Sorrells will each receive proceeds from
company-paid life insurance policies provided to them in their name.
57
Payments
Made Upon a Change in Control- In
the
event of a change in control event, in addition to the benefits listed under
“Payments Made upon Termination”, named executive officers will receive
automatic acceleration of all unvested options in accordance with the terms
of
their individual option agreements. Furthermore, under our change-in-control
severance policy, in the event an executive is terminated in connection with
a
change in control event, he or she will be paid (a) a multiple of base salary,
as determined on an individual basis by the Committee; (b) an amount in lieu
of
annual bonus or incentive compensation; (c) continuation of group health
benefits and (d) acceleration of unvested and outstanding performance-based
equity awards, if any.
The
following table reflects the estimated amount of compensation due to each of
our
named executive officers in the event of termination of their employment. Actual
amounts to be paid out could only be determined at the time of an executive’s
actual separation.
|
Name
|
Benefit
and Payments Upon
Separation
|
Change in Control
|
Disability
|
Death
|
Other
|
|||||||||||
| Jeffrey Parker | ||||||||||||||||
|
|
Salary
|
$
|
975,000
|
(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
|
Short-term
Incentive Compensation
|
225,000
|
(2)
|
-
|
-
|
-
|
||||||||||
|
Long-Term
Incentive Compensation:
|
||||||||||||||||
|
Stock
Options
|
1,132,175
|
(3)
|
566,088
|
(4)
|
566,088
|
(4)
|
-
|
|||||||||
|
Benefits
& Perquisites:
|
||||||||||||||||
|
Health
Benefits
|
|
20,989
|
-
|
-
|
-
|
|||||||||||
|
Life
Insurance Proceeds
|
-
|
-
|
1,000,000
|
(5)
|
-
|
|||||||||||
|
Accrued
Vacation Pay
|
12,500
|
12,500
|
12,500
|
12,500
|
||||||||||||
|
Total
|
$
|
2,365,664
|
$
|
578,588
|
$
|
1,578,588
|
$
|
12,500
|
||||||||
| Cynthia Poehlman | ||||||||||||||||
|
|
Salary
|
$
|
400,000
|
(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Short-term
Incentive Compensation
|
69,200
|
(2)
|
-
|
-
|
-
|
|||||||||||
|
Long-Term
Incentive Compensation:
|
||||||||||||||||
|
Stock
Options
|
944,349
|
(3)
|
472,175
|
(4)
|
472,175
|
(4)
|
-
|
|||||||||
|
Benefits
& Perquisites:
|
||||||||||||||||
|
Health
Benefits
|
20,724
|
-
|
-
|
-
|
||||||||||||
|
Life
Insurance Proceeds
|
-
|
-
|
-
|
-
|
||||||||||||
|
Accrued
Vacation Pay
|
2,381
|
2,381
|
2,381
|
2,381
|
||||||||||||
|
Total
|
$
|
1,436,654
|
$
|
474,556
|
$
|
474,556
|
$
|
2,381
|
||||||||
| David Sorrells | ||||||||||||||||
|
|
Salary
|
$
|
826,875
|
(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Short-term
Incentive Compensation
|
100,000
|
(2)
|
-
|
-
|
-
|
|||||||||||
|
Long-Term
Incentive Compensation:
|
||||||||||||||||
|
Stock
Options
|
238,731
|
(3)
|
119,366
|
(4)
|
119,366
|
(4)
|
-
|
|||||||||
|
Benefits
& Perquisites:
|
||||||||||||||||
|
Health
Benefits
|
20,989
|
-
|
-
|
-
|
||||||||||||
|
Life
Insurance Proceeds
|
-
|
-
|
1,000,000
|
(5)
|
-
|
|||||||||||
|
Accrued
Vacation Pay
|
11,536
|
11,536
|
11,536
|
11,536
|
||||||||||||
|
Total
|
$
|
1,198,131
|
$
|
130,902
|
$
|
1,130,902
|
$
|
11,536
|
||||||||
| (1) |
Under
our change in control severance policy, Messrs. Parker and Sorrells
are
entitled to receive three times their annual base salary, and Ms.
Poehlman
is entitled to two times her annual base salary upon termination
following
a change of control as defined in the agreement.
|
| (2) |
Under
our change in control severance policy each executive is entitled
to
receive payment upon termination equal to the greater of (i) the
amount of
bonus and annual incentive compensation earned by the executive during
the
last full fiscal year prior to the change in control or (ii) the
average
of the bonus and annual incentive compensation earned by the executive
during the prior three full fiscal years.
|
| (3) |
Under
the terms of the individual option agreements, any unvested and
outstanding options will automatically accelerate upon a change in
control
event. The amount reflected in the table represents the intrinsic
value of
options subject to accelerated vesting using the December 31, 2007
closing
price of our common stock of $15.82.
|
| (4) |
Under
the terms of the individual option agreements, one half of any unvested
and outstanding options will automatically accelerate upon
|
58
death
or
disability of the executive. The amount reflected in the table represents the
intrinsic value of options subject to accelerated vesting using the December
31,
2007 closing price of our common stock of $15.82.
| (5) |
Represents
proceeds payable by a third-party insurance carrier on a company-paid
life
insurance policy for the benefit of the
executive.
|
Compensation
of Outside Directors
The
Committee is responsible for establishing outside directors’ compensation. Our
current director compensation program was implemented in 2005 based on the
Committee’s review of the benchmark data and best practices as compiled by Cook
utilizing the same Peer Group used for executive compensation. The committee
retainers were structured in such a way as to provide distinction between
compensation for committee members and chairpersons and between the
responsibilities of the various committees.
Our
non-employee directors’ compensation plan currently provides for an annual cash
retainer of $25,000 for board service. In addition, the plan provides for annual
cash retainers for committee participation as follows:
|
Audit
Committee
|
Compensation
Committee
|
Nominating
Committee
|
||||||||||||||
|
Chair
|
Member
|
Chair
|
Member
|
Chair
|
Member
|
|||||||||||
|
$15,000
|
$
|
7,500
|
$
|
10,000
|
$
|
5,000
|
$
|
5,000
|
$
|
2,500
|
||||||
All
annual retainers are paid in quarterly installments at the end of each fiscal
quarter. The plan also provides for an annual stock option award for our
directors including an option grant of 40,000 shares upon initial election
to
the board and 10,000 shares annually following each subsequent year of service.
The director options are granted on the 15th
day of
the first month following the directors’ election at the annual shareholders
meeting. These options cliff vest one year from the date of grant. In the event
a director resigns or is removed from the board for cause prior to the vesting
date, any unvested options will be forfeited.
All
board
members are reimbursed for reasonable expenses incurred in attending meetings.
In addition, the Company reimburses its board members for all or a portion
of
costs, including travel, for relevant director’s education.
The
following table summarizes the compensation of our non-employee directors for
the year ended December 31, 2007. Directors who are named executive officers
do
not receive separate compensation for their service as a director.
|
(a)
|
(b)
|
(c)
|
(d)
|
|||||||
|
Name
|
Fees earned or
paid
in cash
($)
|
Option
awards(1)
($)
|
Total
($)
|
|||||||
|
Papken
der Torossian
|
$
|
37,500
|
$
|
61,185
|
$
|
98,685
|
||||
|
William
Hightower
|
25,000
|
61,185
|
86,185
|
|||||||
|
John
Metcalf
|
42,500
|
(2)
|
61,185
|
103,685
|
||||||
|
Todd
Parker
|
25,000
|
31,430
|
56,430
|
|||||||
|
William
Sammons
|
37,500
|
(3)
|
61,185
|
98,685
|
||||||
|
Robert
Sterne
|
30,000
|
150,449
|
180,449
|
|||||||
|
Nam
Suh
|
37,500
|
61,185
|
98,685
|
|||||||
59
|
(1)
|
The
amount reported in column (c) above represents the compensation expense
related to director stock option awards as recognized under FAS123R.
On
August 15, 2007, each of our non-employee directors was granted an
option
to purchase 10,000 shares of our common stock at an exercise price
of
$12.30 per share. Each option vests one year from the date of grant
and
expires 7 years from the grant date. The grant date aggregate fair
market
value of each grant was $84,948.
|
| (2) |
The
cash retainer for director’s fees for Mr. Metcalf is paid directly to
Tatum Board Services, LLC.
|
|
(3)
|
Mr.
Sammons has waived receipt of any cash director’s fees. The amounts earned
by Mr. Sammons are accrued by us and, at Mr. Sammons’ request, distributed
to charitable organizations of his choosing.
|
As
of
December 31, 2007, the number of options outstanding for each of our directors
was as follows:
|
Number of securities underlying
outstanding options
|
|||||||
|
Name
|
(#)
exercisable
|
(#)
unexercisable (1)
|
|||||
|
Papken
der Torossian
|
145,000
|
10,000
|
|||||
|
William
Hightower
|
192,500
|
10,000
|
|||||
|
John
Metcalf
|
70,000
|
10,000
|
|||||
|
Todd
Parker
|
55,000
|
10,000
|
|||||
|
William
Sammons
|
145,000
|
10,000
|
|||||
|
Robert
Sterne
|
177,500
|
10,000
|
|||||
|
Nam
Suh
|
116,000
|
10,000
|
|||||
(1) The
unexercisable shares for each director will vest in August 2008.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The
following table sets forth certain information as of March 6, 2008 with respect
to the stock ownership of (i) those persons or groups who beneficially own
more
than 5% of our common stock, (ii) each of our director nominees, (iii) each
executive officer whose compensation exceeded $100,000 in 2007, and (iv) all
of
our directors, director nominees and executive officers as a group (based upon
information furnished by those persons).
|
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class(1)
|
|||||
|
Jeffrey
L. Parker (17)
|
3,222,686
|
(2)
|
11.86
|
%
|
|||
|
Todd
Parker (17)
|
969,088
|
(3)
|
3.65
|
%
|
|||
|
David
Sorrells (17)
|
532,607
|
(4)
|
1.97
|
%
|
|||
|
William
Hightower (17)
|
217,500
|
(5)
|
0.81
|
%
|
|||
|
John
Metcalf (17)
|
70,000
|
(6)
|
0.26
|
%
|
|||
|
William
L. Sammons (17)
|
164,750
|
(7)
|
0.62
|
%
|
|||
|
Robert
G. Sterne (17)
|
178,300
|
(8)
|
0.67
|
%
|
|||
|
Nam
P. Suh (17)
|
109,000
|
(9)
|
0.41
|
%
|
|||
|
Papken
S. der Torossian (17)
|
145,000
|
(10)
|
0.54
|
%
|
|||
|
Cynthia
Poehlman (17)
|
203,923
|
(11)
|
0.76
|
%
|
|||
|
Wellington
Management Company, LLP
|
3,151,713
|
(12)
|
11.90
|
%
|
|||
|
Daniel
M. Lewis
|
2,402,606
|
(13)
|
9.07
|
%
|
|||
|
Knoll
Capital Management, LP
|
1,825,917
|
(14)
|
6.88
|
%
|
|||
|
MaxTak
Capital Advisors, LLC
|
1,637,907
|
(15)
|
6.18
|
%
|
|||
|
All
directors, director nominees and executive officers as a group (10
persons)
|
5,812,854
|
(16)
|
20.19
|
%
|
|||
|
(1)
|
Percentage
includes all outstanding shares of common stock plus, for each person
or
group, any shares of common stock that the person or the group has
the
right to acquire within 60 days pursuant to options, warrants, conversion
privileges or other rights.
|
60
|
(2)
|
Includes
673,491 shares of common stock issuable upon currently exercisable
options, 2,277,584 shares held by Jeffrey Parker and Deborah Parker
Joint
Tenants in Common, 48,400 shares held by J-Parker Family Limited
Partnership and 69,114 shares owned of record by Mr. Parker's three
children over which he disclaims ownership. Mr. Jeffrey L. Parker
has sole
voting and dispositive power over the shares of common stock owned
by the
J-Parker Family Limited Partnership, as a result of which Mr. Jeffrey
Parker is deemed to be the beneficial owner of such shares. Excludes
187,500 shares of common stock issuable upon options that may become
exercisable in the future
|
|
(3)
|
Includes
55,000 shares of common stock issuable upon currently exercisable
options,
876,255 shares held by T-Parker Family Limited Partnership and 10,100
shares owned of record by Mr. Parker’s spouse and child over which he
disclaims ownership. Mr. Todd Parker has sole voting and dispositive
power
over the shares of common stock owned by the T-Parker Family Limited
Partnership, as a result of which Mr. Todd Parker is deemed to be
the
beneficial owner of such shares. Excludes 10,000 shares of common
stock
issuable upon options that may become exercisable in the
future
|
|
(4)
|
Represents
532,607 shares of common stock issuable upon currently exercisable
options
and excludes 26,779 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(5)
|
Includes
192,500 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(6)
|
Represents
70,000 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(7)
|
Includes
145,000 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(8)
|
Includes
177,500 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(9)
|
Represents
109,000 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(10)
|
Represents
145,000 shares of common stock issuable upon currently exercisable
options
and excludes 10,000 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(11)
|
Includes
201,128 shares of common stock issuable upon currently exercisable
options
and excludes 110,140 shares of common stock issuable upon options
that may
become exercisable in the future.
|
|
(12)
|
The
business address of Wellington Management Company, LLP is 75 State
Street,
Boston, Massachusetts 02109. Wellington Management, in its capacity
as
investment adviser, may be deemed to have beneficial ownership of
the
shares of common stock of the Company that are owned of record by
investment advisory clients of Wellington Management.
|
|
(13)
|
The
business address is 100 State Street, Suite 2B, Teaneck, New Jersey
07666.
Daniel Lewis, in his capacity as the controlling person of Gem Investment
Advisors, LLC which is the general partner of Gem Partners, L.P.,
has
shared voting and dispositive authority over 2,336,606 shares of
our
common stock owned by Gem Partners, L.P. Mr. Lewis also had sole
voting
authority over 66,000 shares of our common stock which he owns personally.
Gem Investment Advisors, LLC is also deemed the beneficial owner
of the
2,336,606 shares of our common stock owned by Gem Partners,
L.P.
|
|
(14)
|
The
business address is 666 Fifth Avenue, Suite 3702, New York, New York
10103. Knoll Capital Management, LP (KCMLP), in its capacity as investment
manager, and Fred Knoll, as President of KCMLP are each deemed to
have
beneficial ownership of the shares of our common stock that are owned
of
record by investment advisory clients of KCMLP. Includes 33,335 shares
of
common stock issuable upon currently exercisable
warrants
|
|
(15)
|
The
business address is 2 Executive Drive, Suite 720, Fort Lee, New Jersey
07024. MaxTak Capital Advisors LLC (MaxTak), in its capacity as a
commodity trading advisor, is deemed to have beneficial ownership
of
1,637,907 shares of our common
stock.
|
|
(16)
|
Includes
2,301,226 shares of common stock issuable upon currently exercisable
options held by directors and officers and excludes 394,419 shares
of
common stock issuable upon options that may vest in the future held
by
directors and officers (see notes 2, 3, 4, 5, 6, 7, 8, 9, 10, and
11
above).
|
|
(17)
|
The
person’s address is 7915 Baymeadows Way, Suite 400, Jacksonville, Florida
32256.
|
61
Equity
Compensation Plan Information
The
following table gives the information about common stock that may be issued
upon
the exercise of options, warrants and rights under all of our existing equity
compensation plans as of December 31, 2007, including the 1993 Stock Plan,
the
2000 Performance Equity Plan and other miscellaneous plans.
|
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding
options,
warrants
and rights
|
Weighted-average
exercise price of outstanding
options,
warrants
and
rights
|
Number
of
securities
remaining
available
for
future
issuance
under
equity compensation
plans
(excluding
securities
reflected
in
column
(a))
|
||||||
|
(a)
|
(b)
|
(c)
|
||||||||
|
Equity
compensation plans approved
by security holders
|
4,701,727
|
$
|
20.54
|
693,238
|
||||||
|
Equity
compensation plans not approved
by security holders
|
115,000
|
$
|
23.25
|
0
|
||||||
|
Total
|
4,816,727
|
693,238
|
||||||||
The
equity compensation plans reported upon in the above table that were not
approved by security holders include (i) options to purchase 25,000 shares
granted to two directors in March 1999 at exercise prices of $23.25 per share
that are vested and expire in March 2009 and (ii) options to purchase 90,000
shares granted to an employee in March 1999 at an exercise price of $23.25
that
are vested and expire in 2009.
Item
13. Certain Relationships and Related Transactions and Director
Indpendence
Transactions
with Related Persons
On
March
5, 2008, we sold 129,200 shares of our common stock in a private placement
transaction to our chief executive officer, Jeffrey Parker at a price of $7.74
per share.
Prior
to
June 2006, we leased our headquarters facility pursuant to a lease agreement
dated March 1, 1992 with Jeffrey L. Parker, our chief executive officer and
Barbara Parker, a related party. For the year ended December 31, 2006, we
incurred approximately $140,000 in rental expense under the lease. We believe
that the terms of the lease were no less favorable to us than terms we could
have obtained from an unaffiliated third party.
We
paid
approximately $1,129,000 and 1,532,000 in 2007 and 2006, respectively, for
patent-related legal services to a law firm, of which Robert Sterne, a director
since September 2006, is a partner.
Review,
Approval or Ratification of Transactions with Related Persons
The
audit
committee of our board of directors is responsible for reviewing and approving
transactions with related persons. This responsibility is a part of the audit
committee charter. In certain instances, the full board may review and approve
a
transaction.
62
Director
Independence
Our
common stock is listed on the Nasdaq Global Market System, and we follow the
rules of Nasdaq in determining if a director is independent. The board of
directors also consults with our counsel to ensure that the board of directors’
determination is consistent with those rules and all relevant securities and
other laws and regulations regarding the independence of directors. Consistent
with these considerations, the board of directors affirmatively has determined
that Messrs. William Hightower, John Metcalf, William L. Sammons, Robert G.
Sterne, Nam P. Suh, and Papken S. der Torossian are the independent directors.
The other remaining directors are not considered independent due to their
current or recent employment by the company.
Item
14. Principal Accountant Fees and Services
The
firm
of PricewaterhouseCoopers LLP acts as our principal accountants. The following
is a summary of fees paid to the principal accountants for services
rendered.
Audit
Fees. For
the
years ended December 31, 2006 and December 31, 2007, the aggregate fees billed
for professional services rendered for the audit of our annual financial
statements, the review of our financial statements included in our quarterly
reports, and services provided in connection with regulatory filings were
approximately $390,000 and $458,500, respectively.
Audit
Related Fees. For
the
years ended December 31, 2006 and December 31, 2007, there were no fees billed
for professional services by our principal accountants for assurance and related
services.
Tax
Fees. For
the
years ended December 31, 2006 and December 31, 2007, there were no fees billed
for professional services rendered by our principal accountants for tax
compliance, tax advice or tax planning.
All
Other Fees. For
the
year ended December 31, 2006, the aggregate fee billed for other professional
services by our principal accountants was approximately $1,500 for an annual
license fee for accounting research software. There were no fees billed for
other professional services by our principal accountants for the year ended
December 31, 2007.
All
the
services discussed above were approved by our audit committee. The audit
committee pre-approves the services to be provided by our principal accountants,
including the scope of the annual audit and non-audit services to be performed
by the principal accountants and the principal accountants’ audit and non-audit
fees. The audit committee also reviews and recommends to the board of directors
whether or not to approve transactions between the company and an officer or
director outside the ordinary course of business.
PART
IV
Item
15. Exhibits, Financial Statement Schedules and Reports on Form
8-K
Exhibits
|
Exhibit
Number
|
Description
|
|
|
3.1
|
Articles
of Incorporation, as amended (incorporated by reference from Exhibit
3.1
of Registration Statement No. 33-70588-A)
|
|
|
3.2
|
Amendment
to Amended Articles of Incorporation dated March 6, 2000 (incorporated
by
reference from Exhibit 3.2 of Annual Report on Form 10-K for the
year
ended December 31, 1999)
|
|
|
3.3
|
Bylaws,
as amended (incorporated by reference from Exhibit 3.2 of Annual
Report on
Form 10-K for the year ended December 31,
1998)
|
63
|
Exhibit
Number
|
Description
|
|
|
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 (incorporated by reference from Exhibit
4.02 of
Form 8-K dated November 21, 2005)
|
|
|
4.1
|
Form
of common stock certificate (incorporated by reference from Exhibit
4.1 of
Registration Statement No. 33-70588-A)
|
|
|
4.2
|
Purchase
Option between the Registrant and Tyco Sigma Ltd. dated May 22, 2000
(incorporated by reference from Exhibit 4.1 of Quarterly Report on
Form
10-Q for the quarter ended June 30, 2000)
|
|
|
4.3
|
Purchase
Option between the Registrant and Leucadia National Corporation dated
May
22, 2000 (incorporated by reference from Exhibit 4.2 of Quarterly
Report
on Form 10-Q for the quarter ended June 30, 2000)
|
|
|
4.4
|
Purchase
Option between the Registrant and David M. Cumming dated May 22,
2000
(incorporated by reference from Exhibit 4.3 of Quarterly Report on
Form
10-Q for the quarter ended June 30, 2000)
|
|
|
4.5
|
Purchase
Option between the Registrant and Peconic Fund Ltd. dated May 22,
2000
(incorporated by reference from Exhibit 4.4 of Quarterly Report on
Form
10-Q for the quarter ended June 30, 2000)
|
|
|
4.6
|
Purchase
Option between the Registrant and Texas Instruments, Inc. dated March
8,
2001(incorporated by reference from exhibit 4.7 of Annual Report
on Form
10-K for the year ended December 31, 2000)
|
|
|
4.7
|
Form
of Warrant between the Registrant and each of the investors in the
March
2005 private placement who are the Selling Shareholders (incorporated
by
reference from Exhibit 4.7 of Annual Report on Form 10-K for the
year
ended December 31, 2004)
|
|
|
4.8
|
Form
of Warrant between the Registrant and each of the investors in the
February 2006 private placement who are the Selling Shareholders
(incorporated by reference from Exhibit 10.2 of Form 8-K dated February
3,
2006)
|
|
|
4.9
|
Shareholder
Protection Rights Agreement between the Registrant and American Stock
Transfer & Trust Company, as Rights Agent (incorporated by reference
from Exhibit 4.01 of Form 8-K dated November 21, 2005)
|
|
|
4.10
|
Form
of Rights Certificate pursuant to Shareholder Protection Rights Agreement
(incorporated by reference from Exhibit 4.03 of Form 8-K
|
64
|
Exhibit
Number
|
Description
|
|
|
dated
November 21, 2005)
|
||
|
4.11
|
Standard
Form of Employee Option Agreement (incorporated by reference from
Exhibit
4.11 of Annual Report on Form 10-K for the year ended December 31,
2006)
|
|
|
10.1
|
1993
Stock Plan, as amended (incorporated by reference from the Company's
Proxy
Statement dated October 1, 1996)
|
|
|
10.2
|
Stock
option agreement dated September 7, 2000 between Jeffrey Parker and
Registrant (incorporated by reference from Exhibit 10.2 of
Quarterly Report on Form 10-Q for the period ended June 30,
2001)
|
|
|
10.3
|
Stock
option agreement dated September 7, 2000 between Jeffrey Parker and
Registrant (incorporated by reference from Exhibit 10.3 of
Quarterly Report on Form 10-Q for the period ended June 30,
2001)
|
|
|
10.4
|
2000
Performance Equity Plan (incorporated by reference from Exhibit 10.11
of
Registration Statement No. 333-43452)
|
|
|
10.5
|
Form
of 2002 Indemnification Agreement for Directors and Officers (incorporated
by reference from Exhibit 10.1 of Quarterly Report on Form 10-Q for
the
period ended September 30, 2002)
|
|
|
10.6
|
Asset
Purchase Agreement and related ancillary agreements, dated as of February
25, 2004, among the Company, Thomson and Thomson Licensing (incorporated
by reference from Exhibits 2.1, 10.1, 10.2, 10.3, 10.4, 10.4 and
10.6 of
Current Report on Form 8-K for the event date of February 25, 2004)
|
|
|
10.7
|
List
of Investors for Subscription Agreement and Warrants dated March
10, 2005
(incorporated by reference from Exhibit 10.30 of Annual Report on
Form
10-K for the period ended December 31, 2004)
|
|
|
10.8
|
List
of Investors for Subscription Agreement and Warrants dated February,
3
2006 (incorporated by reference from Exhibit 10.3 of Form 8-k dated
February 3, 2006)
|
|
|
10.9
|
Form
of Stock Purchase Agreement with each of the investors in the February
2007 private placement who are the Selling Stockholders (incorporated
by
reference from Exhibit 10.1 of Form 8-K dated February 23,
2007)
|
|
|
10.10
|
List
of Investors for Subscription Agreement dated February 23, 2007
(incorporated by reference from Exhibit 10.2 of Form 8-K dated February
23, 2007)
|
|
|
10.11
|
Change
in Control Severance Policy dated March 6, 2007 (incorporated by
reference
from Exhibit 10.19 from Annual Report on Form 10-K for
|
65
|
Exhibit
Number
|
Description
|
|
|
the
period ended December 31, 2006)
|
||
|
10.12
|
Engineering
Services Agreement, dated May 2, 2007, between Registrant and ITT
Corporation (incorporated by reference from Exhibit 10.1 on Form
10-Q for
the period ended June 30, 2007)
|
|
|
10.13
|
License
Agreement, dated May 2, 2007, between Registrant and ITT Corporation
(incorporated by reference from Exhibit 10.2 on Form 10-Q for the
period
ended June 30, 2007)
|
|
|
10.14
|
License
and Engineering Service Agreement dated December 21, 2007 between
Registrant and a mobile handset chip supplier*
|
|
|
10.15
|
Form
of Stock Purchase Agreement with each of the investors in the March
2008
private placement who are the Selling Stockholders (incorporated
by
reference from Exhibit 10.1 of Form 8-K dated March 5,
2008)
|
|
|
10.16
|
List
of Investors for Subscription Agreement dated March 5, 2008 (incorporated
by reference from Exhibit 10.2 of Form 8-K dated March 5,
2008)
|
|
|
21.1
|
Table
of Subsidiaries (incorporated by reference from Exhibit 22.1 of Annual
Report on Form 10-K for the period ended December 31, 2004)
|
|
|
23.1
|
Consent
of PricewaterhouseCoopers LLP*
|
|
|
31.1
|
Rule
13a-14 and 15d-14 Certification of Jeffrey Parker*
|
|
|
31.2
|
Rule
13a-14 and 15d-14 Certification of Cynthia Poehlman*
|
|
|
32.1
|
Section
1350 Certification of Jeffrey Parker and Cynthia Poehlman*
|
|
|
99.1
|
Compensation
Committee Charter (incorporated by reference from Annual Report on
Form
10-K for the period ended December 31,
2006)
|
*
Filed
herewith
Financial
Statement Schedules
Schedule
II –
Valuation and Qualifying Accounts
66
Reports
on Form 8-K
|
1.
|
Form
8-K, dated December 21, 2007. Item 1.01 –
Entry into
a Material Definitive Agreement. Announcement of a royalty-bearing
licensing agreement with a mobile handset chip supplier.
|
|
2.
|
Form
8-K, dated December 27, 2007. Item 5.02 – Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. Announcement of 2007
cash
performance incentive award for the chief technology
officer.
|
|
3.
|
Form
8-K, dated February 1, 2008. Item 5.02 – Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. Announcement of 2007
performance incentive awards for the chief executive officer and
chief
financial officer.
|
|
4.
|
Form
8-K, dated March 5, 2008. Item 2.02 – Results of Operations and
Financial Condition. Announcement of the completion of a private
placement. Item 3.02 - Unregistered Sales of Equity Securities.
Announcement of the sale of 1,240,199 shares of common stock for
aggregate
proceeds of approximately $9.3 million and related registration
requirements.
|
67
Signatures
In
accordance with Section 13 of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| Date: March 14, 2008 | ||
| PARKERVISION, INC. | ||
|
|
By: |
/s/
Jeffrey L. Parker
|
|
Jeffrey
L. Parker
|
||
|
Chief
Executive Officer
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
|
Signature
|
Title
|
Date
|
||
|
By:
|
/s/
Jeffrey L. Parker
|
Chief
Executive Officer and Chairman
|
March
14, 2008
|
|
|
Jeffrey
L. Parker
|
of
the Board (Principal Executive Officer)
|
|||
|
By:
|
/s/
Cynthia L. Poehlman
|
Chief
Financial Officer (Principal Accounting
|
March
14, 2008
|
|
|
Cynthia
L. Poehlman
|
Officer)
|
|||
|
By:
|
/s/
David F. Sorrells
|
Chief
Technical Officer and Director
|
March
14, 2008
|
|
|
David
F. Sorrells
|
||||
|
By:
|
/s/
William A. Hightower
|
Director
|
March
14, 2008
|
|
|
William
A. Hightower
|
||||
|
By:
|
/s/
John Metcalf
|
Director
|
March
14, 2008
|
|
|
John
Metcalf
|
||||
|
By:
|
/s/
Todd Parker
|
Director
|
March
14, 2008
|
|
|
Todd
Parker
|
||||
|
By:
|
/s/
William L. Sammons
|
Director
|
March
14, 2008
|
|
|
William
L. Sammons
|
||||
|
By:
|
/s/
Robert G. Sterne
|
Director
|
March
14, 2008
|
|
|
Robert
G. Sterne
|
||||
|
By:
|
/s/
Nam P. Suh
|
Director
|
March
14, 2008
|
|
|
Nam
P. Suh
|
||||
|
By:
|
/s/
Papken der Torossian
|
Director
|
March
14, 2008
|
|
|
Papken
der Torossian
|
||||
68
PARKERVISION,
INC. AND SUBSIDIARY
VALUATION
AND QUALIFYING ACCOUNTS
SCHEDULE
II
|
Valuation
Allowance for Income Taxes
|
Balance
at
Beginning
of
Period
|
Provision
|
Write-
Offs
|
Balance
at
End
of Period
|
|||||||||
|
Year
ended December 31, 2005
|
$
|
51,246,748
|
$
|
9,454,464
|
$
|
0
|
$
|
60,701,212
|
|||||
|
Year
ended December 31, 2006
|
60,701,212
|
6,340,888
|
0
|
67,042,100
|
|||||||||
|
Year
ended December 31, 2007
|
67,042,100
|
4,434,374
|
0
|
71,476,474
|
|||||||||
69
Index
to
Exhibits
|
10.14
|
License
and Engineering Service Agreement dated December 21, 2007 between
Registrant and a mobile handset chip supplier
|
|
|
23.1
|
Consent
of PricewaterhouseCoopers LLP
|
|
|
31.1
|
Rule
13a-14 and 15d-14 Certification of Jeffrey Parker
|
|
|
31.2
|
Rule
13a-14 and 15d-14 Certification of Cynthia Poehlman
|
|
|
32.1
|
Section
1350 Certification of Jeffrey Parker and Cynthia
Poehlman
|
70