UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-K
(Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES ACT OF 1934
For the transition period from ________to__________
Commission file number 0-22904
-------
PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2971472
(State of Incorporation) (I.R.S. Employer ID No.)
8493 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
(904) 737-1367
(Address of principal executive offices)
Securities registered pursuant to Section12(b) of the Act:
NONE
Securities registered pursuant to Sec12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if there is no disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
As of March 16, 1999, the aggregate market value of the Issuer's Common Stock,
$.01 par value, held by non-affiliates of the Issuer was approximately
$184,372,216 (based upon $26.063 per share closing price on that date, as
reported by the NASDAQ National Market).
As of March 16, 1999, 11,757,208 shares of the Issuer's Common Stock were
outstanding.
Documents incorporated by reference: Portions of the definitive Proxy Statement
to be delivered to stockholders in connection with the 1999 Annual Meeting are
incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
ParkerVision, Inc. (the "Company") is engaged in the design, development and
marketing of microelectronic hardware and software with various applications in
the communications industry. The Company develops and markets automated video
camera control systems and automated production systems. In addition, the
Company is developing a wireless radio frequency ("RF") technology, which the
Company believes has the potential to be applied to a broad range of wireless
applications and replaces certain traditional RF hardware. The Company was
incorporated under the laws of the state of Florida on August 22, 1989.
Approximately 97% of the Company's revenues in 1998 and 100% of revenues prior
to 1998 have been generated from its automated video camera control systems,
marketed under the tradename CameraMan(R). These systems were developed to allow
the creation of professional-quality video communication by non-professional
video users. These systems include a proprietary "tracking" technology that
allows a video user to appear in the video while also controlling the camera.
The Company markets to certain educational and videoconferencing segments of the
commercial markets where audiovisual solutions have become increasingly popular
for communication, training, presentation, instructional and educational needs.
The Company offers its CameraMan(R) products in a variety of
application-specific packages designed for the distance education and
videoconferencing markets. In 1995, the Company entered into a joint product
development agreement with VTEL Corporation ("VTEL"), a manufacturer of visual
communications systems. This agreement provided for the integration of
CameraMan(R) camera products with certain VTEL products to create fully
integrated videoconferencing systems.
The Company's automated production systems, marketed under the tradenames
PVTV(TM) or STUDIO(TM), were designed specifically to meet the needs of studio
production markets. The PVTV(TM) product line includes a professional, broadcast
quality video production system that integrates video, audio, machine control
and camera control functions into an intelligent single-operator station. The
system was designed to allow organizations to economize their resources by
maximizing their production capabilities. A single operator can control, in
parallel, the production functions that traditionally require as many as six to
twelve individuals to operate.
The Company installed three PVTV(TM) beta sites in 1998 -- a cable network
operator, a broadcast news station and an educational facility. The Company
worked extensively with its beta sites during 1998 and increased the
technological capabilities of its system to include late breaking news
functionality and integration of a widely used news automation service. The
Company also focused much of 1998 on filing patents to protect its proprietary
technologies as they relate to the PVTV(TM) system.
The Company's wireless RF technology was discovered as a result of research
efforts targeted at improving the wireless capabilities of its automated camera
control systems. In 1996, the Company filed its first patent related to these
research efforts and announced the development of a new wireless technology.
Late in 1997, the Company announced the invention of a universal direct
conversion receiver chip, called Eddie(TM), which the Company believes to
represent a major breakthrough in wireless RF receiver technology. The Company
believes its invention dramatically simplifies wireless RF receiver electronics
and delivers a high level of performance at a low cost, relative to other
currently available technology.
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<PAGE>
In 1997, the Company entered into an agreement with the IBM Corporation ("IBM")
for the development, manufacture and marketing, under IBM's name, of wireless
personal computer peripheral products utilizing the Company's proprietary
technology. Throughout 1997, the Company continued to work toward integrating
its technology into integrated circuits ("IC"), resulting in the completion of
its first wireless IC called Eddie(TM). In January 1998, IBM terminated its
agreement with the Company prior to testing of the new universal direct
conversion receiver IC. Also in January 1998, the Company contracted with The
Boeing Company ("Boeing"), an independent testing laboratory, to test its
wireless technology. Boeing verified the Company's claims for the technology in
a series of tests conducted in February 1998.
In July 1998, the Company announced its belief that its wireless technology,
officially named Direct2Data(TM), or D2D(TM) has the capability to become the
new standard for RF receiver technology, replacing decades-old heterodyne RF
architecture. The Company focused much of the remainder of 1998 on filing
patents to protect its intellectual property and continuing to develop
enhancements of the technology.
In December 1998, Questar InfoComm, Inc., a subsidiary of Questar Corporation,
independently confirmed the performance of the Company's D2D(TM) technology.
Questar InfoComm also invested $5 million in ParkerVision common stock in a
private placement transaction and signed a letter of intent to jointly develop
products utilizing the Company's D2D(TM) technology.
PRODUCTS
- --------
The Company's CameraMan(R) automated video camera control systems utilizes a
portable, computerized base which pans and tilts simultaneously to achieve fluid
motion, into which is integrated a professional quality single-chip or
three-chip imaging camera that provides the system camera control functions,
such as auto-focus and auto-image control. The base unit also includes a
proprietary automatic tracking capability. Additional peripheral devices are
available to control the automatic tracking functions and to remotely control
base unit and camera functions. CameraMan(R) camera products are offered in a
variety of application-specific packages.
For the distance education market, the Company offers Presenter and Student
Camera systems. The presenter system allows a presenter, or instructor, to wear
a tracking device with built-in microphone, so that the camera will
automatically follow the presenter's movements throughout a room. The student
system includes a student response feature allowing students to "raise their
hands" electronically by pressing a locator button on a microphone. The camera
will then automatically recall the student's location thereby providing
educators and students with an "eye to eye" level of communication. For the
videoconferencing market, the Company offers a Personal Locator system. This
system allows each videoconferencing participant to program his or her personal
location preset and then recall that preset at the touch of a button on that
individual's keypad. The system also includes a chairperson keypad with "system
lockout" functionality for meeting control. For general-purpose commercial
applications where a high-quality, full-featured pan/tilt system is desired but
tracking capability is not needed, the Company offers a General Pan/Tilt system.
This system is field upgradable to all other application-specific systems and,
as a result, is easily adaptable to distance education and videoconferencing
applications.
All of the Company's single-chip application-specific packages are available in
a VTEL-labeled product line. The basic difference between the VTEL-labeled
products and the Company's other products is the ability for the VTEL products
to be factory integrated with select VTEL equipment.
3
<PAGE>
The Company's automated camera control systems have list prices ranging from
approximately $5,000 to $10,000 for a single-chip system and $19,000 to $30,000
for a three-chip system.
The Company's PVTV(TM) or STUDIO(TM) systems provides fully-integrated, PC-based
production systems with unique functionality. These systems incorporate two or
more CameraMan(R) single-chip or three-chip camera systems with additional
audio, video and machine control functions, a graphical user interface and
software based on a Microsoft(R) operating system. A proprietary "transition
macro" technology allows the system operator to build, revise and preview a
production in storyboard fashion and then run the entire live or live-to-tape
production with the press of one button. These systems also allow the operator
to manually pause or interrupt the automated production, as needed, for
insertion of changes. In addition to CameraMan(R) cameras, the PVTV(TM) systems
can work with other video sources such as satellite feeds,
compression/decompression devices and cameras produced by other manufacturers.
The PVTV(TM) product line is currently available in three application-specific
packages. The StudioONE(TM) system is a base line system with limited
video/audio inputs/outputs ("I/O") and limited control ports. This system offers
various options, which enhance the system functionality. The StudioONE(TM)
system is applicable to certain educational and corporate environments and its
list price ranges from $80,000 to $150,000, depending upon the upgrade options
required. The StudioPRO(TM) system includes the same base functionality of the
StudioONE, but adds system enhancements such as additional video/audio I/O,
additional control ports, and general purpose interface ("GPI") control which
allows the integration of non-protocal peripheral equipment. The StudioPRO(TM)
system is applicable to educational, corporate and some broadcast environments
and its list price ranges from $160,000 to $250,000. The StudioPRO(TM) system
can be upgraded to a StudioNEWS(TM) system, which is the highest end system
currently available from the Company. The StudioNEWS(TM) system adds proprietary
functionality to allow for the insertion of late breaking news in a live
broadcast environment. In addition, StudioNEWS(TM) allows for multi-script
format and integration of a news automation system. This system is most
applicable to the broadcast and cable production markets. The list price for a
StudioNEWS(TM) system ranges from $250,000 to $350,000.
The PVTV(TM) product line includes components that may be packaged with the base
STUDIO(TM) system to provide additional functionality. These systems include the
ScriptViewer(TM) and Shot Director(TM) systems. The ScriptViewer(TM) system is a
robotic, automated teleprompter system for CameraMan(R) cameras that integrates
with STUDIO(TM). The Shot Director(TM) is a joystick controller which is
compatible with both single-chip and three-chip CameraMan(R) camera systems and
provides real-time camera control and setup functionality for up to sixteen
CameraMan(R) cameras. The Shot Director(TM) is packaged with the STUDIO(TM) as
well as offered as a stand-alone system for use with CameraMan(R) cameras.
MARKETING AND SALES
- -------------------
The CameraMan(R) video camera control systems and the PVTV(TM) automated
production systems are marketed to educators, corporate professionals and
broadcasters who make use of audiovisual, telecommunications and production
systems in distance education, videoconferencing, and live or live-to-tape
broadcasts. In the education market, the Company targets universities, colleges,
primary schools, hospitals/clinics, and corporate/government training
facilities. The Company believes
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<PAGE>
telecommunications technologies are a trend in education resulting in teaching
programs which are more timely, more accessible, and more cost-effective per
student. In the videoconferencing market, the Company targets corporations who
are utilizing on-site videoconferencing rooms for long-distance training and
communication among corporate personnel, customers, clients and suppliers. In
the broadcast production market, the Company targets broadcast and cable
networks/stations, independent studios and corporate, education, healthcare,
religious and government studios.
System sales are directed by an internal sales staff and a network of authorized
audiovisual product dealers, telecommunication dealers and systems integrators
who design and specify audiovisual and production equipment of various
manufacturers. In addition, the Company maintains national account sales
arrangements, such as the program with VTEL, for specific applications and
targeted commercial markets.
The majority of the Company's authorized dealers are located throughout the
United States and Canada. During 1997, the Company began expanding its
audiovisual dealer network to include certain international markets, primarily
Asia.
The Company currently supports its distribution channels with marketing programs
to promote its products. These include targeted trade advertising, direct mail
campaigns, lead generation/fulfillment, tradeshow attendance and live
demonstration facilities. In addition, the Company provides training of its
dealers' and national accounts' sales, support and installation personnel.
The Company's revenues by distribution channel are as follows:
Distribution Channel 1998 1997 1996
---------------------------- ------ ------ ------
National Resellers 50% 59% 64%
OEM Customers 39% 36% 35%
International Resellers 8% 5% 1%
Direct 3% 0% 0%
VTEL accounted for approximately 35% of the Company's revenues in 1998, 1997 and
1996. No other customer accounted for more than 10% of the Company's revenues in
1998 or 1997. In 1996, an audiovisual reseller, TeleMeasurements, Inc.,
accounted for approximately 11% of the Company's revenues.
The Company plans to commercialize its D2D(TM) wireless technology by pursuing
strategic partnerships and licensing arrangements. The Company intends to market
its technology to semiconductor companies, wireless product companies, and third
party RF system design companies. The Company may also consider additional
strategies for marketing its technology including, but not limited to, (a)
contracting with a foundry to manufacture IC's which the Company could then sell
direct to product companies, (b) entering into joint product development
arrangements for the development of specific products utilizing the wireless
technology, and (c) developing and marketing its own wireless RF products.
Currently the Company has not finalized any formal arrangements for the sale or
licensing of its D2D(TM) technology.
5
<PAGE>
COMPETITION
- -----------
The videoconferencing industry, which includes distance education, is highly
competitive. The Company is aware of certain other companies that have
commercialized or developed technologies and products, which are competitive
with certain functions of the CameraMan(R), automated camera control systems.
Several manufacturers of pan/tilt heads compete with the Company's camera
systems. Some of these pan/tilt heads have limited preset location capabilities,
but they offer no tracking capabilities and must be operated manually. Some of
the above mentioned products sell for more than the CameraMan(R) camera system
while others sell at prices similar to, or less than, that of the CameraMan(R)
system, but offer limited functions. Both Canon and Sony offer systems with
certain automatic tracking capabilities. The Canon system requires integration
of third party software and a personal computer with specific video hardware in
order to perform certain tracking functions. The Sony system offers a
visual/color-tracking technology embodied within their camera. While the Canon
and Sony systems are offered at prices similar to, or less than, the
CameraMan(R) system, the Company believes these systems have a significantly
lower level of performance than the CameraMan(R) system and do not have the
application-specific flexibility that is incorporated with the Company's
products. The Company believes that it competes principally on the basis of the
capabilities of the CameraMan(R) camera system, ease of system application, and
system flexibility.
The studio production industry is also highly competitive. Tektronics, Sony
Corporation, Panasonic Corporation, Ross, and Echolabs, among others, offer
video switchers and various other products for studio environments. A
traditional audio/video production environment involves the coordination of
multiple operators who independently operate various pieces of equipment in
parallel to achieve audio, video, machine and camera control functions. The
Company is not aware of any competitors who currently offer a system solution
that integrates audio, video, machine control and camera control through a
single interface and provides the technology to allow these functions to operate
automatically and in parallel. The Company intends to compete based on the
acquisition of patents on its proprietary "transition macro" technology and
continued enhancements of its system to offer users more automation and
functionality than its competitors.
Many of the Company's competitors, in both the videoconferencing and studio
production industries, are well-established, have substantially greater
financial and other resources than the Company, have established reputations for
success in the development, sale and service of products, and have significant
advertising budgets to permit them to implement extensive advertising and
promotional campaigns in response to competitors. Certain of these competitors
dominate their respective industries and have the financial resources necessary
to enable them to withstand substantial price competition, which is expected to
increase, and downturns in the markets for communication products.
Although the Company is still researching and developing its wireless technology
and it believes it represents a significant advancement in RF technology, the
Company anticipates that it will encounter competition in this area once it
begins commercialization, as well as resistance to change as is common with the
introduction of new technologies. The Company believes that one source of
competition will be from older technological solutions which designers and
manufacturers are currently using and about which they are knowledgeable. The
Company expects this to persist until its technology is more widely acknowledged
and utilized. Another source of competition may arise from other RF technologies
that are in development but which not have yet emerged. Although the Company
expects to compete in this market on the basis of its patented technology, it is
possible that competitors will attempt to find alternative solutions or develop
superior technology.
6
<PAGE>
PRODUCTION AND SUPPLY
The Company engages in assembly operations for its automated video camera
control and production systems at its facility in Jacksonville, Florida. The
Company's operations involve the inspection of each component, assembly of the
system's electronic circuitry and other components, a series of quality
specification measurements, and various other computer, visual and physical
tests, including product field testing to certify final performance
specifications. The Company believes that it has sufficient production capacity
to satisfy increased demand for these systems for the foreseeable future. The
Company obtains all of its component parts, including standard electronic
components and specially designed components, from third-party manufacturers.
The Company currently purchases all of its requirements of specially designed
component parts from single-source suppliers. The Company owns the design and
dies for such components and believes that alternative sources of supply for
such components are available. In addition, the Company purchases the camera
modules for its automated camera systems and several of the hardware components
for its automated production systems from single-source suppliers. Alternative
sources of supply would require modifications to existing systems. The Company
maintains blanket orders and/or purchase contracts with these suppliers. The
Company purchases other system components pursuant to purchase orders placed
from time to time in the ordinary course of business.
For the years ended December 31, 1998, 1997 and 1996, one supplier accounted for
approximately 18%, 40% and 21%, respectively of the Company's component
purchases. This supplier is the single-source supplier of the Company's camera
modules for its automated camera systems. No other supplier accounted for more
than 15% of the Company's component purchases in 1998, 1997 or 1996.
At December 31, 1998, the Company had commitments to purchase camera modules and
other parts totaling approximately $462,000 through 1999. The Company is
substantially dependent on the ability of its suppliers, among other things, to
satisfy performance and quality specifications and dedicate sufficient
production capacity for components within scheduled delivery times. Failure or
delay by the Company's suppliers in supplying necessary components to the
Company would adversely affect the Company's ability to obtain and deliver
products on a timely and competitive basis. The Company endeavors to mitigate
the potential adverse effect of supply interruptions by carefully qualifying
vendors on the basis of quality and dependability, and by maintaining an
inventory of certain components, but there can be no assurances that such
components will be readily available when needed.
The Company's sales cycle for its camera and studio products is estimated to be
from one to eighteen months. The period from execution of a customer's purchase
order to delivery of a CameraMan(R) camera system is typically one to four
weeks. The period from execution of a customer's purchase contract to delivery
and installation for a studio system can range from three weeks to six months,
depending upon peripheral equipment requirements and the readiness of the
customer's site. The Company attempts to forecast orders and to purchase long
lead-time components in advance of receipt of purchase orders to permit it to
provide deliveries of completed systems within its standard delivery period. At
December 31, 1998, the Company maintained an inventory of standard electronic
and other system components of $1,996,573. Substantially all of the Company's
systems are delivered to customers by common carrier.
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The Company offers a one-year limited warranty on its camera products and a
ninety-day warranty on its studio products covering defects in workmanship and
materials and software bugs. During the warranty period the Company will replace
parts and make repairs to system components at its expense. The Company records
a reserve for future warranty costs at the time of sale. Extended support and
service contracts are offered to the customer to cover hardware repair as well
as software support and upgrades for the studio systems. The revenues from these
extended support contracts are recognized ratably over the service period.
PATENTS AND TRADEMARKS
- ----------------------
The Company holds or has filed multiple patents related to its automated camera
control systems, its automated production systems and its wireless technology.
The Company currently holds twelve United States patents and five foreign
patents covering certain tracking functions and methods for controlling the
field of view in an automatic tracking camera system. The Company has also filed
five provisional applications and has applied for fourteen additional United
States patents and seven additional foreign patents relating to its products and
technologies.
The Company promotes the ParkerVision and CameraMan trademarks in connection
with its marketing activities and holds United States trademark registrations
for such marks. In addition, the Company has applied to register other
trademarks, including PVTV(TM), Direct2Data(TM) and D2D(TM).
GOVERNMENT REGULATION
- ---------------------
The Company utilizes wireless communications in its CameraMan(R) camera and
PVTV(TM) systems and in its D2D(TM) technology. These wireless communications
utilize infrared and radio frequency technology that is subject to regulation by
the Federal Communications Commission ("FCC"). The Company has obtained, or is
in the process of obtaining, all licenses and approvals necessary for the
operation of its products. There can be no assurance that, in the future, the
Company will be able to obtain required licenses or that the FCC will not
require the Company to comply with more stringent licensing requirements.
Failure or delay in obtaining required licenses would have a material adverse
effect on the Company. In addition, expansion of the Company's operations into
certain foreign markets may require the Company to obtain additional licenses
for its products. Amendments to existing statutes and regulations, adoption of
new statutes and regulations and the Company's expansion into foreign
jurisdictions, could require the Company to alter methods of operations at costs
that could be substantial, which could have an adverse effect on the Company.
There can be no assurance that the Company will be able, for financial or other
reasons, to comply with applicable laws and regulations and licensing
requirements.
RESEARCH AND DEVELOPMENT
- ------------------------
For the years ended December 31, 1998, 1997 and 1996, the Company expended
approximately $3,825,000, $3,296,000 and $1,483,000, respectively, on research
and development.
For the past three years, the Company's principal research and development
efforts have been devoted to the development of the PVTV(TM) product line and
the D2D(TM) technology.
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PVTV (TM)
- ---------
Development of the initial STUDIO(TM) system was completed in 1998 and beta
sites were installed. Since that time, the Company's engineering staff has
continued to develop technology enhancements to the system, including
integration of a widely-used news automation service and development of the
proprietary late-breaking news technology that are key features of the
StudioNEWS(TM) product. The Company plans to continue to devote research and
development efforts to the PVTV(TM) product line and expects to introduce
several additional systems and features in 1999 including a digital studio
product line, integration of additional news automation systems and an open
platform studio system that will allow robotic control of other manufacturers'
cameras.
Direct2Data(TM)
- ---------------
The Company believes its D2D(TM) technology represents a completely new micro
electronic circuit architecture that has the capability of replacing RF
heterodyne architecture which is the current industry standard in wireless
digital communications. In 1998, the Company announced that its D2D(TM)
technology allowed for a single-step conversion of an incoming RF signal
directly to baseband digital data, eliminating the need for the RF heterodyne
architecture in RF receiver design. The company believes the D2D(TM)
architecture can be implemented in a wide range of semiconductor processes
allowing the opportunity to integrate other system functions into the same IC as
the RF receiver. This technology breakthrough reduces complexity, size, power
consumption and cost of wireless communication systems.
In addition to the Company's own engineering staff, the Company engages
unrelated consulting firms to provide application engineering and design
services for the Company's D2D(TM) technology. In 1998, these firms conducted
independent testing of the D2D(TM) technology and verified its performance
capabilities.
The Company plans to continue its research and development efforts on D2D(TM)
into 1999 with a focus on the development of application-specific solutions
based on the D2D(TM) technology and further enhancements to the technology.
EMPLOYEES
- ---------
As of December 31, 1998, the Company had eighty-one full-time employees, of
which twenty-five are employed in manufacturing, twenty-two in engineering
research and development, twenty-one in sales, support and marketing, and
thirteen in finance and administration. None of the Company's employees are
represented by a labor union. The Company considers its employee relations
satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices and assembly operations are located in
approximately 33,000 square feet of leased space on three acres of land in
Jacksonville, Florida, pursuant to a lease agreement with Jeffrey Parker,
Chairman of the Board, Chief Executive Officer and President of the Company, and
Barbara Parker, Mr. Parker's mother. The initial lease term expired in February
1997, and the Company exercised its first of three five-year renewal options.
The lease is on a triple net basis and currently provides for a monthly rental
payment of $25,867 through February 2002.
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The Company believes that its manufacturing facility is adequate for its current
and reasonably foreseeable future needs. The Company believes that additional
physical capacity at its current facility will accommodate expansion, if
required.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
- ------------------
The Company's common stock is traded under the symbol (PRKR) on the Nasdaq
National Market ("Nasdaq"), which is the principal market for the common stock.
Listed below is the range of the high and low bid prices of the common stock for
the last three fiscal years, as reported by Nasdaq. The amounts represent
inter-dealer quotations without adjustment for retail markups, markdowns or
commissions and do not necessarily represent the prices of actual transactions.
Calendar Year Calendar Year Calendar Year
1996 1997 1998
----------------- ------------------ ------------------
High Low High Low High Low
------- ------ ------- ------- ------- -------
1st Quarter $11.125 $6.500 $17.375 $11.750 $24.000 $12.188
2nd Quarter 17.500 10.625 21.250 12.625 27.250 19.250
3rd Quarter 13.750 9.125 32.125 18.500 23.500 10.813
4th Quarter 15.375 10.500 31.500 15.125 24.750 11.375
HOLDERS
- -------
As of March 16, 1999, there were 120 holders of record. The Company believes
there to be approximately 2,100 beneficial holders of the Company's common
stock.
DIVIDENDS
- ---------
To date, the Company has not paid any dividends on its common stock. The payment
of dividends, if any, in the future is within the discretion of the board of
directors and will depend upon the Company's ability to generate earnings, its
capital requirements and financial condition, and other relevant factors. The
Company does not presently intend to declare any dividends in the foreseeable
future, but instead intends to retain all earnings, if any, for use in the
Company's business.
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<PAGE>
SALES OF UNREGISTERED SECURITIES
- --------------------------------
<TABLE>
<CAPTION>
If option, warrant
Consideration received and Exemption or convertible
description of underwriting from security, terms
Date of Title of Number or other discounts to market registration of exercise or
sale security sold price afforded to purchasers claimed conversion
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/98 - Common stock 75,570 Received proceeds of $283,034 4(2) Underwriters
11/98 warrants granted
11/30/93
exercisable
through 11/30/98
at an exercise
price of $8.25 per
share
11/98 Options to 90,000 Options granted - no 4(2) Exercisable for
purchase consideration received by periods lasting
common stock Company until exercise five years from
granted to the date the
outside options vest,
consultants options vest from
zero to four years
from the date of
grant at an exercise
price of $18.75
per share.
11/98 Options to 176,300 Options granted - no 4(2) Exercisable for
purchase consideration received by periods lasting
common stock Company until exercise five years from
granted to the date the
employees options first
pursuant to become vested,
stock option options vest from
plans zero to ten years
from the date of
grant at an
exercise price of
$18.75 per share
12/1/98 Common stock 238,096 Received proceeds of 4(2) n/a
$5,000,000
12/98 Options to 162,500 Options granted - no 4(2) Exercisable for
purchase consideration received by periods lasting
common stock Company until exercise five to ten years
granted to from the date the
employees and options first
directors become vested,
pursuant to options vest from
stock option zero to ten years
plans from the date of
grant at an
exercise price of
$23.125 per share
</TABLE>
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth consolidated financial data for the Company as of
the dates and for the periods indicated. The data has been derived from the
audited financial statements of the Company included in Item 8. The selected
financial data should be read in conjunction with the consolidated financial
statements of the Company and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenues, net $ 9,892 $ 10,799 $ 9,196 $ 3,903 $ 1,228
Gross margin 4,009 4,684 3,209 1,462 585
Operating expenses 10,191 8,637 5,411 5,139 4,262
Interest income 1,476 1,019 614 399 479
Interest expense 0 0 76 278 325
Net income (loss) from
continuing operations (4,706) (2,934) (1,674) (3,809) (3,682)
Net income (loss) per share
from continuing operations (0.41) (0.28) (0.17) (0.43) (0.42)
BALANCE SHEET DATA:
Total assets 40,250 38,685 18,162 10,955 14,342
Long term liabilities 18 5 3 3,035 3,249
Shareholders' equity 38,982 37,527 17,277 6,970 10,646
Working capital 25,647 24,424 8,214 8,680 12,785
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
- --------------------------
When used in the Form 10-K and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "expects" or "the
Company expects", "will continue," "is anticipated," "estimated" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. These risks include, but are not limited to, the continuing losses of
the Company which
12
<PAGE>
may result in the need for additional capital in the future or a change in
current operations, the need for substantial capital and use of current working
capital amounts to develop new products and for research and development,
uncertainty of product development, technological obsolescence, market
acceptance of its products and dependence on third party suppliers and
distributors. The Company may also have to expend substantial employee time and
financial resources to meet governmental regulation requirements and for the
protection of its intellectual property rights. The Company has no obligation to
publicly release the result of any revisions that may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
GENERAL
- -------
The Company has made significant investments in developing the technology and
manufacturing capability for its products, the returns on which are dependent
upon the generation of future revenues for realization. The Company has not yet
generated revenues sufficient to offset its operating expenses. To date the
Company has used the proceeds from the sale of its equity securities to fund its
operations. The Company anticipates increases in revenues in 1999. These
increases are subject to the Company continuing to expand its product lines and
attracting additional means of distribution and customers, among other things.
The Company intends to continue to use its working capital to build its
infrastructure to support future marketing and sales and research and
development activities for its products. No assurance can be given that such
expenditures will result in increased sales, new products, or technological
advances.
RESULTS OF OPERATIONS FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1998, 1997
- --------------------------------------------------------------------------------
AND 1996
- --------
Revenues
- --------
The Company's revenues to date consist primarily of sales of its CameraMan(R)
video camera control systems and various accessories that complement those
systems. Revenues for the years ended December 31, 1998, 1997 and 1996 were
$9,891,543, $10,799,067, and $9,195,811, respectively. The number of camera
systems sold and the average selling price per system for the years ended
December 31, 1998, 1997 and 1996 are as follows:
# Avg. Selling
Systems Price Per
Sold System
------- ------------
1998 1,413 $6,800
1997 1,797 $6,000
1996 1,611 $5,700
The decrease in revenues from 1997 to 1998 is a result of a decrease in the
number of camera systems sold, offset somewhat by an increase in the average
selling price per system, and revenues generated from the sales of initial
STUDIO(TM) systems to beta customers. Although the number of camera systems sold
decreased approximately 21% from 1997 to 1998, revenues generated from camera
system sales decreased only 11%. This is primarily due to a higher mix of
three-chip camera system sales in 1998, along with an increase in international
sales, which generally have a higher
13
<PAGE>
average selling price than domestic sales. Management believes the decrease in
the number of camera systems sold is primarily due to the focus of the internal
sales staff and management on the launch of its automated studio production
systems. Management believes this focus will result in an increase in STUDIO(TM)
system sales in 1999.
From 1996 to 1997, the number of systems sold increased from 1,611 systems in
1996 to 1,797 systems in 1997. The increase in units sold is primarily
attributable to increased market acceptance of the Company's products as well as
the Company's expansion into international markets during 1997. The increase in
revenues from 1996 to 1997 is also attributable, in part, to an increase in the
average selling price per system from approximately $5,700 in 1996 to
approximately $6,000 in 1997. This increase is primarily due to price increases
on a majority of the CameraMan(R) camera products during 1997.
The Company anticipates an increase in revenue in 1999, primarily from sales of
its PVTV(TM) products. The PVTV(TM) product has list prices ranging from
approximately $80,000 to over $350,000 per system, as compared to CameraMan(R)
camera systems which range in selling price from $5,000 to $10,000 for
single-chip systems and from $19,000 to $30,000 for three-chip systems. The
Company is also attempting to commercialize its D2D(TM) RF technology, which
could result in initial product or licensing revenues in 1999.
While the Company strives for consistent revenue growth, there can be no
assurance that consistent revenue growth or profitability can be achieved. The
Company's ability to achieve revenue growth is dependent upon many factors,
including market acceptance of new products and technologies, ability of vendors
to supply key components, development of new products in a timely manner,
relationships with significant customers and resellers, and changes in capital
spending by customers. There can be no assurance that the Company will be able
to increase or even maintain its current level of revenues on a quarterly or
annual basis in the future.
Gross Margin
- ------------
For the years ended December 31, 1998, 1997 and 1996, gross margins as a
percentage of sales were 41%, 43% and 35%, respectively.
The decrease in margin from 1997 to 1998 is primarily due to initial production
costs related to the STUDIO(TM) system and promotional price discounts offered
on certain single-chip products during the second half of 1998 in order to
reduce inventory of a particular single-chip camera module that has been
discontinued by the manufacturer.
The increase in margin from 1996 to 1997 is primarily due to price increases on
the majority of the Company's product line, as well as a reduction of
manufacturing overhead during 1997.
While the Company continuously works to improve its gross margin through product
pricing, labor efficiencies, reduction of overhead, and product design, there
can be no assurance that gross margins will improve significantly over, or
remain stable with, the gross margins attained in 1998 due to the highly
competitive nature of the industry, the introduction of new products, and
fluctuations in the cost of component parts.
14
<PAGE>
Research and Development Expenses
- ---------------------------------
The Company's research and development expenses increased by $529,762 or 16%
from 1997 to 1998 and increased by $1,812,881, or 122% from 1996 to 1997.
Research and development expenses as a percentage of revenues were 39%, 31%, and
16% in 1998, 1997 and 1996, respectively.
From 1997 to 1998, the increase in research and development expenses was
primarily related to the Company's continued development of the D2D(TM) RF
technology. The increased expenses related to D2D(TM) included fees for
third-party application engineering services, increased depreciation due to
capital expenditures for test and development equipment, and increased prototype
expenses.
From 1996 to 1997, the increase in research and development expenses was a
result of increased personnel and prototype materials for the continued
development of the Company's PVTV(TM) product line and its wireless technology.
The markets for the Company's products and technologies are characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions. The Company's ability to successfully develop and
introduce, on a timely basis, new and enhanced products and technologies will be
a significant factor in the Company's ability to grow and remain competitive.
Although the percentage of revenues invested by the Company may vary from period
to period, the Company is committed to investing in its research and development
programs.
Marketing and Selling Expenses
- ------------------------------
Marketing and selling expenses increased by $286,121, or 8% from 1997 to 1998
and increased by $1,085,378, or 45% from 1996 to 1997. Marketing and selling
expenses as a percentage of revenues were 38%, 32%, and 26% for the years ended
December 31, 1998, 1997 and 1996, respectively.
The increase in marketing and selling expenses from 1997 to 1998 is primarily
due to increased promotional expenses related to the Company's PVTV(TM) product
line, offset somewhat by decreases in personnel and related travel costs.
The increase in marketing and selling expenses from 1996 to 1997 is, in part, a
reflection of a full year of personnel and related costs resulting from
additions to the sales and marketing staff during 1996. In addition, the Company
increased its expenditures related to trade shows, advertising and other
promotional campaigns in order to promote the Company's PVTV(TM) product line
and to expand distribution into international markets.
The Company is committed to continuing its investment in marketing and selling
efforts in order to continue to increase market awareness and penetration of its
products, and anticipates further increases in sales and marketing expenses in
1999 in order to support the Company's commercialization of its D2D(TM)
technology.
15
<PAGE>
General and Administrative Expenses
- -----------------------------------
The Company's general and administrative expenses increased by $738,080, or 39%
from 1997 to 1998 and increased by $419,136 or 29% from 1996 to 1997. General
and administrative expenses consist primarily of executive and administrative
personnel compensation, insurance costs and costs incurred for outside
professional services.
The increase in general and administrative expenses from 1997 to 1998 is
primarily the result of increased personnel costs and outside professional fees.
During 1998, the Company expanded its executive management team with the
addition of a President and Chief Operating Officer. In addition, the Company
added an investor relations staff to coordinate shareholder communications and
activities. The Company also experienced increases in outside professional fees,
primarily legal fees, in connection with its wireless technology.
The increase in general and administrative expenses from 1996 to 1997 is the
result of increases in personnel costs and outside professional fees. During
1996, two officers voluntarily reduced their salaries resulting in a decrease in
personnel costs. These salaries were adjusted back to their previous levels
during 1997. In addition, the Company increased its use of outside professional
services, primarily legal services, in connection with its wireless technology.
As a percentage of revenues, general and administrative expenses were 26%, 17%,
and 16% in 1998, 1997 and 1996, respectively. The Company does anticipate
increases in general and administrative expenses in order to support the
commercialization of its PVTV(TM) and D2D(TM) products and technologies.
Nonrecoverable Start-up and Excess Capacity Costs
- -------------------------------------------------
The Company incurred nonrecoverable start-up and excess capacity costs of
$91,350 in 1996. No such costs were incurred in 1997 or 1998. Non-recoverable
start-up and excess capacity costs represent materials, labor and overhead costs
incurred by the Company in excess of those directly or indirectly attributable
to system sales. The Company does not anticipate recognizing any excess capacity
costs in future periods.
Interest Expense
- ----------------
The Company incurred interest expense of $75,547 in 1996. No interest expense
was incurred in 1997 or 1998. Interest expense represents interest on the
subordinated debentures payable to related parties. These subordinated
debentures were converted to equity in April 1996.
Interest Income
- ---------------
Interest income increased by $456,476 from 1997 to 1998 and by $404,970 from
1996 to 1997. Interest income primarily represents interest earned on the
Company's investment of the proceeds from its initial public offering in 1993
and its subsequent sales of securities during 1996, 1997 and 1998.
16
<PAGE>
Backlog
- -------
As of December 31, 1998, 1997 and 1996, the Company had backlog of approximately
$390,000, $31,000, and $260,000, respectively. Backlog consists of camera system
orders received from customers, which generally have a specified delivery
schedule within one to four weeks of receipt.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1998, the Company had working capital of $25,647,161, including
$21,646,829 in cash, cash equivalents and short-term investments. The Company
used cash for operating activities of $5,617,935, $3,409,705, and $1,280,403 for
the years ended December 31, 1998, 1997 and 1996, respectively. The increases in
cash used for operating activities are primarily the result of increases in the
net losses generated by the Company.
The Company generated cash from investing activities of $8,537,997 for the year
ended December 31, 1998 and used cash in investing activities of $18,786,094 and
$6,700,317 for the years ended December 31, 1997 and 1996, respectively. The
cash provided by and used for investing activities is primarily a result of the
purchase and maturity of investments in government backed securities, as well as
capital expenditures. The Company incurred $962,003, $1,541,007, and $948,183
for capital expenditures in 1998, 1997 and 1996, respectively. These capital
expenditures primarily represent the purchase of certain research and
development test equipment, marketing and sales demonstration equipment and
computer and office equipment to support additional personnel. In 1997, capital
expenditures also included leasehold improvement costs incurred to remodel the
Company's offices. The Company was granted rent concessions in 1996 and 1997 to
offset the remodeling costs. At December 31, 1998, the Company was not subject
to any significant commitments to make additional capital expenditures.
The Company generated cash from financing activities of $5,516,180, $22,774,260,
and $8,243,925 for the years ended December 31, 1998, 1997 and 1996,
respectively. The cash generated from financing activities represents proceeds
from the issuance of common stock to institutional investors in transactions
exempt from registration under the Securities Act of 1933 and from exercise of
warrants issued to the underwriters of the initial public offering in November
1993 and employee stock options.
The Company's principal source of liquidity at December 31, 1998 consisted of
$21.6 million in cash, cash equivalents and short-term investments resulting
from its initial public offering and subsequent offerings. In addition, at
December 31, 1998, the Company has $8 million in long-term investments. Until
the Company generates sufficient revenues from system and other sales, it will
be required to continue to utilize its cash and investments to cover the
continuing expense of product development, marketing and general administration.
The Company believes its cash and investment balances will provide sufficient
resources to meet its cash requirements for the next twelve months as well as on
a longer-term basis, if necessary.
17
<PAGE>
YEAR 2000 READINESS
- -------------------
The Company is in the process of evaluating the potential impact of the
situation commonly referred to as the "Year 2000" (Y2K) issue. This issue
concerns the inability of information systems to properly recognize and process
date sensitive information relating to the year 2000 and beyond. The inability
to properly interpret dates beyond the year 1999 could lead to business
disruptions.
The Company has formed an internal Y2K team to assess the Company's products,
its internal information systems and processes, and its third party suppliers
for Y2K readiness. The team has identified existing systems which require action
and is in the process of developing and executing plans to make corrections in
affected areas prior to the issue causing any disruption of normal business
activities.
All of the Company's products that are installed or available for sale have
either successfully passed Y2K compliance testing or have been deemed Y2K
not-applicable by virtue of the fact that they do not process date information
in any manner. Although the Company's Y2K compliant products have undergone the
Company's normal quality testing procedures, there can be no assurance that
these products, or third-party products used with the Company's products, do not
contain undetected errors or defects associated with Y2K date functions that may
materially or adversely affect the Company.
The Company primarily utilizes third party software packages for its internal
information systems and processes. Many of these packages have already been
rendered Y2K compliant by the manufacturers, and as a part of ongoing support
agreements with these manufacturers, the Company is able to upgrade to Y2K
compliant versions at minimal to no additional cost. As a result, efforts
required to modify the Company's business systems have been minimized. The
Company expects its principal internal management information systems to be
fully Y2K compliant by September 1999. The Company is examining and taking steps
to ensure that its manufacturing processes will not be interrupted and its
facilities infrastructure will not experience any failures or difficulties as a
result of the year 2000 issues.
The Company also faces risks and uncertainties to the extent that third-party
suppliers of products, service and systems on which the Company relies do not
have business systems or products that comply with the Y2K requirements. The
Company has initiated communications with all of its significant suppliers and
customers to determine the extent to which the Company's systems and products
are vulnerable to those third parties' failure to remediate their own Y2K
issues. There is no guarantee that the systems or products of other companies on
which the Company relies will be timely converted and would not have an adverse
effect on the Company's systems or products. The Company's Y2K team is in the
process of identifying what actions are needed to mitigate vulnerability to
problems related to enterprises with which the Company interacts.
Based on the status of its assessment to date, the Company does not anticipate
significant costs or lost revenue associated with the Y2K issue that would have
a material adverse effect on the Company's operating results or financial
condition.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
Index to Financial Statements
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 20
FINANCIAL STATEMENTS:
Balance Sheets - December 31, 1998 and 1997 21-22
Statements of Operations -- for the years ended
December 31, 1998, 1997 and 1996 23
Statements of Shareholders' Equity - for the years ended
December 31, 1998, 1997 and 1996 24
Statements of Cash Flows - for the years ended
December 31, 1998, 1997 and 1996 25
Notes to Financial Statements -- December 31, 1998, 1997
and 1996 26-38
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts 43
Schedules other than those listed have been omitted since
they are either not required, not applicable or the
information is otherwise included.
19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To ParkerVision, Inc.:
We have audited the accompanying balance sheets of PARKERVISION, INC. (a Florida
corporation) as of December 31, 1998 and 1997, and the related statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ParkerVision, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 8, Financial
Statements and Supplementary Data, is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, based on our audits, fairly states, in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
February 24, 1999
20
<PAGE>
PARKERVISION, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $10,569,435 $ 2,133,193
Short-term investments 11,077,394 18,815,957
Accounts receivable, net of allowance for doubtful
accounts of $37,308 and $38,405 at December 31,
1998 and 1997, respectively 805,880 660,947
Interest and other receivables 183,823 386,634
Inventories, net 3,237,567 2,970,087
Prepaid expenses and other 1,023,011 610,915
----------- -----------
Total current assets 26,897,110 25,577,733
LONG-TERM INVESTMENTS 8,000,000 9,494,404
PROPERTY AND EQUIPMENT, net 2,760,335 2,541,123
OTHER ASSETS, net 2,592,565 1,071,772
----------- -----------
Total assets $40,250,010 $38,685,032
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
21
<PAGE>
PARKERVISION, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 609,523 $ 560,106
Accrued expenses:
Salaries and wages 178,006 313,267
Rebates payable 108,185 76,261
Warranty reserve 99,656 92,674
Other accrued expenses 221,175 90,161
Deferred revenue 33,404 20,973
------------ ------------
Total current liabilities 1,249,949 1,153,442
DEFERRED INCOME TAXES 18,091 4,678
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares
authorized, none issued or outstanding 0 0
Common stock, $.01 par value, 20,000,000 shares
authorized, 11,718,678 and 11,337,707 shares
issued and outstanding at December 31, 1998 and
1997, respectively 117,187 113,377
Warrants outstanding 3,257,625 3,385,758
Additional paid-in capital 52,543,817 46,330,279
Accumulated other comprehensive income 72,241 0
Accumulated deficit (17,008,900) (12,302,502)
------------ ------------
Total shareholders' equity 38,981,970 37,526,912
Total liabilities and shareholders' equity $ 40,250,010 $ 38,685,032
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
22
<PAGE>
PARKERVISION, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues, net $ 9,891,543 $ 10,799,067 $ 9,195,811
Cost of goods sold 5,882,552 6,115,412 5,987,097
------------ ------------ ------------
Gross margin 4,008,991 4,683,655 3,208,714
Research and development expenses 3,825,414 3,295,652 1,482,771
Marketing and selling expenses 3,757,795 3,471,674 2,386,296
General and administrative expenses 2,607,915 1,869,835 1,450,699
Nonrecoverable start-up and excess
capacity costs 0 0 91,350
Interest expense to related parties 0 0 75,547
Interest income (1,475,735) (1,019,259) (614,289)
Other expense, net 0 0 10,810
------------ ------------ ------------
Net loss $ (4,706,398) $ (2,934,247) $ (1,674,470)
============ ============ ============
Basic loss per common share $ (0.41) $ (0.28) $ (0.17)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
PARKERVISION, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Accumulated
Warrants Additional Other Total
Par Out- Paid-In Comprehensive Accumulated Shareholders'
Shares Value Standing Capital Income Deficit Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 8,800,541 $ 88,005 $ 360 $14,556,754 $ 18,750 $(7,693,785) $ 6,970,084
Issuance of common stock upon
employee stock option exercise 27,638 277 0 46,148 0 0 46,425
Issuance of common stock and
warrants on April 12, 1996, net of
cash offering costs of $602,500 800,000 8,000 640,000 6,749,500 0 0 7,397,500
Issuance of common stock for
conversion of subordinated
debentures payable 324,425 3,244 0 3,241,006 0 0 3,244,250
Issuance of common stock for
cash on April 22, 1996 80,000 800 0 799,200 0 0 800,000
Issuance of warrants for
financial consulting services 0 0 512,000 0 0 0 512,000
Change in unrealized gain on
investments available for sale 0 0 0 0 (18,750) 0 (18,750)
Net loss for the period ended
December 31, 1996 0 0 0 0 0 (1,674,470) (1,674,470)
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 10,032,604 100,326 1,152,360 25,392,608 0 (9,368,255) 17,277,039
Issuance of common stock upon
employee stock option exercise 122,607 1,226 0 486,915 0 0 488,141
Issuance of common stock upon
warrant exercise 192,496 1,925 (222) 1,266,916 0 0 1,268,619
Issuance of common stock and
warrants on September 5, 1997,
net of cash offering costs
of $1,257,500 990,000 9,900 2,233,620 18,773,980 0 0 21,017,500
Issuance of options for business
consulting services 0 0 0 409,860 0 0 409,860
Net loss for the period ended
December 31, 1997 0 0 0 0 0 (2,934,247) (2,934,247)
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 11,337,707 113,377 3,385,758 46,330,279 0 (12,302,502) 37,526,912
Issuance of common stock upon
Employee stock option exercise 8,350 84 0 52,231 0 0 52,315
Issuance of common stock upon
Warrant exercise 134,525 1,345 (128,133) 606,953 0 0 480,165
Issuance of common stock on
December 1, 1998 238,096 2,381 0 4,981,319 0 0 4,983,700
Issuance of options for consulting
Services, net of forfeitures 0 0 0 573,035 0 0 573,035
Change in unrealized gain on
Investments available for sale 0 0 0 0 72,241 0 72,241
Net loss for the period ended
December 31, 1998 0 0 0 0 0 (4,706,398) (4,706,398)
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1998 11,718,678 $ 117,187 $ 3,257,625 $52,543,817 $ 72,241 $(17,008,900) $38,981,970
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
PARKERVISION, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (4,706,398) $ (2,934,247) $ (1,674,470)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization 1,064,572 717,780 609,485
Amortization of discounts on investments (194,792) (112,130) (139,452)
Provision for obsolete inventories 210,000 100,000 330,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net (144,933) 482,174 (691,847)
Decrease (increase) in interest and other receivables 202,811 (244,260) 252,515
Increase in inventories (477,480) (1,112,191) (13,132)
Increase in prepaid and other expenses (226,245) (217,746) (73,071)
Increase in other assets (1,441,977) (361,131) (27,852)
Increase in accounts payable and accrued expenses 84,076 278,469 207,979
Increase (decrease) in deferred revenue 12,431 (6,423) (60,558)
------------ ------------ ------------
Total adjustments (911,537) (475,458) 394,067
------------ ------------ ------------
Net cash used for operating activities (5,617,935) (3,409,705) (1,280,403)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments classified as available for sale 0 (10,009,375) 0
Purchase of investments classified as held to maturity (8,000,000) (12,735,712) (11,890,092)
Proceeds from maturity of investments 17,500,000 5,500,000 6,137,958
Purchase of property and equipment (962,003) (1,541,007) (948,183)
------------ ------------ ------------
Net cash provided by (used for) investing activities 8,537,997 (18,786,094) (6,700,317)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5,516,180 22,774,260 8,243,925
------------ ------------ ------------
Net cash provided by financing activities 5,516,180 22,774,260 8,243,925
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 8,436,242 578,461 263,205
CASH AND CASH EQUIVALENTS, beginning of year 2,133,193 1,554,732 1,291,527
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 10,569,435 $ 2,133,193 $ 1,554,732
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
PARKERVISION, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. THE COMPANY AND NATURE OF BUSINESS:
-----------------------------------
ParkerVision, Inc. (the "Company) is engaged in the design, development and
marketing of the CameraMan(R) automated video camera control systems and
CameraManSTUDIO(TM) automated production systems. The Company is also engaged in
the research and development of a wireless radio-frequency ("RF") technology
which the Company believes has potential applications in a wide variety of
commercial and consumer markets. The Company was incorporated under the laws of
the state of Florida on August 22, 1989.
The Company sells its video products through audiovisual dealers and other
equipment manufacturers throughout the United States as well as in Canada, Latin
America and Asia. Approximately 92% of the Company's sales are generated through
dealers and other equipment manufacturers in the United States. The Company is
in a highly competitive industry with rapidly changing and evolving technologies
and an increasing number of market entrants that have introduced or are
developing an array of new audiovisual and telecommunications products and
services. The Company's potential competitors in this industry have
substantially greater financial, technical and other resources than those of the
Company.
The Company has made significant investments in developing the technology and
manufacturing capability for its products, the returns on which are dependent
upon the generation of future revenues for realization. The Company has not yet
generated sufficient revenues to offset its expenses and, thus, has utilized
proceeds from the sale of equity securities to fund its operations. In the
opinion of management, the Company has adequate funds to meet its liquidity
needs for 1999 as well as on a longer-term basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. The more significant estimates made by management include
the allowance for doubtful accounts receivable, inventory reserves for potential
excess or obsolete inventory, the amortization period for intangible assets, and
warranty reserves. Actual results could differ from the estimates made.
Management periodically evaluates estimates used in the preparation of the
financial statements for continued reasonableness. Appropriate adjustments, if
any, to the estimates used are made prospectively based upon such periodic
evaluation.
26
<PAGE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include overnight repurchase agreements and U.S.
Treasury money market investments totaling approximately $10,032,000 and
$1,845,000 at December 31, 1998 and December 31, 1997, respectively.
INVESTMENTS
Investments consist of funds invested in U.S. Treasury notes, U.S. Treasury
bills and mortgage-backed securities guaranteed by the U.S. government. The
Company accounts for investment securities under Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires investment securities to be
classified as held-to-maturity, trading or available-for-sale based on the
characteristics of the securities and the activity in the investment portfolio.
Investments classified as held-to-maturity, which have maturities of less than
one year, and investments classified as available-for-sale are included in
short-term investments. Long-term investments include securities classified as
held-to-maturity with maturities ranging from one to four years.
At December 31, 1998 and 1997, short-term investments included an investment
classified as available-for-sale reported at its fair value of $10,078,100 and
$10,008,203, respectively, and investments classified as held-to-maturity
reported at their amortized cost of $999,294 and $8,807,754, respectively.
Long-term investments are reported at their amortized cost of $8,000,000 and
$9,494,404 at December 31, 1998 and 1997, respectively. For all of the
investments classified as held-to-maturity, amortized cost approximates fair
value. For the year ended December 31, 1998 an unrealized gain of $72,241 was
recognized. No unrealized gains or losses were recognized for the year ended
December 31, 1997.
INVENTORIES
Inventories are stated at the lower of average cost (which approximates the
first-in, first-out method) or market (net realizable value). Cost includes the
acquisition of purchased materials, labor and overhead. Purchased materials
inventory consists principally of components and subassemblies. The Company's
substantial investment in inventory is due to anticipated future demand for its
product and the buildup of safety stock on single-source or long lead-time
components. Management believes the Company will realize its investment in
inventory through future product sales and that the Company's purchased
materials net inventories could, if necessary, be resold "as is" without
incurring substantial loss.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation. The
cost and accumulated depreciation of assets sold or retired are removed from
their respective accounts, and any resulting gain or loss is recognized in the
accompanying statements of operations. Depreciation is determined using the
straight-line method over the estimated useful lives of the assets, ranging from
three to seven years, or over the lease term of the respective assets, as
applicable.
OTHER ASSETS
Included in other assets are patent costs, prepaid licensing fees and prepaid
consulting fees. Patent costs represent costs incurred to obtain patents and
trademarks for product concepts and methodologies developed by the Company. The
Company has submitted additional patent applications that are currently pending.
Capitalized patent costs are being amortized over the
27
<PAGE>
estimated lives of the related patents, ranging from five to twenty years.
Prepaid licensing fees represent costs incurred to obtain licenses for use of
certain technologies in future products. Prepaid licensing fees are being
amortized over the estimated terms of the licensing agreements, ranging from
three to fourteen years. Prepaid consulting fees represent the estimated fair
market value of warrants issued as consideration for such consulting services
(see Note 10). These fees are being amortized over the terms of the related
consulting agreements, generally five years.
REVENUE RECOGNITION
Product revenues, recorded net of discounts, are recognized at the time a
product is shipped or services are performed and the Company has no significant
further obligations to the customer. Customer prepayments are deferred until
product shipment has occurred or services have been rendered and there are no
significant further obligations to the customer.
WARRANTY COSTS
The Company generally warrants its video products against defects in workmanship
and material for one year from the date of shipment. Estimated costs related to
warranty are accrued at the time of revenue recognition and are included in
sales and marketing expense. For the years ended December 31, 1998, 1997 and
1996, warranty expenses were approximately $95,000, $55,000 and $35,000,
respectively.
NONRECOVERABLE START-UP AND EXCESS CAPACITY COSTS
Nonrecoverable start-up and excess capacity costs include materials, labor and
overhead costs incurred by the Company in excess of those directly or indirectly
attributable to system sales. Such costs are primarily composed of the cost of
excess facilities and are expensed as incurred.
LOSS PER SHARE
Basic loss per share is determined based on the weighted-average number of
common shares assumed to be outstanding during each year. Diluted loss per share
is the same as basic loss per share as all common share equivalents are excluded
from the calculation, as their effect is anti-dilutive. The weighted-average
number of common shares assumed to be outstanding for the years ended December
31, 1998, 1997 and 1996, is 11,413,555, 10,490,480, and 9,681,182, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that long-lived assets and
certain identifiable intangibles of an entity be reviewed for impairment. If
circumstances suggest that their values may be impaired, an assessment of
recoverability is performed prior to any write-down of the asset. In performing
the review for recoverability, the Company estimates the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future cash flows is less than the carrying amount of
the asset, an impairment loss is recognized. As of December 31, 1998, the
Company does not believe any assets that are subject to SFAS No. 121 are
impaired.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components. The Company's comprehensive
income (loss) is comprised of unrealized gains (losses) on available-for-sale
securities which are included in accumulated other comprehensive
28
<PAGE>
income in the statement of shareholders' equity. The Company's comprehensive
income (losses) for the years ended December 31, 1998, 1997 and 1996 was
$72,241, $0 and $(18,750), respectively. Prior year financial statements have
been reclassified to conform to the requirements of SFAS No. 130.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has announced that it plans to amend
Accounting Principles Bulletin No. 25 as early as September 1999. The proposed
changes affect the way compensation would be recorded in connection with stock
options and other stock awards. The amendment, as currently drafted, would
require the Company to recognize expense in the income statement on a quarterly
basis based on fair value calculations at the end of each quarter for options
granted to non-employee directors and consultants. If adopted, the amendments
would be applied prospectively but would cover events that occur after December
15, 1998.
STATEMENTS OF CASH FLOWS
The Company paid interest of $83,658 during 1996. No interest was paid during
1997 and 1998. The Company issued 15,000 options, valued at approximately
$104,000, in 1998 for professional services provided in 1998. The Company also
issued 75,000 options in 1998 for professional services to be provided over a
three-year period, valued at approximately $797,000. The Company issued 50,000
options in 1997 for professional services to be provided over a five-year
period, valued at approximately $410,000. The Company terminated the service
agreement in 1998 resulting in forfeiture of 40,000 unvested options valued at
approximately $328,000. The Company issued 324,425 shares of common stock in
1996 for conversion of subordinated debentures totaling $3,244,250. The Company
also issued 200,000 warrants in 1996 for professional services to be provided
over a five-year period valued at $512,000.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements in
order to conform to the 1998 presentation.
3. INVENTORIES:
------------
Inventories consist of the following at December 31, 1998 and 1997:
1998 1997
----------- -----------
Purchased materials $ 1,996,573 $ 1,948,581
Work in process 241,676 378,859
Finished goods 1,406,664 1,059,699
----------- -----------
3,644,913 3,387,139
Less allowance for inventory
obsolescence (407,346) (417,052)
----------- -----------
$ 3,237,567 $ 2,970,087
=========== ===========
29
<PAGE>
4. PROPERTY AND EOUIPMENT, NET:
----------------------------
Property and equipment, at cost, consist of the following at December 31, 1998
and 1997:
1998 1997
----------- -----------
Manufacturing and office equipment $ 4,592,604 $ 3,737,218
Tools and dies 792,688 792,688
Leasehold improvements 426,624 366,581
Furniture and fixtures 181,452 134,877
----------- -----------
5,993,368 5,031,364
Less accumulated depreciation (3,233,033) (2,490,241)
----------- -----------
$ 2,760,335 $ 2,541,123
=========== ===========
Depreciation expense related to property and equipment was $742,791, $516,569,
and $524,762 in 1998, 1997, and 1996, respectively.
5. OTHER ASSETS
------------
Other assets consist of the following at December 31, 1998 and 1997:
1998 1997
----------- -----------
Patents and copyrights $ 1,391,490 $ 325,164
Prepaid consulting fees 1,033,857 737,480
Prepaid licensing fees 700,000 325,000
Other assets 5,095 4,450
----------- -----------
3,130,442 1,392,094
Less accumulated amortization (537,877) (320,322)
----------- -----------
$ 2,592,565 $ 1,071,772
=========== ===========
Amortization of patents and copyrights was $43,843, $47,591, and $42,058 in
1998, 1997 and 1996, respectively. Amortization of prepaid consulting fees was
$168,361, $153,620, and $42,659 in 1998, 1997 and 1996, respectively.
Amortization of prepaid licensing fees was $5,351 in 1998, 1997 and 1996.
6. INCOME TAXES AND TAX STATUS:
----------------------------
The Company accounts for income taxes in accordance with SFAS No.109,
"Accounting for Income Taxes." 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, 1998, 1997, and 1996 is as follows:
30
<PAGE>
1998 1997 1996
----------- ----------- ---------
Tax benefit at statutory rate $(1,600,175) $ (997,644) $(569,320)
State tax benefit (235,320) (146,712) (83,724)
Increase in valuation allowance 1,919,106 1,295,305 613,711
Increase in research and
development credit (78,139) (223,974) 0
Other (5,472) 73,025 39,333
----------- ----------- ---------
$ 0 $ 0 $ 0
=========== =========== =========
The Company's deferred tax assets and liabilities relate to the following
sources and differences between financial accounting and the tax bases of the
Company's assets and liabilities at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current deferred taxes:
Current deferred tax assets:
Inventory obsolescence reserve $ 169,049 $ 173,077
Inventory capitalization 61,746 0
Warranty reserve 41,357 38,460
Vacation accrual 35,275 22,825
Allowance for doubtful accounts 15,483 15,938
Deferred revenue 13,863 8,704
Related-party payables and accruals 1,567 2,793
----------- -----------
338,340 261,797
Less valuation allowance (320,249) (257,119)
----------- -----------
Total current deferred tax assets $ 18,091 $ 4,678
=========== ===========
Noncurrent deferred taxes:
Noncurrent deferred tax assets:
Net operating loss carryforward $ 6,773,503 $ 4,842,441
Research and development credit carryforward 302,113 223,974
Patent amortization and other 237,759 112,983
----------- -----------
7,313,375 5,179,398
Less valuation allowance (6,921,975) (5,065,999)
----------- -----------
Total noncurrent deferred tax assets 391,400 113,399
Noncurrent deferred tax liabilities:
Warrant exercise (249,000) 0
Depreciation and other (160,491) (118,077)
----------- -----------
Total noncurrent deferred tax liabilities (409,491) (118,077)
Net noncurrent deferred income tax liability $ (18,091) $ (4,678)
=========== ===========
</TABLE>
31
<PAGE>
The Company has recorded a valuation allowance to state its deferred tax assets
at estimated net realizable value due to the uncertainty related to realization
of these assets through future taxable income. The valuation allowance for
deferred tax assets as of December 31, 1998 and 1997 was $7,242,224 and
$5,323,118, respectively.
At December 31, 1998, the Company had net operating loss and research and
development carryforwards for income tax purposes of approximately $16,322,000
and $728,000, respectively, which expire from 2008 to 2013. The Company's
ability to benefit from the net operating loss and research and development
carryforwards could be limited under certain provisions of the Internal Revenue
Code if ownership of the Company changes by more than 50%, as defined.
7. COMMITMENTS AND CONTINGENCIES
-----------------------------
LEASE COMMITMENTS
The Company leases manufacturing facilities and office space under noncancelable
leases that expire at various dates through 2002. Certain leases obligate the
Company to pay property taxes, maintenance and repair costs.
Future minimum lease payments under all operating leases as of December 31, 1998
were as follows:
1999 $328,337
2000 329,384
2001 329,384
2002 53,315
PURCHASE COMMITMENTS
At December 31, 1998, the Company has commitments to purchase materials
aggregating approximately $462,000 through 1999 from four suppliers. One of
these suppliers is a single-source supplier of the Company's camera modules and
accounted for approximately 18%, 40%, and 21% of the Company's component
purchases for the years ended December 31, 1998, 1997 and 1996, respectively. No
other supplier accounted for more than 15% of the Company's component purchases
in 1998, 1997, or 1996.
8. RELATED-PARTY TRANSACTIONS:
---------------------------
The Company leases its manufacturing and headquarter office facilities from the
Chairman and Chief Executive Officer of the Company and his mother. The lease's
current terms obligate the Company through February 28, 2002 at a monthly lease
payment of $25,867.
32
<PAGE>
9. BUSINESS SEGMENT INFORMATION
----------------------------
The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information," effective January 1, 1998. SFAS No. 131 provides
guidance regarding identification of reportable segments and establishes
disclosure requirements for reportable segments. The Company operates in one
reportable operating segment of microelectronic hardware and software products
and related technologies.
One customer, Vtel Corporation ("VTEL"), accounted for approximately 35% of
total revenues in 1998, 1997 and 1996. No other customer accounted for more than
10% of total revenues in 1998 or 1997. In 1996, one other reseller accounted for
approximately 11% of total revenues.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist primarily of trade receivables. VTEL and two other
resellers accounted for approximately 63% of accounts receivable at December 31,
1998. The Company closely monitors extensions of credit and has never
experienced significant credit losses.
10. STOCK OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION PLANS:
-----------------------------------------------------------
1993 STOCK PLAN
The Company adopted a stock plan in September 1993 (the "1993 Plan"). The 1993
Plan, as amended, provides for the grant of options and other Company stock
awards to employees, directors and consultants, not to exceed 2,000,000 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, bargain purchases of common stock, bonuses of common stock and various
stock benefits or cash. Under terms of the plan, incentive stock options may not
be granted at less than the fair market value of the common stock on the date of
grant and expire no later than ten years after the date of grant.
Options granted to employees and consultants under the 1993 Plan generally vest
for periods up to ten years and are exercisable for a period of five years from
the date the options become vested. Options granted to directors under the 1993
Plan are generally exercisable immediately and expire ten years from the date of
grant. Options to purchase 6,820 shares of common stock were available for
future grants under the 1993 Plan at December 31, 1998.
The following table summarizes activity under the 1993 Plan for each of the
years ended December 31:
33
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
Wtd. Wtd.. Wtd.
Avg. Ex. Avg. Ex. Avg. Ex.
Shares Price Shares Price Shares Price
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,187,200 $13.46 297,275 $ 9.96 168,500 $ 7.07
Granted 902,640 19.31 941,000 14.41 134,275 13.33
Exercised (8,350) 6.26 (39,800) 9.45 (5,000) 3.25
Forfeited (143,960) 15.63 (11,275) 14.40 (500) 10.50
--------------------- --------------------- ---------------------
Outstanding at
end of year 1,937,530 $16.06 1,187,200 $13.46 297,275 $ 9.96
===================== ===================== =====================
Exercisable at
end of year 668,460 $14.11 398,800 $11.24 256,875 $10.05
===================== ===================== =====================
Weighted average
fair value of
options granted $12.37 $ 8.65 $ 5.94
====== ====== ======
</TABLE>
The options outstanding at December 31, 1998 under the 1993 Plan have exercise
price ranges and weighted average contractual lives as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ------------------------
Number Wtd.Avg. Number
Range of Outstanding at Remaining Wtd. Avg. Exercisable Wtd. Avg.
Exercise December Contractual Exercise at December Exercise
Prices 31, 1998 Life Price 31, 1998 Price
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$5.00 - $11.88 426,350 9 years $ 10.36 289,050 $ 9.83
$13.88-$23.13 1,511,180 12 years $ 17.66 379,410 $ 17.38
</TABLE>
NON-PLAN OPTIONS/WARRANTS
The Company grants options and warrants outside the 1993 Plan for employment
inducements and for non-employee consultants. Non-plan options and warrants are
granted with exercise prices equal to fair market value at the date of grant.
Non-plan options granted as employment inducements generally vest over five to
ten years and are generally exercisable for a period of five years from the date
the options become vested. Non-plan options or warrants granted to non-employee
consultants vest over the term of the related consulting agreement, generally
one to five years, and expire five years from the date the option or warrant
becomes vested.
34
<PAGE>
The following table summarizes activity related to non-plan options and warrants
for each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- --------------------- ---------------------
Wtd. Wtd. Wtd.
Avg. Ex. Avg. Ex. Avg. Ex.
Shares Price Shares Price Shares Price
-------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 50,000 $ 5.00 132,807 $ 2.72 155,488 $ 2.52
Granted 516,625 21.17 250,000 15.13 0
Exercised 0 (82,807) 1.36 (22,638) 1.36
Forfeited 0 (250,000) 15.13 (43) 1.36
-------------------- --------------------- ---------------------
Outstanding at
end of year 566,625 $ 19.74 50,000 $ 5.00 132,807 $ 2.72
==================== ===================== =====================
Exercisable at
end of year 85,325 $ 11.32 50,000 $ 5.00 132,807 $ 2.72
==================== ===================== =====================
Weighted average
fair value of
options granted $ 14.11
========
</TABLE>
The non-plan options and warrants outstanding at December 31, 1998 have exercise
price ranges and weighted-average contractual lives as follows:
<TABLE>
<CAPTION>
Options/Warrants Options/Warrants
Outstanding Exercisable
------------------------------------------ ---------------------------
Number Wtd.Avg. Number
Range of Exercise Outstanding at Remaining Wtd. Avg. Exercisable at Wtd. Avg.
Prices December Contractual Exercise December 31, Exercise
31, 1998 Life Price 1998 Price
- ------------------ -------------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$5.00 50,000 5 years $ 5.00 50,000 $ 5.00
$15.13-$21.38 516,625 10 years $21.17 35,235 $20.26
</TABLE>
COMPENSATION COSTS
The Company's employee stock options are accounted for under APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost for
this plan been determined consistent with SFAS No. 123, the Company's net loss
and net loss per share would have been increased to the following pro forma
amounts:
35
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Loss: As Reported $(4,706,398) $(2,934,247) $(1,674,470)
Pro Forma (9,010,611) (4,786,415) (2,412,705)
Basic Net Loss Per Share: As Reported $(0.41) $(0.28) $(0.17)
Pro Forma (0.79) (0.46) (0.25)
</TABLE>
The fair value of each employee option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1998, 1997 and 1996:
1998 1997 1996
-------------- -------------- --------------
Expected volatility 62% 55% 40%
Risk free interest rate 4.70% to 5.98% 5.75% to 6.85% 6.04% to 6.78%
Expected life 2-11 years 2-11 years 5 years
Dividend yield -- -- --
NON EMPLOYEE OPTIONS/WARRANTS
In November 1998, the Company granted options to outside patent counsel to
purchase an aggregate of 75,000 shares of common stock at an exercise price of
$18.75 per share. Options to purchase 50,000 shares were granted under the 1993
Plan and options to purchase the remaining 25,000 shares were granted outside
the 1993 Plan. These options vest ratably over a period of three years beginning
one year from the date of grant, and expire five years from the date they become
vested. The estimated fair value of these options is approximately $10.62 per
share or approximately $797,000, which is included in other assets and is being
amortized to expense over the vesting period. The fair value is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk free interest rate of 4.70%, no expected
dividend yield, expected life of five years and expected volatility of 62%.
Also in November 1998, in exchange for services rendered in 1998, the Company
granted non-plan options to a consultant to purchase 15,000 shares of common
stock at an exercise price of $18.75 per share. These options are fully
exercisable and expire five years from the date of grant. The estimated fair
value of these options is approximately $6.95 per share or approximately
$104,250, which has been expensed in the accompanying statement of operations.
The fair value is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions: risk free
interest rate of 4.70%, no expected dividend yield, expected life of two years
and expected volatility of 62%.
In May 1997, the Company retained outside counsel to serve as a consultant and
advisor for a period of five years. As compensation for these services, the
Company issued options, under the 1993 Plan, to purchase 50,000 shares of common
stock at an exercise price of $15.125 per share. The options
36
<PAGE>
vested ratably over a five-year period. In 1998, the consulting agreement was
cancelled, and 40,000 unvested options were forfeited. The estimated fair value
of the vested portion of the option is approximately $8.20 per share or $82,000,
which was fully expensed in 1998. The fair value of this option was estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions: risk free interest rate of 6.63%, no
expected dividend yield, expected life of 7 years and expected volatility of
40%.
In connection with its Regulation S offering (see Note 11), on September 5,
1997, the Company granted warrants to an outside financial consultant to
purchase an aggregate of 180,000 shares of common stock of the Company at an
exercise price of $22.50 per share. The warrants are exercisable for a period of
five years from the date of consummation of the offering. The warrants have an
estimated fair market value of $12.41 per share, or $2,233,800 which is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions: risk free interest rate of 6.08%, no
expected dividend yield, an expected life of three years, and expected
volatility of 64%.
In connection with its Regulation S offering (see Note 11), on April 12, 1996,
the Company granted warrants to outside financial consultants to purchase an
aggregate of 250,000 shares of common stock of the Company at an exercise price
of $10.00 per share. The warrants are exercisable for a period of five years
from the date of consummation of the offering. The warrants have an estimated
fair market value of $2.56 per share, or $640,000 which is estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk free interest rate of 6.34%, no expected
dividend yield, an expected life of two years, and expected volatility of 40%.
In July 1996, the Company retained Whale Securities Co., L.P. ("Whale") to serve
as a financial consultant and advisor for a period of five years. As
compensation for these services, the Company issued warrants to Whale and its
designee for the purchase of 200,000 shares of the Company's common stock at an
exercise price of $10.00 per share. The warrants are exercisable for a period of
five years from the date of issuance, and their estimated fair value of $2.56
per share or $512,000 is included in other assets and is being amortized to
expense over the term of the consulting agreement. The fair value of the
warrants is estimated on the date of issuance using the Black-Scholes option
pricing model with the following weighted average assumptions: risk free
interest rate of 6.34%, no expected dividend yield, expected life of two years
and expected volatility of 40%. Warrants representing 50,000 shares were
exercised in 1998.
11. STOCK AUTHORIZATION AND ISSUANCE:
---------------------------------
PREFERRED STOCK
The Certificate of Incorporation of the Company authorizes the Board of
Directors to issue up to 1,000,000 shares of preferred stock, $1.00 par value.
No preferred shares have been issued or are outstanding.
37
<PAGE>
COMMON STOCK
On December 1, 1998, the Company issued 238,096 shares of its common stock to
Questar InfoComm, Inc. in a private placement transaction. The shares, which
constituted approximately 2% of the Company's outstanding common stock on an
after-issued basis, were sold at a price of $21.00 per share, for net proceeds
of approximately $5,000,000.
On September 5, 1997, the Company issued 900,000 shares of its common stock to
overseas investors in a transaction pursuant to Regulation S of the Securities
Act of 1933, as amended (the "1997 Offering"). The shares, which constituted
approximately 8% of the Company's outstanding common stock on an after-issued
basis, were sold at a price of $22.50 per share. After deducting issuance and
offering costs of $1,257,500, the Company received net proceeds of $18,992,500.
Also on September 5, 1997, the Company issued 90,000 shares of its common stock
to three investors in a private placement transaction pursuant to Section 4(2)
of the Securities Act of 1933, as amended. These shares, which constituted
approximately 0.8% of the Company's outstanding common stock on an after-issued
basis, were sold at a price of $22.50 per share, and the Company received net
proceeds of $2,025,000.
On April 12, 1996, the Company completed an offering of 800,000 shares of its
common stock to overseas investors in a transaction pursuant to Regulation S of
the Securities Act of 1933, as amended (the "1996 Offering"). The shares, which
constituted approximately 8.3% of the Company's outstanding common stock on an
after-issued basis, were sold at a price of $10.00 per share. After deducting
issuance and offering costs of $602,500, the Company received net proceeds
therefrom of $7,397,500.
Also in connection with the 1996 Offering, certain related parties agreed to
convert subordinated debentures of the Company at a value of $10.00 per share
for an aggregate of 324,425 shares of common stock (see Note 7).
On April 22, 1996, the Company issued 80,000 shares of its common stock to two
investors in a private placement transaction pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These shares, which constituted
approximately 0.8% of the Company's outstanding common stock on an after-issued
basis, were sold at a price of $10.00 per share, and the Company received net
proceeds of $800,000.
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information contained under the captions "Election of Directors" in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of
Stockholders, which will be filed with the Commission pursuant to Regulation 14A
under the Securities and Exchange Act of 1934, as amended, (the "1998 Proxy
Statement"), is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Election of Directors - Executive
Compensation" in the 1998 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security Ownership of Certain
Beneficial Owners" in the 1998 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Election of Directors - Certain
Relationships and Related Transactions" in the 1998 Proxy Statement is
incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit Number Description
-------------- ----------------------------------------------------------
3.1 Articles of Incorporation, as amended (incorporated by
reference from Exhibit 3.1 of Registration Statement No.
33-70588-A).
3.2 Bylaws, as amended
4.1 Form of common stock certificate (incorporated by
reference from Exhibit 4.1 of Registration Statement No.
33-70588-A).
39
<PAGE>
4.2 Purchase option agreement dated April 12, 1996 between the
Registrant and Financial Consultant (incorporated by
reference from Exhibit 10.3 of Quarterly Report of Form
10-QSB for the quarterly period ended March 31, 1996).
4.3 Purchase option agreement dated April 12, 1996 between the
Registrant and Financial Consultant (incorporated by
reference from Exhibit 10.4 of Quarterly Report of Form
10-QSB for the quarterly period ended March 31, 1996).
4.4 Warrant agreement between the Registrant and Whale
Securities Co., L.P. dated July 16, 1996 (incorporated by
reference from Exhibit 4.1 of Quarterly Report of Form
10-QSB for the quarterly period ended September 30, 1996).
4.5 Warrant agreement between the Registrant and Frog Hollow
Partners dated July 16, 1996 (incorporated by reference
from Exhibit 4.2 of Quarterly Report of Form 10-QSB for
the quarterly period ended September 30, 1996).
4.6 Purchase option agreement dated September 5, 1997 between
the Registrant and Financial Consultant (incorporated by
reference from Exhibit 4.7 of Annual Report on Form 10-KSB
for the period ended December 31, 1997).
10.1 Lease dated March 1, 1992 between the Registrant and
Jeffrey Parker and Barbara Parker for 8493 Baymeadows Way,
Jacksonville, Florida (incorporated by reference from
Exhibit 10.1 of Registration Statement No. 33-70588-A).
10.2 1993 Stock Plan, as amended (incorporated by reference
from the Company's Proxy Statement dated October 1, 1996).
10.3 Stock option agreement dated October 11, 1993 between the
Registrant and Jeffrey Parker (incorporated by reference
from Exhibit 10.13 of Registration Statement
No.33-70588-A).
10.4 Form of indemnification agreement between the Registrant
and each of the directors and officers of the Registrant
(incorporated by reference from Exhibit 10.15 of
Registration Statement No.33-70588-A).
10.5 First amendment to lease dated March 1, 1992 between the
Registrant and Jeffrey Parker and Barbara Parker for 8493
Baymeadows Way, Jacksonville, Florida (incorporated by
reference from Exhibit 10.21 of Annual Report on Form
10-KSB for the year ended December 31, 1995)
40
<PAGE>
10.6 Second amendment to lease dated March 1, 1992 between the
Registrant and Jeffrey Parker and Barbara Parker for 8493
Baymeadows Way, Jacksonville, Florida (incorporated by
reference from Exhibit 10.1 of Quarterly Report of Form
10-QSB for the quarterly period ended March 31, 1996).
10.7 Consulting agreement between the Registrant and Whale
Securities Co., L.P. dated July 16, 1996, as amended
(incorporated by reference from Exhibit 10.1 of Quarterly
Report of Form 10-QSB for the quarterly period ended
September 30, 1996).
10.8 Third amendment to lease dated March 1, 1992 between the
Registrant and Jeffrey Parker and Barbara Parker for 8493
Baymeadows Way, Jacksonville, Florida (incorporated by
reference from Exhibit 10.19 of Annual Report of Form
10-KSB for the period ended December 31, 1996).
10.9 Employment agreement dated July 23, 1998 between the
Registrant and Richard L. Sisisky (incorporated by
reference from Exhibit 10.4 of Registration Statement No.
333- 62497).
10.10 Stock option agreement (vesting) dated July 23, 1998
between the Registrant and Richard L. Sisisky
(incorporated by reference from Exhibit 10.4 of
Registration Statement No. 333- 62497).
10.11 Stock option agreement (acceleration) dated July 23, 1998
between the Registrant and Richard L. Sisisky
(incorporated by reference from Exhibit 10.4 of
Registration Statement No. 333- 62497).
10.12 Subscription agreement dated December 1, 1998 between the
Registrant and Questar InfoComm, Inc.
23.1 Consent of Arthur Andersen LLP
27.1 Financial data schedule
99.1 Risk Factors
(B) REPORTS ON FORM 8-K
None.
41
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PARKERVISION, INC.
Date: March 30, 1999 By: /s/ Jeffrey Parker
----------------------
Jeffrey 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 Parker Chief Executive Officer and March 30, 1999
------------------------ Chairman of the Board
Jeffrey Parker
By: /s/ Richard L. Sisisky President, Chief Operating March 30, 1999
------------------------ Officer and Director
Richard L. Sisisky
By: /s/ David F. Sorrells Chief Technical Officer March 30, 1999
------------------------ and Director
David F. Sorrells
By: /s/ Stacie Parker Wilf Secretary, Treasurer March 30, 1999
------------------------ and Director
Stacie Parker Wilf
By: /s/ Cynthia Poehlman Controller and Chief March 30, 1999
----------------------- Accounting Officer
Cynthia Poehlman
By: /s/ Francesco Bolgiani Director March 30, 1999
-------------------------
Francesco Bolgiani
By: /s/ William A. Hightower Director March 30, 1999
-------------------------
William A. Hightower
By: /s/ Todd Parker Director March 30, 1999
-------------------------
Todd Parker
By: /s/ William L. Sammons Director March 30, 1999
------------------------
William L. Sammons
By: /s/ Arthur G. Yeager Director March 30, 1999
-----------------------
Arthur G. Yeager
42
<PAGE>
PARKERVISION, INC.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
Balance at Provision Balance at
Valuation Allowance for Beginning Charged to End of
Inventory Obsolescence of Period Expense Write-Offs Period
- ---------------------------- ---------- ---------- ---------- ----------
Year ended December 31, 1996 $332,000 $330,000 $(252,132) $409,868
Year ended December 31, 1997 409,868 100,000 (92,816) 417,052
Year ended December 31, 1998 417,052 210,000 (219,706) 407,346
Balance at Balance at
Valuation Allowance for Beginning End of
Income Taxes of Period Provision Write-Offs Period
- ---------------------------- ---------- ---------- ---------- ----------
Year ended December 31, 1996 $3,097,968 $ 929,845 $ 0 $4,027,813
Year ended December 31, 1997 4,027,813 1,295,305 0 5,323,118
Year ended December 31, 1998 5,323,118 1,919,106 0 7,242,224
43
<PAGE>
INDEX TO EXHIBITS
3.2 Bylaws, as amended
10.12 Subscription agreement dated December 1, 1998 between the
Registrant and Questar InfoComm, Inc.
23.1 Consent of Arthur Andersen LLP
27.1 Financial data schedule
99.1 Risk Factors
44
PARKERVISION, INC.
BYLAWS
ARTICLE I
GENERAL
-------
SECTION 1.1. OFFICES. The registered office of the corporation shall be in
the State of Florida. The Corporation may also have offices at such other places
both within and without the State of Florida as the Board of Directors may from
time to time determine or the business of the Corporation may require.
SECTION 1.2. SEAL. The Corporation may or may not have a corporate seal.
Any corporate seal of the Corporation shall be in the form of a circle and shall
have inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Florida".
SECTION 1.3. FISCAL YEAR. The fiscal year of the Corporation shall be the
period from January 1 through December 31 of each year.
ARTICLE II
STOCKHOLDERS
------------
SECTION 2.1. PLACE OF MEETING. All meetings of the stockholders shall be
held at the office of the Corporation in Jacksonville, Florida, except such
meetings as the Board of Directors expressly determines shall be held elsewhere,
in which case meetings may be held upon notice as hereinafter provided at such
other place or places within or without Jacksonville, Florida, as the Board of
Directors shall have determined and as shall be stated in such notice.
SECTION 2.2. ANNUAL MEETING. The annual meeting of the stockholders shall
be held in such month as the Board of Directors may determine, not less
frequently than once every 14 months, on such date and at such time as the Board
of Directors may determine. At each annual meeting the stockholders entitled to
vote shall elect such Directors as are to be elected at such meeting, as
determined under the Corporation's Articles of Incorporation, as they may be
amended from time to time (the "Articles of Incorporation"), by plurality vote
by ballot, and they may transact such other corporate business as may properly
be brought before the meeting. At the annual meeting any business may be
transacted, irrespective of whether the notice calling such meeting shall have
contained a reference thereto, except where notice is required by law, the
Articles of Incorporation, or these bylaws.
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<PAGE>
SECTION 2.3. QUORUM. At all meetings of the stockholders, the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or by proxy, shall constitute a quorum requisite for the
transaction of business except as otherwise provided by law, by the Articles of
Incorporation, or by these bylaws. If, however, such majority shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or by proxy, by a majority vote,
shall have power to adjourn the meeting from time to time without notice other
than announcement at the meeting until the requisite amount of voting stock
shall be present. If the adjournment is for more than thirty (30) days, of if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At such adjourned meeting at which the
requisite number of voting stock shall be represented, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
SECTION 2.4 RIGHT TO VOTE; PROXIES. Except as otherwise provided in the
Articles of Incorporation, each stockholder having the right to vote at any
meeting shall be entitled to one vote for each share of stock held by him. Any
stockholder entitled to vote at any meeting of stockholders may vote either in
person or by proxy, but no proxy which is dated more than eleven months prior to
the meeting at which it is offered shall confer the right to vote thereat unless
the proxy provides that it shall be effective for a longer period. Every proxy
shall be in writing, subscribed by a stockholder or his duly authorized
attorney-in-fact, and dated, but need not be sealed, witnessed or acknowledged.
SECTION 2.5. VOTING. At all meetings of stockholders all questions, except
as otherwise expressly provided for by statute, the Articles of Incorporation or
these bylaws, shall be determined by a majority vote of the stockholders present
in person or represented by proxy and entitled to vote thereat and all elections
of directors shall be by plurality. The stockholders will nave cumulative vote
on any question or in the election of directors. Except as otherwise expressly
provided by law, the Articles of Incorporation or these bylaws, at all meetings
of stockholders the voting shall be by voice vote, but any stockholder qualified
to vote on the matter in question may demand a stock vote, by shares of stock,
upon such question, whereupon such stock vote shall be taken by ballot, each of
which shall state the name of the stockholder voting and the number of shares
voted by him, and, if such ballot be cast by proxy, it shall also state the name
of the proxy.
SECTION 2.6. NOTICE OF ANNUAL MEETINGS. Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to vote
thereat at such address as appears on the stock books of
2
<PAGE>
the Corporation at least ten (10) days (and not more than fifty (50) days) prior
to the meeting. It shall be the duty of every stockholder to furnish to the
Secretary of the Corporation or the transfer agent, if any, the class of stock
owned by such stockholder, the post office address of such stockholder, and to
notify said Secretary or transfer agent of any change therein.
SECTION 2.7. STOCKHOLDERS' LIST. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and filed
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held, at least ten (10) days before such
meeting and shall, at all times during the usual hours for business and during
the whole time of said election, be open to the examination of any stockholder
for a purpose germane to the meeting.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes,may be called only by the Board of Directors or the Chief
Executive Officer.
SECTION 2.9. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting of stockholders, stating the time and place and object thereof, shall be
mailed, postage prepaid, not less than ten (10) nor more than fifty (50) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the Corporation. No business may be
transacted at such meeting except that referred to in said notice or in a
supplemental notice given also in compliance with the provisions hereof or such
other business as may be germane or supplementary to that stated in said notice
or notices.
SECTION 2.10. INSPECTORS. One or more inspectors may be appointed by the
Board of Directors before or at any meeting of stockholders or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which the inspector or inspectors
are appointed, such inspector or inspectors shall open and close the polls,
receive and take and close the polls, receive and take charge of the proxies and
ballots, and decide all questions touching on the qualifications of voters, the
validity of proxies and the acceptance and rejection of votes. If any inspector
previously appointed shall fail to attend or refuse or be unable to serve, the
presiding officer shall appoint a substitute inspector.
3
<PAGE>
SECTION 2.11. NOMINATIONS FOR DIRECTORS. Nominations for the election of
directors may be made by the Board of Directors. Nominations for the election of
directors may be made by any stockholder entitled to vote for the election of
directors in accordance with the procedures set forth herein. Any stockholder
entitled to vote for the election of directors at any meeting may nominate a
person or persons for election as directors only if written notice of such
stockholder's nomination is given, either by personal delivery or by United
States mail, postage prepaid, to the Secretary of the Corporation not later than
120 days in advance of the same day and month that the Corporation's proxy
statement was released to stockholders in connection with the previous year's
annual meeting of stockholders or if no annual meeting was held in the previous
year then by the end of the fiscal year to which the annual meeting in which the
nomination will be made relates. Each notice of a stockholder's nomination shall
set forth: (i) the name and address of the stockholder who is making the
nomination and the person or persons to be nominated; (ii) a representation that
the stockholder is a holder of record of the stock of the Corporation entitled
to vote at the meeting; (iii) a description of all arrangements and
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are made; (iv) such other information regarding each nominee
proposed by the stockholder as would have been required to be included in a
proxy statement filing pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated, or intended to be
nominated, by the Board or Directors; and (v) the written consent of each
nominee to serve as a Director of the Corporation if so elected. The chairman of
any meeting of stockholders at which time is a proposal to elect directors and
the Board of Directors may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedures.
SECTION 2.12. STOCKHOLDER PROPOSALS TO BE TRANSACTED AT ANNUAL MEETING. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must give written notice thereof, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation, not
later than 120 days in advance of the same day and month the Corporation's proxy
statement was released to stockholders in connection with the previous year's
annual meeting of stockholders or if no annual meeting was held in the previous
year then by the end of the fiscal year for which the annual meeting in which
the proposal will be made relates. Any such notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting and, in the event that such
business includes a proposal to amend either the Certificate of Incorporation or
By-laws of the Corporation, the language
4
<PAGE>
of the proposed amendment, (ii) the name and address of the stockholder
proposing such business, (iii) a representation disclosing (a) the number of
shares beneficially owned by such stockholder, (b) the length of time such
shares have been held by the stockholder, (c) that the stockholder will continue
to own such securities through the annual meeting, and (d) that the stockholder
intends to appear in person or by proxy at the meeting at which the proposal
will be considered, and (iv) any material interest of the stockholder in such
business. The chairman of any annual meeting of stockholders may refuse to
permit any business to be brought before an annual meeting without compliance
with the foregoing procedures.
SECTION 2.13. ACTION BY CONSENT. Unless otherwise restricted by the
Articles of Incorporation or these bylaws, any action required or permitted to
be taken at any meeting of the stockholders may be taken without a meeting if
written consent thereto is signed by all stockholders.
ARTICLE III
DIRECTORS
---------
SECTION 3.1. NUMBER OF DIRECTORS. Except as otherwise provided by law, the
Articles of Incorporation or these bylaws, the property and business of the
Corporation shall be managed by or under the direction of a board of not less
than three (3) nor more than ten (10) directors. The specific number of
directors from time to time shall be fixed by the Board of Directors. Directors
need not be stockholders, residents of Florida or citizens of the United States.
SECTION 3.2. RESIGNATION. Any director of this Corporation may resign at
any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein, or at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 3.3. PLACE OF MEETINGS AND BOOKS. The Board of Directors may hold
their meetings and keep the books of the Corporation outside the State of
Florida, at such places as they may from time to time determine.
SECTION 3.4. GENERAL POWERS. In addition to the powers and authority
expressly conferred upon them by these bylaws, the Board may exercise all such
powers of the Corporation and do all such acts and things as are not by statute
or by the Articles of Incorporation or by these bylaws directed or required to
be exercised or done by the
5
<PAGE>
stockholders.
SECTION 3.5. EXECUTIVE COMMITTEE. There may be an Executive Committee of
one or more directors designated by resolution passed by a majority of the whole
Board. The act of a majority of the members of such committee shall be the act
of committee. Said committee may meet at stated times or on notice to all by any
of their own number, and shall have and may exercise those powers of the Board
of Directors in the management of the business affairs of the Corporation as are
provided by law and may authorize the seal of the Corporation to be affixed to
all papers which may require it. Vacancies in the membership of the committee
shall be filled by the Board of Directors at a regular meeting or at a special
meeting called for that purpose.
SECTION 3.6. OTHER COMMITTEES. The Board of Directors may also designate
one or more committees in addition to the Executive Committee, by resolution or
resolutions passed by a majority of the whole board; such committee or
committees shall consist of one or more directors of the Corporation, and to the
extent provided in the resolution or resolutions designating them shall have and
may exercise specific powers of the Board of Directors in the management of the
business and affairs of the Corporation to the extent permitted by statute and
shall have power to authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
SECTION 3.7. POWERS DENIED TO COMMITTEES. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
Articles of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or to amend the bylaws of the Corporation. Further, committees of the Board of
Directors shall not have any power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 3.8. SUBSTITUTE COMMITTEE MEMBER. In the absence or on the
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of such absent or
disqualified member. Any committee shall keep regular minutes of its proceedings
and report the same to the board as may be required by the board.
6
<PAGE>
SECTION 3.9. COMPENSATION OF DIRECTORS. The Board of Directors shall have
the power to fix the compensation of directors and members of committees of the
Board. The directors may be paid their expenses, if any, of attendance at such
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 3.10. ANNUAL MEETING. The Board, including any newly elected
members, may meet at such place and time as shall be fixed and announced by the
presiding officer at the annual meeting of stockholders, for the purpose of
organization or otherwise, and no further notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or they may meet at such place and
time as shall be stated in a notice given to such directors two (2) days prior
to such meeting, or as shall be fixed by the consent in writing of all the
directors.
SECTION 3.11. REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such time and place as shall from time to time be determined
by the Board.
SECTION 3.12 SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman of the Board, if any, or the President, on two (2) days notice
to each director, or such shorter period of time before the meeting as will
nonetheless be sufficient for the convenient assembly of the directors so
notified; special meetings shall be called by the Secretary in like manner and
on like notice, on the written request of two or more directors.
SECTION 3.13. QUORUM. At all meetings of the Board of Directors a majority
of the total number of directors shall be necessary and sufficient to constitute
a quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically permitted or
provided by statute, or by the Articles of Incorporation or by these bylaws. If
at any meeting of the Board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than by
announcement at said meeting which shall be so adjourned.
7
<PAGE>
SECTION 3.14. TELEPHONIC PARTICIPATION IN MEETINGS. Members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.15. ACTION BY CONSENT. Unless otherwise restricted by the
Articles of Incorporation or these bylaws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if written consent thereto is signed by all
members of the Board or of such committee as the case may be and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 3.16. ADVISORY COMMITTEES. The Board of Directors may designate one
or more Advisory Committees; the members of any such Advisory Committee need not
be directors or stockholders of the Corporation. Any Advisory Committee created
by the Board of Directors shall neither hold nor exercise any power or authority
of the Board of Directors or the Corporation whatsoever. Without limiting the
foregoing, an Advisory Committee shall have no power or authority to enter into
any contract or agreement for or on behalf of the Board of Directors or the
Corporation or in any way to bind the Board of Directors or the Corporation; an
Advisory Committee shall function solely and exclusively for the purpose of
rendering advice and counsel to the Board of Directors as and when requested by
the Board of Directors. An Advisory Committee shall be formed for such advisory
purpose or purposes as deemed necessary or appropriate by the Board of Directors
from time to time, including but not limited to, advice and counsel concerning
long range strategic planning. The members of an Advisory Committee shall be
paid such compensation as shall be determined by the Board of Directors from
time to time.
ARTICLE IV
OFFICERS
--------
SECTION 4.1. SECTION; STATUTORY OFFICERS. The officers of the Corporation
shall be chosen by the Board of Directors. There shall be a Chief Executive
Officer, a President, a Secretary and a Treasurer, and there may be a Chairman
of the Board of Directors, a Chief Scientific Officer, one or more Vice
Presidents, one or more Assistant Secretaries, and one or more Assistant
Treasurers, as the Board of Directors may elect. Any number of offices may be
held by the same person.
8
<PAGE>
SECTION 4.2. TIME OF ELECTION. The officers above named shall be chosen by
the Board of Directors at its first meeting after each annual meeting of
stockholders. None of said officers need be a director.
SECTION 4.3. ADDITIONAL OFFICERS. The Board may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as determined from
time to time by the Board.
SECTION 4.4. TERMS OF OFFICE. Each officer of the Corporation shall hold
office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
SECTION 4.5. COMPENSATION OF OFFICERS. The Board of Directors shall have
power to fix the compensation of all officers of the Corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
SECTION 4.6. CHAIRMAN OF THE BOARD. Unless the Board of Directors otherwise
determines, the Chairman of the Board of Directors shall be the Chief Executive
Officer of the Corporation. The Chairman of the Board of Directors shall preside
at all meetings of the stockholders and directors, and shall have such other
duties as may be assigned to him from time to time by the Board of Directors.
SECTION 4.7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the senior corporate officer of the Corporation. Unless there is a Chairman of
the Board, the Chief Executive Officer shall preside at all meetings of the
Board of Directors and stockholders. Under the supervision of the Board of
Directors and of any Executive Committee, the Chief Executive Officer shall have
the general control and management of the Corporation's business and affairs,
subject however, to the right of the Board of Directors and of any Executive
Committee to confer any specific power upon any other officer or officers of the
Corporation. The Chief Executive Officer shall do and perform all acts and
things incident to the office of Chief Executive Officer and such other duties
as may be assigned from time to time by the Board of Directors or any Executive
Committee.
SECTION 4.8. PRESIDENT. The President shall be executive Officer next in
authority to the Chief Executive Officer and, under the supervision of the Chief
Executive Officer, shall be the chief operating officer of the Corporation. The
President need not be a director.
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SECTION 4.9. CHIEF SCIENTIFIC OFFICER. The Chief Scientific officer, under
the supervision of the Chief Executive Officer, shall be responsible for the
general control and direction of the Corporation's scientific research and
development.
SECTION 4.10. VICE PRESIDENTS. The Vice Presidents shall perform such of
the duties of the President on behalf of the Corporation as may be respectively
assigned to them from time to time by the Board of Directors or by the Executive
Committee or by the President. The Board of Directors or the Executive Committee
may designate one of the Vice Presidents as the Executive Vice President, and in
the absence or inability of the President to act, such Executive Vice President
shall have and possess all of the powers and discharge all of the duties of the
President, subject to the control of the Board and of the Executive Committee.
SECTION 4.11. TREASURER. The Treasurer shall have the care and custody of
all the funds and securities of the Corporation which may come into the hands of
the Treasurer, and the power and authority to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or
proper and to deposit the same to the credit of the Corporation in such bank or
banks or depository as the Board of Directors or any Executive Committee, or the
officers or agents to whom the Board of Directors or any Executive Committee may
delegate such authority, may designate, and the Treasurer may endorse all
commercial documents requiring endorsements for or on behalf of the Corporation.
The Treasurer may sign all receipts and vouchers for payments made to the
Corporation. The Treasurer shall render an account of transactions to the Board
of Directors or to the Executive Committee as often as the Board or the
Committee shall require the same. The Treasurer shall enter regularly in the
books to be kept by the Treasurer for that purpose full and adequate account of
all moneys received and paid by the Treasurer on account of the Corporation. The
Treasurer shall perform all acts incident to the position of Treasurer, subject
to the control of the Board of Directors and any Executive Committee. The
Treasurer shall, when requested pursuant to vote of the Board of Directors or
the Executive Committee, give a bond to the Corporation conditioned for the
faithful performance of the Treasurer's duties, the expense of which bond shall
be borne by the Corporation.
SECTION 4.12. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; the Secretary shall
attend to the giving and serving of all notices of the Corporation. Except as
otherwise ordered by the Board of Directors or the Executive Committee, the
Secretary shall attest the seal of the Corporation upon all contracts and
instruments executed under such seal and shall affix the seal of the Corporation
thereto and to all
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certificates of shares of the capital stock. The Secretary shall have charge of
the stock certificate book, transfer book and stock ledger, and such other books
and papers as the Board of Directors or any Executive Committee may direct. The
Secretary shall, in general, perform all the duties of Secretary, subject to the
control of the Board of Directors and any Executive Committee.
SECTION 4.13. ASSISTANT SECRETARY. The Board of Directors or any two of the
officers of the Corporation acting jointly may appoint or remove one or more
Assistant Secretaries of the Corporation. Any Assistant Secretary upon
appointment shall perform such duties of the Secretary, and also any and all
such other duties as any Executive Committee or the Board of Directors or the
President or the Executive Vice President or the Treasurer or the Secretary may
designate.
SECTION 4.14. ASSISTANT TREASURER. The Board of Directors or any two of the
officers of the Corporation acting jointly may appoint or remove one or more
Assistant Treasurers of the Corporation. Any Assistant Treasurer upon
appointment shall perform such duties of the Treasurer, and also any and all
such other duties as any Executive Committee or the Board of Directors or the
President or the Executive Vice President or the Treasurer or the Secretary may
designate.
SECTION 4.15. SUBORDINATE OFFICERS. The Board of Directors may select such
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority, and perform such duties as the
Board of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
ARTICLE V
STOCK
-----
SECTION 5.1. STOCK. Each stockholder shall be entitled to a certificate or
certificates of stock of the Corporation in such form as the Board of Directors
may from time to time prescribe. The certificates of stock of the Corporation
shall be numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate shall certify the holder's name and number and
class of shares and shall be signed by both of (A) either the President or a
Vice President, and (B) any one of the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, and shall be sealed with the corporate
seal of the Corporation, if applicable. If such certificate is countersigned by
a transfer agent other than the Corporation or its employee, or by a registrar
other than the Corporation or its employee, the signature of the officers of the
officers of the Corporation and the corporate seal
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may be facsimiles. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature shall have been used
thereon had not ceased to be such officer or officers of the Corporation.
SECTION 5.2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not
be required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (A) arrange for the disposition of fractional
interests by those entitled thereto, (B) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (c) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the Corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the Corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
SECTION 5.3. TRANSFERS OF STOCK. Subject to any transfer restrictions then
in force, the shares of stock of the Corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives and upon such transfer the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers or to such other person as the
directors may designate by whom they shall be canceled and new certificates
shall thereupon be issued. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof save as expressly provided by the laws of
Florida.
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SECTION 5.4. RECORD DATE. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action. If no such record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held; the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at any meeting of stockholders shall apply to any
adjournment of the meeting; provided however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 5.5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
SECTION 5.6. DIVIDENDS.
A. POWER TO DECLARE. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Articles of Incorporation and the laws
of Florida.
B. RESERVES. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property
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of the Corporation, or for such other purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
SECTION 5.7. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate for
shares of stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of such
evidence of the loss, theft or destruction and upon indemnification of the
Corporation and its agents to such extent and in such manner as the Board of
Directors may from time to time prescribe.
SECTION 5.8. INSPECTION OF BOOKS. The Board of Directors shall have power
from time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors.
ARTICLE VI
MISCELLANEOUS MANAGEMENT PROVISIONS
-----------------------------------
SECTION 6.1. CHECKS, DRAFTS AND NOTES. All checks, drafts or orders for the
payment of money, and all notes and acceptances of the Corporation, shall be
signed by such officer or officers, agent or agents, as the Board of Directors
may designate.
SECTION 6.2. NOTICES.
A. MANNER. Notices to directors may, and notices to stockholders shall, be
in writing and delivered personally or mailed to the directors or stockholders
at their addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram or orally, by telephone or in person.
B. WAIVER. Whenever any notice is required to be given under the provisions
of the statutes, the Articles of Incorporation or these bylaws, a written waiver
of notice signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
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SECTION 6.3. CONFLICT OF INTEREST. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the board of or committee thereof which authorized the
contract or transaction, or solely because his or their votes are counted for
such purpose, if (A) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee and the Board or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (B) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders of
the Corporation entitled to vote thereon, and the contract or transaction as
specifically approved in good faith by vote of such stockholders; or (C) the
contract or transaction is fair as to the Corporation as to the time it is
authorized, approved or ratified by the Board of Directors, a committee or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee which
authorizes the contract or transaction.
SECTION 6.4. VOTING OF SECURITIES OWNED BY THE CORPORATION. Subject always
to the specific directions of the Board of Directors (A) any shares or other
securities issued by any other Corporation and owned or controlled by this
Corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this Corporation if he is present at such
meeting or, in his absence, by the Treasurer of this Corporation if he is
present at such meeting, and (B) whenever, in the judgment of the President, it
is desirable for this Corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other corporation and
owned by this Corporation, such proxy or consent shall be executed in the name
of this Corporation by the President without the necessity of any authorization
by the Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above states as the proxy or
proxies of this Corporation shall have full right, power and authority to vote
the shares or other securities issued by such other corporation and owned by
this Corporation the same as if such shares or other securities might be voted
by this Corporation.
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ARTICLE VII
INDEMNIFICATION
---------------
SECTION 7.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of being or having been a director or
officer of the Corporation or serving or having served at the request of the
Corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (an "Indemnitee"),
whether the basis of such proceeding is alleged action or failure to act in an
official capacity as a director, trustee, officer, employee or agent or in any
other capacity while serving as a director, trustee, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Florida Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto) (as used in this Article VII, the "Florida
Law"), against all expense, liability and loss (including attorney fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such Indemnitee in connection
therewith and such indemnification shall continue as to an Indemnitee who has
ceased to be a director, trustee, officer, employee or agent and shall inure to
the benefit of the Indemnitee's heirs, executors and administrators; provided
however, that except as provided in Section 7.2 hereof with respect to
Proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such Indemnitee in connection with a Proceeding (or part thereof)
initiated by such Indemnitee only if such Proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article VII shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such Proceeding in advance of its final disposition (an
"Advancement of Expenses"); provided however, that if the Florida Law so
requires, an Advancement of Expenses incurred by an Indemnitee shall be made
only upon delivery to the Corporation of an undertaking (an "Undertaking") by or
on behalf of Indemnitee, to repay all amounts so advanced if it shall ultimately
be determined by final judicial decision from which there is no further right to
appeal (a "Final Adjudication") that such Indemnitee is not entitled to be
indemnified for such expenses under this Article VII or otherwise.
SECTION 7.2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
7.1 hereof is not paid in full by the Corporation within sixty (60) days after a
written claim has been received by the Corporation,
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except in the case of a claim for Advancement of Expenses, in which case the
applicable period shall be twenty (20) days, the Indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any suit, or in a suit brought
by the Corporation to recover an Advancement of Expenses pursuant to the terms
of an Undertaking, the Indemnitee shall be entitled to be paid also the expense
of prosecuting or defending such suit. In (A) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to endorse a right to an Advancement of Expenses) it shall be a
defense that, and (B) in any suit by the Corporation to recover an Advancement
of Expenses pursuant to the terms of an Undertaking the Corporation shall be
entitled to recover such expenses upon a Final Adjudication that, the Indemnitee
has not met the applicable standard of conduct set forth in the Florida Law.
Neither the failure of the Corporation (including its Board of Directors,
independent counsel or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the Indemnitee is proper
in the circumstances because the Indemnitee has met the applicable standard of
contract set forth in the Florida Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such Advancement of Expenses, under this
Article VII or otherwise, shall be on the Corporation.
SECTION 7.3. NON-EXCLUSIVITY OF RIGHTS. The rights to indem nification and
to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
SECTION 7.4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any officer, director, employee or agent of the
Corporation or any other corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under this Article VII or under the Florida Law.
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SECTION 7.5. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the Advancement of Expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article VII with respect to the indemnification and Advancement of
Expenses of directors and officers of the Corporation.
ARTICLE VIII
AMENDMENTS
----------
SECTION 8.1. AMENDMENTS. The bylaws of the Corporation may be altered,
amended or repealed at any meeting of the Board of Directors upon notice thereof
in accordance with these bylaws, or at any meeting of the stockholders by the
vote of the holders of the majority of the stock issued and outstanding and
entitled to vote at such meeting, in accordance with the provisions of the
Articles of Incorporation of the Corporation and of the laws of Florida.
18
Exhibit 10.12
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 1, 1998 (the
"Agreement"), is between PARKERVISION, INC., having its principal office at 8493
Baymeadows Way, Jacksonville, Florida (the "Company"), and Questar InfoComm,
Inc., having its principal office at 180 East 100 South, P.O. Box 45433, Salt
Lake City, Utah 84145-0433 (the "Buyer").
1. PURCHASE AND SALE. Subject to the terms and conditions herein set forth,
the Company hereby sells and delivers to Buyer and Buyer hereby purchases from
the Company, for an aggregate purchase price of $5,000,000, an aggregate of
238,096 shares (the "Shares") of the Company's common stock, $.01 par value per
share (the "Common Stock"). The Company hereby delivers to Buyer a stock
certificate in Buyer's name representing the Shares. The Buyer hereby makes
payment to the Company by delivery of a bank or certified check payable to the
order of the Company or by wire transfer to an account designated by Company in
the amount of $5,000,000.
2. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents and warrants to and covenants with Buyer as follows:
2.1 ORGANIZATION. The Company is duly organized, validly existing and
in good standing under the laws of the State of Florida.
2.2 AUTHORITY; EXECUTION AND DELIVERY. The execution, delivery, and
performance of this Agreement has been duly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company or its
stockholders are required. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid, and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights in general or general principles
of equity. The Shares have been duly authorized and are legally and validly
issued, fully paid and non-assessable.
2.3 FINANCIAL CONDITION. The financial statements of the Company
included in the Disclosure Documents (as defined in Section 2.5) fairly present
the financial position, the results of operations, the changes in financial
position and the changes in stockholders' equity and the other information
purported to be shown therein of the Company at the respective dates and for the
respective periods to which they apply and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of the results for such periods have been
made.
2.4 SUBSEQUENT EVENTS. Subsequent to the respective dates as of which
information is given in the Disclosure Documents, except as described therein,
there has not been any material adverse change in the condition (financial or
otherwise), earnings, business, properties or prospects of the Company.
2.5 DISCLOSURE. The Company has provided to Buyer true, correct and
complete copies of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997; the Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1998; and its Notice of Annual Meeting of Stockholders and
Proxy Statement relating to its annual meeting
<PAGE>
of stockholders held on June 12, 1998 (collectively, the "Disclosure
Documents"). Each of the Disclosure Documents when filed with the Securities and
Exchange Commission complied in all material respects with the requirements of
the form and rules and regulations applicable thereto.
3. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to the
Company as follows:
(a) It is aware that its investment involves a substantial degree of
risk, including, but not limited to the following: (i) the Company has had
substantial operating losses for the fiscal year ended December 31, 1997 and for
the three and nine months ended September 30, 1998, and expects to continue to
incur losses in the future; (ii) the Company has a significant customer which
during the nine months ended September 30, 1998 accounted for approximately 32%
of total revenues; (iii) the Company is developing and introducing new products
in its camera control segment and wireless technology segment, which products
are subject to the risks of timely, cost effective development, market
identification and introduction and customer acceptance; (iv) the Company has
and is seeking additional patents for its technologies which may not provide
adequate intellectual property protection or may not be granted, thereby
subjecting the Company to additional competitive pressures; (v) the consequences
of the Company, its vendors and/or customers not being Y2K compliant before
December 31, 1999; (vi) the Company may need additional financing in the future
to fund development, manufacture and marketing of its products and to fund
operating losses; (vii) management and the existing principal stockholders of
the Company beneficially own a substantial amount of the outstanding voting
stock of the Company and accordingly are in a position to substantially
influence the election of all directors of the Company and the vote on matters
requiring stockholder approval; and (viii) the Company's success will to a
significant extent rely upon the continued services and abilities of Jeffrey
Parker and the Company has neither an employment agreement with nor key-man life
insurance on Mr. Parker. Buyer acknowledges and is aware that there is no
assurance as to the future performance of the Company.
(b) Buyer is purchasing the Shares for its own account for investment
and not with a view to or in connection with a distribution of the Shares, nor
with any present intention of selling or otherwise disposing of all or any part
of the Shares. Buyer understands that it must bear the economic risk of its
investment because, among other reasons, the Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
the securities laws of any state and, therefore, cannot be resold, pledged,
assigned, or otherwise disposed of until they are registered under the
Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available.
(c) Buyer has the financial ability to bear the economic risk of its
investment in the Company, including its complete loss.
(d) Buyer has the knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Company and has obtained sufficient information from the Company to evaluate
the merits and risks of an investment in the Company. Buyer has had full
opportunity to ask questions and receive satisfactory answers concerning all
matters pertaining to its investment and all such questions have been answered
to its satisfaction. Buyer has been provided an opportunity to obtain any
additional information concerning the Company and all other information to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
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Buyer has received no representation or warranty from the Company with respect
to its investment in the Company. Buyer has relied solely upon its own
investigation in making a decision to invest in the Company.
(e) Buyer is an "accredited investor" as defined in Section 2(15) of
the Securities Act and in Rule 501 promulgated thereunder.
(f) This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights in general or general principles of equity.
4. RESTRICTIONS ON TRANSFER.
4.1 RESTRICTIONS ON TRANSFER. Buyer agrees that it will not sell,
transfer, or otherwise dispose of any of the Shares, except pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act and the Company has received
an opinion of counsel reasonably satisfactory to the Company that such exemption
is available.
4.2 LEGEND. Each certificate for the Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR
IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
EXEMPTION IS AVAILABLE."
The Company shall remove such legend from the certificates representing the
Shares whenever the Shares may be sold freely, without restriction, under the
Securities Act.
4.3 REGISTRATION RIGHTS. Buyer shall have the right to have the Shares
included in any registration statement (a Registration) filed by the Company on
any form other than S-4 and S-8, unless such Shares are then saleable under an
exemption from such registration requirements. Notwithstanding the foregoing, if
a Registration is an underwritten registration and the managing underwriter
advises the Company that, in its opinion, the number of securities requested to
be included in such Registration exceeds the number which can be marketed (i) at
a price reasonably related to their then current market value or (ii) without
materially and adversely affecting the offering, then Buyer shall agree, if
requested by the Company and the managing underwriter, that the number of shares
of common stock of the Company to be sold by all stockholders and included in
the Registration shall be apportioned pro rata among all such holders according
to the total number of shares of common stock owned by such stockholders,
including Buyer (it being understood that, if only the Company is selling
securities pursuant to the Registration, no Shares shall be included in the
Registration). Notwithstanding the foregoing, the Company shall have no
obligation hereunder in connection with any Registration (i) unless Buyer
provides to the Company information and documents with respect to its ownership
of Shares, compliance with the law, manner of proposed disposition and
3
<PAGE>
such other matters as the Company shall reasonably request for disclosure in the
Registration, (ii) if such registration is then permitted by law and the policy
of the Securities and Exchange Commission or (iii) if the Company is then
prohibited from doing so pursuant to a written agreement with an unaffiliated
third party.
5. MISCELLANEOUS.
5.1 EXPENSES. Each party shall be liable for its own expenses in
connection with the transactions contemplated by this Agreement.
5.2 AMENDMENTS. This Agreement may not be changed orally, but only by
an agreement in writing signed by the party against whom enforcement is sought.
5.3 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the Company
and of Buyer, whether so expressed or not.
5.4 NOTICES, ETC. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person or
mailed by certified or registered mail first-class, postage prepaid:
If to the Company: with a copy to:
ParkerVision, Inc. Graubard Mollen & Miller
8493 Baymeadows Way 600 Third Avenue
Jacksonville, Florida 32256 New York, New York 10016
Attention: Mr. Jeffrey Parker Attn: David Alan Miller, Esq.
If to the Buyer: with a copy to:
CEO Questar InfoComm, Inc. Questar InfoComm, Inc.
180 East 100 South P.O. Box 45433 180 East 100 South, P.O. Box 45433
Salt Lake City, Utah 84145-0433 Salt Lake City, Utah 84145-0433
Attn: Clyde Heiner, Pres. & CEO Attn: Donn Hilton
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (i) if
delivered by hand, at the time of receipt thereof and (ii) if sent by registered
or certified first-class mail, postage prepaid, five business days thereafter.
Any party may, by written notice to the other, change the address to
which notices to such party are to be delivered or mailed.
5.5 GOVERNING LAW. This Agreement is being delivered and is intended
to be performed in the State of Florida and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
such state.
5.6 COUNTERPARTS. This Agreement may be signed in counterparts.
4
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
PARKERVISION, INC. QUESTAR INFOCOMM, INC.
By: /s/ Jeffrey Parker By: /s/ Clyde Heiner
---------------------------- --------------------------
Jeffrey Parker, Clyde Heiner,
Chairman and Chief President and Chief
Executive Officer Executive Officer
5
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference of our report included in this Form 1O-K, into
ParkerVision, Inc.'s previously filed registration statements on Form S-8 File
Nos. 33-93658 and 333-62497 and registration statement on Form S-3 File No.
333-17683.
Arthur Andersen LLP
Jacksonville, Florida
March 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,569,435
<SECURITIES> 11,077,394
<RECEIVABLES> 805,880
<ALLOWANCES> 37,308
<INVENTORY> 3,237,567
<CURRENT-ASSETS> 26,897,110
<PP&E> 5,993,368
<DEPRECIATION> 3,233,033
<TOTAL-ASSETS> 40,250,010
<CURRENT-LIABILITIES> 1,249,949
<BONDS> 0
117,187
0
<COMMON> 0
<OTHER-SE> 38,864,783
<TOTAL-LIABILITY-AND-EQUITY> 40,250,010
<SALES> 9,891,543
<TOTAL-REVENUES> 9,891,543
<CGS> 5,882,552
<TOTAL-COSTS> 5,882,552
<OTHER-EXPENSES> 10,191,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,706,398)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,706,398)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,706,398)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
RISK FACTORS
PARKERVISION HAS A HISTORY OF LOSSES. ParkerVision has had losses in each year
since its inception in 1989. There can be no assurances that revenues from the
current CameraMan(R) or PVTV(TM) products or products and technologies being
developed Will produce revenues that will cover operational expenses or result
in net profits.
PARKERVISION MAY REQUIRE ADDITIONAL CAPITAL TO FUND ITS OPERATIONS AND RESEARCH
AND DEVELOPMENT. Because ParkerVision has had net losses and positive cash flow
has not been generated from operations, it has funded its operating activities
to date from the sale of equity securities. Although ParkerVision had working
capital of $25,647,161 at December 31, 1998, it is possible that its business
plan and operations will require additional capital in the future which may be
in the form of loans or additional sales of equity securities. A loan may result
in the imposition of operational limitations and will have payment obligations
that may be burdensome to ParkerVision. The sale of equity securities will
result in dilution to the current stockholders ownership of ParkerVision.
ParkerVision does not have any plans or arrangements for additional financing at
this time.
MICROELECTRONIC HARDWARE AND SOFTWARE IS SUBJECT TO RAPID TECHNOLOGICAL CHANGES
THAT REQUIRE PARKERVISION TO DEVELOP AND MARKET ENHANCEMENTS TO CURRENT PRODUCTS
AND DEVELOP NEW PRODUCTS. Because of the rapid technological development that
regularly occurs in the microelectronics industry, ParkerVision must continually
devote substantial resources to the developing and introducing new product
offerings and creating new products. This is necessary to establish and increase
market share and grow revenues. If another company offers better products, or
ParkerVision development lags, the competitive position and revenues of
ParkerVision may be adversely affected.
PARKERVISION HAS EXPENDED SIGNIFICANT RESOURCES FOR RESEARCH AND DEVELOPMENT OF
NEW PRODUCTS AND TECHNOLOGY THAT MAY NOT BE COMMERCIALLY ACCEPTED. ParkerVision
devotes substantial resources to research and development. There can be no
assurances that the results of the research and the product development will
produce commercially viable products and technologies. If new products and
technologies are not commercially accepted, the funds expended will not be
recoverable and ParkerVision's competitive position and revenues may be
adversely affected.
IF PARKERVISION'S PATENTS DO NOT PROVIDE THE ANTICIPATED MARKET PROTECTIONS, ITS
COMPETITIVE POSITION WILL BE ADVERSELY AFFECTED. ParkerVision has a number of
patents and patent applications relating to its microelectronic technologies.
ParkerVision relies on these to provide competitive advantages. It believes that
many of these 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
otherwise challenged such that some or all of the protection is lost,
ParkerVision will suffer adverse effects from the loss of competitive advantage
and its ability to offer unique products and technologies. Concomitantly, there
would be an adverse impact on its financial condition and business prospects.
<PAGE>
PARKERVISION WIRELESS COMMUNICATIONS USE INFRARED AND RADIO FREQUENCY TECHNOLOGY
SUBJECT TO REGULATION BY THE FEDERAL COMMUNICATIONS COMMISSION. ParkerVision
must obtain licenses and approvals from the FCC for the operation of its
products. ParkerVision may also have to obtain licenses and approvals from
foreign governments if its products are sold overseas. The inability to obtain
any required licenses and approvals, or a change in current regulation that
impacts issued licenses and approvals, will have an adverse impact on the
ability of ParkerVision to market its products. Therefore, there will be an
adverse impact on the revenues and business prospects of ParkerVision.
THE CAMERAMAN(R) AND PVTV(TM) PRODUCTS COMPETE WITH OTHER PRODUCTS. The
videoconferencing and studio production industries are highly competitive. There
are many other companies that offer products that compete with those of
ParkerVision. ParkerVision, however, believes that no one competing product
offers the range of options and capabilities of the CameraMan(R) and PVTV(TM)
products in thE tasks for which these products have been designed. The principal
competitors include Sony Corporation, Panasonic Corporation and Tektronics. Each
of these companies are well established, have substantially greater financial
and other resources and have established reputations or success in the
development, sale and service of products. They also have significant
advertising budgets that permit them to implement extensive advertising and
promotional campaigns in response to competitors. If these or other companies
improve or change their products or launch significant marketing efforts in the
market segments in which ParkerVision operates, ParkerVision may lose market
share.
PARKERVISION EXPECTS COMPETITION IN CONNECTION WITH ITS DIRECT2DATA(TM)
TECHNOLOGY. Although the D2D(TM) technology of ParkerVisIon is believed to be a
significant technological advancement, it will face competition from older
technological solutions until the ParkerVision products are more widely
acknowledged and utilized. This technology may also face competition from other
technological advances which are under development and have not yet emerged.
PARKERVISION PURCHASES CRITICAL COMPONENTS FOR ITS CAMERAMAN(R) AND AUTOMATED
CAMERA SYSTEMS FROM SINGLE SOURCE SUPPLIERS. To change suppliers for any one of
these components would require modifications to existing systems. If
ParkerVision is unable to obtain its components from the current sources, its
business would be disrupted, and it would have to expend some of its resources
to modify its products.
IF PARKERVISION LOSES ITS SIGNIFICANT CUSTOMER FOR CAMERAMAN(R) CAMERAS, ITS
REVENUES WILL BE SIGNIFICANTLY AFFECTED. Vtel Corporation purchased 43% of the
CameraMan(R) camera systems sold in 1998, which represented 35% of
ParkerVision's revenues for 1998. VTEL was also a significant customer in each
of 1997 and 1996. These CameraMan(R) systems are used in the video conferencinG
market. The loss of this customer will severely impact revenues of ParkerVision,
and the ParkerVision presence in this particular market would be diminished.
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS ON MARKET PRICE AND LIQUIDITY.
ParkerVision has outstanding options and warrants to purchase 3,084,155 shares
of common stock. This represents about 21% of the common stock outstanding on a
fully diluted basis. All of these have exercise prices at less than the current
market price of the common stock. Most of the underlying common stock is
registered for sale by ParkerVision to the option holder or for public sale by
the security holder. The amount of common stock available for the sales may have
an adverse impact on
<PAGE>
ParkerVision's ability to raise capital in the public market 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 the
current stockholders ownership of ParkerVision.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF THE COMMON STOCK IN THE PUBLIC
MARKET COULD ADVERSELY AFFECT THE MARKET PRICE. Substantially all of the
currently outstanding shares of common stock have been registered for the sale
under the Securities Act, are eligible for sale under an exemption from the
registration requirements of the Securities Act or are subject to registration
rights which require ParkerVision to register the shares in the future. Sales or
the expectation of sales, of a substantial number of shares of common stock in
the public market could adversely affect the prevailing market price of the
common stock.
THE MARKET OF THE PARKERVISION COMMON STOCK HAS FLUCTUATED SIGNIFICANTLY,
SOMETIMES IN A MANNER UNRELATED TO PARKERVISION'S PERFORMANCE. The market price
of the common stock has varied in response to various factors and events. These
include:
o the number of shares of common stock being sold and purchased in the
marketplace;
o variations in operating results;
o rumors of significant events which can circulate quickly in the
marketplace, particularly over the internet; and
o the difference between actual results and the results expected by investors
and analysts.
Since the common stock has been publicly traded, its market price has
fluctuated over a wide range and ParkerVision expects it to continue to do so in
the future. In addition, the stock market had experienced broad price and volume
fluctuations in recent years that have often been unrelated to the operating
performance of companies. These broad market fluctuations also may adversely
affect the market price of the common stock.
COMPUTER PROGRAMS AND MICROPROCESSORS THAT HAVE TIME SENSITIVE SOFTWARE MAY
RECOGNIZE THE DATE USING "00" AS THE YEAR 1900 RATHER THAN THE YEAR 2000, OR NOT
RECOGNIZE THE DATE AT ALL, WHICH COULD RESULT IN MAJOR SYSTEM FAILURES OR
MISCALCULATIONS. ParkerVision is addressing the issue of whether or to what
extent its systems will be vulnerable to the potential errors and failures as a
result of the Year 2000 problem. If ParkerVision or its vendors experience Year
2000 problems, these problems could adversely impact the ability of ParkerVision
to carry on its business, including causing interruptions in the operation of
its manufacturing, ordering, customer billing, date interfacing and mission
critical services.
PROVISIONS IN THE CERTIFICATE OF THE INCORPORATION AND BY-LAWS COULD HAVE
AFFECTS THAT CONFLICT WITH THE INTEREST OF stockholders. Some provisions in the
certificate of incorporation and by-laws of ParkerVision 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 proposals
by stockholders under the by-laws.
March 26, 1999
