ParkerVision, Inc.
PARKERVISION INC (Form: 10-K, Received: 03/30/2012 16:37:26)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
 
  (Mark One)   (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR  
  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
     
    For the fiscal year ended December 31, 2011  
     
    ( ) 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.)
 
7915 Baymeadows Way, Suite 400
Jacksonville, Florida 32256
 (Address of Principal Executive Offices)

Registrant’s telephone number, including area code:   (904) 732-6100

Securities registered pursuant to Section 12(b) of the Act:
 
    Title of Each Class   Name of Each Exchange on Which Registered
    Common Stock, $.01 par value   The NASDAQ Stock Market
    Common Stock Rights   The NASDAQ Stock Market
 
Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes (  ) No (X)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.  Yes (  ) No (X)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)   of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No (  )

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  (  )
 
 
 

 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act.  (Check one):
    Large accelerated filer ( )   Accelerated filer ( )
    Non-accelerated filer ( )   Smaller reporting company (X)
    (Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).   Yes (  ) No (X)

As of June 30, 2011, the aggregate market value of the registrant’s common stock, $.01 par value, held by non-affiliates of the registrant was approximately $32,108,153 (based upon $0.57 share closing price on that date, as reported by NASDAQ).

As of March 30, 2012, 67,640,442 shares of the Issuer's Common Stock were outstanding.
 
 
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TABLE OF CONTENTS

INTRODUCTORY NOTE
4
     
PART I
   
Item 1.
Business
4
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
12
Item 2.
Properties
12
Item 3.
Legal Proceedings
12
Item 4.
Mine Safety Disclosures
12
     
PART II
   
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder and Issuer Purchases of Equity Securities
12
Item 6.
Selected Financial Data
13
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
18
Item 8.
Financial Statements and Supplementary Data
19
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
44
Item 9A.
Controls and Procedures
44
Item 9B.
Other Information
44
     
PART III
   
Item 10.
Directors, Executive Officers and Corporate Governance
45
Item 11.
Executive Compensation
48
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
60
Item 13.
Certain Relationships and Related Transactions and Director Independence
62
Item 14.
Principal Accountant Fees and Services
62
     
PART IV
   
Item 15.
Exhibits and Financial Statement Schedule
63
     
SIGNATURES
68
     
SCHEDULE
69
     
EXHIBIT INDEX
70
 
 
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INTRODUCTORY NOTE

Unless the context otherwise requires, in this Annual Report on Form 10-K (“Annual Report”) “we”, “us”, “our” and the “Company” mean ParkerVision, Inc.

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public.  This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our future plans, objectives, and expectations under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (“SEC”), the words or phrases “will likely result”, “management expects”, “we expect”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify such “forward-looking statements.”   Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made.  Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties set forth in this Annual Report under the heading “Risk Factors” and in our other periodic reports.  Examples of such risks and uncertainties include general economic and business conditions, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key business and sales relationships, reliance on our intellectual property, the outcome of litigation and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
 
PART I
 
Item 1.  Business.

We were incorporated under the laws of the state of Florida on August 22, 1989.  We are in the business of innovating fundamental wireless technologies.   We design, develop and market our proprietary radio frequency (“RF”) technologies and products for use in semiconductor circuits for wireless communication products.  We anticipate our future business will include both licensing of our intellectual property and the sale of integrated circuits based on our technology for incorporation into wireless devices designed by our customers.  In addition, from time to time, we offer engineering consulting and design services to our customers, for a negotiated fee, to assist them in developing prototypes and/or products incorporating our technologies.  We are primarily focused on incorporating our technologies into mobile handsets for 3G and 4G cellular networks, but our technologies are applicable to other wireless products that incorporate RF transmitters, receivers, and/or transceivers, some of which are related to networks serving mobile handsets such as data cards, femtocells, machine-to-machine, and embedded applications.  Our technology can also be applied to non-cellular radio applications such as military radios and cable modems.

Our business operates under a single segment.  Refer to our financial statements in Item 8 to this Annual Report for financial data including our net losses from operations and total assets.

Recent Developments

In July 2011, we filed a complaint in the United States District Court of the Middle District of Florida against Qualcomm Incorporated (“Qualcomm”) seeking unspecified damages and injunctive relief for infringement of seven of our patents related to radio-frequency receivers and the down-conversion of electromagnetic signals (the “Complaint”).  Qualcomm filed an Answer and Counterclaim to our Complaint (the “Counterclaim”) in which Qualcomm denied infringement and alleged invalidity and unenforceability of each of our patents.  Qualcomm also named our long-time patent prosecution counsel, Sterne, Kessler, Goldstein & Fox PLLC
 
 
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(“SKGF”) as a co-defendant in its Counterclaim and further alleged that we aided and abetted SKGF in its alleged breach of fiduciary duty to Qualcomm and tortiously interfered with Qualcomm’s contractual relationship with SKGF.  In November 2011, we filed a motion to dismiss nine counts of Qualcomm’s Counterclaim and a motion to strike certain of Qualcomm’s affirmative defenses.  SKGF also filed a motion to dismiss Qualcomm’s claims against them.  In February 2012, we filed an amended Complaint which dropped two patents from our original Complaint and added one patent which was not included in our original Complaint.  In March 2012, Qualcomm filed an amended Counterclaim which dropped two counts from the original Counterclaim.  Qualcomm also filed a motion to dismiss our claims of indirect patent infringement.  The court has not yet ruled on these motions.

In November 2011, Qualcomm also filed a motion for preliminary injunction against SKGF.  In February 2012, the   court denied as moot Qualcomm’s motion for preliminary injunction.  Instead, the Court approved a protective order, which all parties negotiated and agreed to, that enables SKGF to continue delivering legal advice and services to ParkerVision provided that they do not represent ParkerVision in the lawsuit or advise the Company regarding Qualcomm’s alleged infringement.

The court has set a hearing on claim construction for August 10, 2012, a deadline for fact discovery of November 30, 2012, and a trial date of August 5, 2013.   Discovery in the case has recently commenced.  At this time, we do not believe it is possible to predict the outcome of these proceedings.  The law firm of McKool Smith is representing us in this litigation on a partial contingency basis.

General Development of Business

Our business has been primarily focused on the development and marketing of our RF technologies for mobile applications.  Our technologies represent unique, proprietary methods for processing RF waveforms in wireless applications.  Our technologies apply to both transmit and receive functions of a radio transceiver.  A portion of our transmit technology is marketed as Direct2Power™, or d2p™, and enables the transformation of a baseband data signal to an RF carrier waveform, at the desired power output level, in a single unified operation.  A portion of our receiver technology is marketed as Direct2Data™, or d2d™, and enables the direct conversion of an RF carrier to a baseband data signal.  Our development and marketing efforts since 2005 have been primarily focused on a portion of our transmit technologies; however, incorporation of some of our receiver technology in mobile applications is also contemplated in our product plans.  Our patent infringement litigation is based on some of our receiver intellectual property (“IP”).

We completed the first d2p integrated circuit (“IC”) which embodied many of the advancements of our technology in 2006. This enabled us to create partially-integrated prototype radios for demonstration purposes. Since 2006, we have continued to further develop our prototype ICs and related demonstration platforms.  Our prototypes support functionality that is multi-band (meaning multiple frequencies) and multi-mode (meaning multiple cellular standards and corresponding modulation formats). Our ICs support multiple bands of cellular and PCS (Personal Communications Service) frequencies and support the current and emerging cellular standards including GSM/EDGE, CDMA, W-CDMA, and HSUPA.  We are also able to demonstrate 802.16e WiMax and LTE standards with our current ICs.

In concert with advancing our prototypes, we began cultivating potential customer relationships, primarily in the mobile handset industry.  We believe our direct customers will likely be the mobile handset manufacturers and their chipset suppliers in the mobile handset industry.  We have also cultivated relationships with the network providers who exert significant influence on the OEMs (Original Equipment Manufacturers) in the mobile handset industry.

Our lack of tenure in the mobile handset industry coupled with the unique nature of our technology resulted in lengthy and intense technology evaluation and due diligence efforts by potential customers.  Furthermore, in order to utilize our technology in a mobile handset application, our RF chipsets must interface with the baseband processor that generates the data to be transmitted.  Although our technology is capable of interfacing with any baseband processor, the development of the interface between the baseband processor and our chipset requires a cooperative effort with the baseband provider.

 
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In December 2007, we entered into a licensing and engineering services agreement with VIA Telecom, Inc. (“VIA”) who is a global supplier of CDMA baseband processors used in a wide range of mobile devices.  VIA designs and supplies chipsets and related reference designs to handset OEMs and ODMs (Original Design Manufacturers) for incorporation into mobile devices.  During 2008 and 2009, our development efforts were focused on advancing our ICs from prototype to production-ready samples for VIA and other potential customers.  We also began development of various packaging designs and production test programs.  During 2009, we worked with VIA to co-develop a sample 3G mobile handset which verified our technology in a working implementation and tested our technology’s performance.  The results of these efforts were utilized to market our product to VIA’s customers.

During 2010, we modified our circuit layout and packaging to meet the design requirements of one of VIA’s customers.  The testing of our product in this design was completed in early 2011.  Despite the successful test results, this design did not result in an order from the prospective customer; however we were able to utilize the test results in marketing our solution to other VIA customers.   Since mid-year 2011, we have been working with VIA and one of their largest OEM customers to design and test a handset solution incorporating our ICs, the successful completion of which, we anticipate will result in the incorporation of our technology into one or more of this OEM’s products.

Although VIA has the right, under their licensing agreement with us, to manufacture devices based on our technology and pay us a per unit royalty for the license, the agreement also provides for us to manufacture and sell such devices ourselves to third parties.   We anticipate that our initial product revenues will be generated from chipset sales to VIA’s customers rather than through the licensing arrangement.  We are highly dependent on our relationship with VIA, the loss of which could have a material adverse effect on our business.

ITT Corporation (“ITT”) has been a licensee of our d2p technology since 2007.   In 2008, we delivered a development/demonstration platform to ITT for their use in product development and demonstration to their customers.  ITT marketed our technology, based on our commercial designs, to a number of their customers and in October 2009, ITT was awarded a government contract for the demonstration of our technology in a highly integrated transceiver application for military products.  ITT in turn, engaged us as a subcontractor to incorporate our commercial ICs into an existing highly integrated transceiver platform.  The services related to this product demonstration were completed in the first quarter of 2010.  We assisted ITT in seeking additional government funding projects for products incorporating our technologies; however, to date, we are not aware of any funds received by ITT for this purpose.  We do not intend to initiate any new development efforts for ITT-related projects, unless those projects are funded by either ITT or their customers.  In the event ITT completes development of a product incorporating our technology, we will receive a per unit royalty from them for any such products sold under the terms of our agreement with them.

Since 2005, we have generated no royalty or product revenue from our RF technologies.  Our ability to generate revenues sufficient to offset costs is subject to our ability to successfully support our customers in completing their initial product designs, our ability to secure a reasonable market share through product offerings with our current customers and/or the addition of new customers and/or products, and our ability to successfully protect our IP.

Competitive Position

We operate in a highly competitive industry against companies with substantially greater financial, technical, and sales and marketing resources.   Our technologies, which are currently being marketed in the mobile handset industry, face competition from incumbent providers of transceivers, such as Broadcom, Qualcomm, Intel, Renesas, ST-Ericsson, Fujitsu, MediaTek, and others, as well as incumbent providers of power amplifiers, including companies such as Anadigics, RF Microdevices, and Skyworks, among others.   Each of our competitors, however, also has the potential of becoming a customer for our technologies.

To date, we are unaware of any competing or emerging RF technologies that provide all the simultaneous
 
 
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benefits that our technology enables.  Our unique technologies process the RF waveform in a more optimal manner than traditional technologies, thereby allowing the creation of handsets and other products that have extended battery life, lower operating temperatures, more easily incorporate multiple air interface standards and frequencies in smaller form factors, and reduce manufacturing costs.   Our technologies provide such attractive benefits, in part, because of their unique integrated circuit architectures which enable highly accurate transmission and reception of RF waveforms that use less power than traditional linear architectures and components thereby extending battery life, reducing heat and enabling certain packaging advantages.

Hurdles to the adoption of our technologies include entrenchment of, and therefore familiarity with, existing technologies, the disruptive nature of our technology, and our lack of tenure in the markets we are targeting.  We believe we can gain adoption, and therefore compete, based on the performance advantages enabled by our unique circuit architectures, as supported by a solid and defensible IP portfolio.  Our circuit architectures are capable of being compliant with all current mobile phone standards and can be configured to accept all standard baseband data interfaces with the cooperation of the baseband processor OEMs.  In addition, we believe that one or more of our technology’s abilities to provide improved power efficiencies, highly accurate RF carrier waveforms, smaller form factors and better manufacturing yields, provides a solution to existing problems in applications for 3G and 4G standards and beyond that the mobile wireless industry is seeking to solve, as well as in other applications where we believe our IP can provide an attractive solution.

Production and Supply

The ICs which incorporate our RF technologies are produced through fabrication relationships with IBM Microelectronics (“IBM”) using a Silicon Germanium process and Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) using a CMOS semiconductor process.  We believe IBM and TSMC have sufficient capacity to meet our foreseeable needs.  In addition, our ICs have been and can be produced using different materials and processes, if necessary, to satisfy capacity requirements and/or customer preferences.   In instances where our customer licenses our IP, the production capacity risk shifts to that customer.

Patents and Trademarks

We consider our IP, including patents, patent applications, trademarks, and trade secrets to be significant to our competitive positioning.   We have a program to file applications for and obtain patents, copyrights, and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate to establish and maintain our proprietary rights in our technology and products.  As of December 31, 2011, we have 128 U.S. and 60 foreign patents related to our RF technologies.  In addition, we have approximately 51 U.S. and foreign patent applications pending.  We estimate the economic lives of our patents to be fifteen to twenty years and our current portfolio of patents and patent applications has an average estimated remaining life of approximately 12 years.

From time to time, we obtain licenses from others for standard industry circuit designs that are integrated into our own ICs as supporting components that are peripheral to our core technologies.  We believe there are multiple sources for these types of standard circuits and we estimate the economic lives of the licenses to be two to five years based on estimated technological obsolescence.

Research and Development

For the years ended December 31, 2011, 2010, and 2009 we spent approximately $8.4 million, $8.9 million, and $13.5 million, respectively, on Company-sponsored research and development activities.  Our research and development efforts have been, and are expected to continue to be, devoted to the development and advancement of RF technologies, including the development of prototype ICs for proof of concept purposes, the development of production-ready silicon samples and reference designs for specific customer applications, and the creation of test programs for quality control testing of our ICs in high volumes.
 
 
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Employees

As of December 31, 2011, we had 47 full-time and 2 part-time employees, of which 31 are employed in engineering research and development, 6 in sales and marketing, and 12 in executive management, finance and administration.  Our employees are not represented by a labor union.  We consider our employee relations satisfactory.

Available Information and Access to Reports

We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC.  The SEC maintains an Internet site ( http://www.sec.gov ) where these reports may be obtained at no charge. Copies of these reports may also be obtained from the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC  20549.  Information on the operation of the SEC Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.  Copies of these reports may also be obtained at no charge from the Company’s website (http://www.parkervision.com) via the link “SEC filings.”  We also will provide copies of the annual report on Form 10-K and the quarterly reports on Forms 10-Q filed during the current fiscal year, including any amendments thereto, upon written request to us at ParkerVision, Inc., Investor Relations, 7915 Baymeadows Way, Suite 400, Jacksonville, Florida, 32256.  These reports will be provided at no charge.  Exhibits to these reports may be obtained at a cost of $.25 per page plus $5.00 postage and handling.

Item 1A.  Risk Factors.

In addition to other risks and uncertainties described in this Annual Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.  As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.

Our financial condition raises substantial doubt as to our ability to continue as a going concern.
 
Our independent registered certified public accounting firm has included in their audit opinion on our financial statements as of and for the year ended December 31, 2011 a statement with respect to substantial doubt regarding our ability to continue as a going concern. Our financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.  The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our suppliers and may adversely affect our ability to raise additional capital in the future.
 
We have had a history of losses which may ultimately compromise our ability to implement our business plan and continue in operation.
 
We have had losses in each year since our inception in 1989, and continue to have an accumulated deficit which, at December 31, 2011, was approximately $241.8 million.  The net loss for 2011 was approximately $14.6 million.  To date, our technologies and products have not produced revenues sufficient to cover operating, research and development and overhead costs.  We also will continue to make expenditures on marketing, research and development, pursuit of patent protection for and defense of our intellectual property and operational costs for fulfillment of any contracts that we achieve for the sale of our products or technologies.  We expect that our revenues in 2012, if any, will not bring the Company to profitability and our current capital resources will not be sufficient to sustain our operations through 2012.  If we are not able to generate sufficient revenues or obtain sufficient capital resources, we will not be able to implement our business plan and investors will suffer a loss in their investment.  This may result in a change in our business strategies.
 
 
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We expect to need additional capital in the future, which, if we are unable to raise will result in our not being able to implement our business plan as currently formulated.
 
Because we have had net losses and, to date, have not generated positive cash flow from operations, we have funded our operating losses from the sale of equity securities from time to time.  We anticipate that our business plan will continue to require significant expenditures for research and development, patent protection, sales and marketing, and general operations.  Furthermore, we expect that the implementation of significant cost reduction measures in order to reduce our cash needs would jeopardize our operations and future growth plans.  Our current capital resources include cash, cash equivalents, and available for sale securities of $5.2 million at December 31, 2011.   We believe our current capital resources will not be sufficient to meet our working capital needs for 2012, and we will require additional capital to fund our operations.  Financing, if any, may be in the form of debt or additional sales of equity securities. The incurrence of debt or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us. The sale of equity securities will result in dilution to the current shareholders’ ownership.  The long-term continuation of our business plan is dependent upon the generation of sufficient revenues from the sale of our products, additional funding, reducing expenses or a combination of the foregoing.  The failure to generate sufficient revenues, raise capital or reduce expenses will have a material adverse effect on our ability to achieve our long-term business objectives.
 
Our industry is subject to rapid technological changes which if we are unable to match or surpass, will result in a loss of competitive advantage and market opportunity.
 
Because of the rapid technological development that regularly occurs in the microelectronics industry, we must continually devote substantial resources to developing and improving our technology and introducing new product offerings.  For example, in fiscal years 2011 and 2010, we spent approximately $8.4 million and $8.9 million, respectively, on research and development, and we expect to continue to spend a significant amount in this area in the future. These efforts and expenditures are necessary to establish and increase market share and, ultimately, to generate revenues. If another company offers better products or our product development lags, a competitive position or market window opportunity may be lost, and therefore our revenues or revenue potential may be adversely affected.
 
If our products are not commercially accepted, our developmental investment will be lost and our ability to do business will be impaired.
 
There can be no assurance that our research and development will produce commercially viable technologies and products.  If existing or new technologies and products are not commercially accepted, the funds expended will not be recoverable, and our competitive and financial position will be adversely affected.  In addition, perception of our business prospects will be impaired with an adverse impact on our ability to do business and to attract capital and employees.
 
If our patents and intellectual property do not provide us with the anticipated market protections and competitive position, our business and prospects will be impaired.
 
We rely on our intellectual property, including patents and patent applications, to provide competitive advantage and protect us from theft of our intellectual property.  We believe that many of our patents are for entirely new technologies.  If the patents are not issued or issued patents are later shown not to be as broad as currently believed, or are otherwise challenged such that some or all of the protection is lost, we will suffer adverse effects from the loss of competitive advantage and our ability to offer unique products and technologies.  As a result, there would be an adverse impact on our financial condition and business prospects.
 
On July 20, 2011, we filed a complaint in the United States District Court of the Middle District of Florida against Qualcomm Incorporated seeking unspecified damages and injunctive relief for infringement of a number of our patents related to radio-frequency receivers and the down-conversion of electromagnetic signals.  Qualcomm has filed counterclaims against us.  The trial date for this case is set for August 2013.  At this time, we do not believe it is possible to predict the outcome of the litigation.  We could incur significant costs in this litigation and there can be no assurance that we will prevail or that any damages we receive will
 
 
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cover our costs.   Furthermore, the litigation may divert our technical and management personnel from their normal responsibilities.  The occurrence of any of the foregoing could adversely affect our ability to pursue our business plan.
 
If we cannot demonstrate that our technologies and products can compete in the marketplace and are better than current competitive solutions, then we will not be able to generate the sales we need to continue our business and our prospects will be impaired.
 
We expect to face competition from chip suppliers such as Anadigics, Broadcom, Fujitsu, Intel, MediaTek, Qualcomm, Renesas, RF Microdevices, Skyworks, and ST-Ericsson, among others.  Our technology may also face competition from other emerging approaches or new technological advances which are under development and have not yet emerged.  If our technologies and products are not established in the market place as improvements over current, traditional chip solutions in wireless communications, our business prospects and financial condition will be adversely affected.
 
Our business is highly reliant on our business relationships with baseband suppliers for support of the interface of their product to our technology and the support of our sales and marketing efforts to their customers, the failure of which will have an adverse impact on our business.
 
The successful commercialization of our products will be impacted, in part, by factors outside of our control including the success and timing of product development and sales support activities of the suppliers of baseband processors with which our products interface.  Delays in or failure of a baseband supplier’s product development or sales support activities will hinder the commercialization of our products which will have an adverse impact on our ability to generate revenues and recover development expenses.
 
We rely, in large part, on key business and sales relationships for the successful commercialization of our products, which if not developed or maintained, will have an adverse impact on achieving market awareness and acceptance and will result in a loss of business opportunity.
 
To achieve a wide market awareness and acceptance of our products, as part of our business strategy, we will attempt to enter into a variety of business relationships with other companies which will incorporate our technologies into their products and/or market products based on our technologies.  The successful commercialization of our products will depend in part on our ability to meet obligations under contracts with respect to the products and related development requirements.  The failure of these business relationships will limit the commercialization of our products which will have an adverse impact on our business development and our ability to generate revenues and recover development expenses.
 
We are highly dependent on Mr. Jeffrey Parker as our chief executive officer.  If his services were lost, it would have an adverse impact on our leadership and on how we are perceived within the industry and by investors.
 
Because of Mr. Parker’s position in the company and the respect he has garnered in both the industry in which we operate and the investment community, the loss of his services might be seen as an impediment to the execution of our business plan.  If Mr. Parker were no longer available to the company, investors might experience an adverse impact on their investment.  We currently have an employment agreement with Mr. Parker and we maintain key-employee life insurance for our benefit on Mr. Parker.
 
If we are unable to attract or retain key executives and other highly skilled employees, we will not be able to execute our current business plans.
 
Our business is very specialized, and therefore it is dependent on having skilled and specialized key executives and other employees to conduct our research, development and customer support activities.  The inability to obtain or retain these key executives and other specialized employees would have an adverse impact on the research, development and technical customer support activities that our products require.  These activities are instrumental to the successful execution of our business plan.
 
Our outstanding options and warrants may affect the market price and liquidity of the common stock.
 
At December 31, 2011, we had 67,573,775 shares of common stock outstanding and had 11,105,288 options and warrants outstanding for the purchase of shares of common stock.  Of these outstanding options and warrants, 8,460,411 were exercisable as of December 31, 2011.  The majority of the underlying common
 
 
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stock of these securities is registered for sale to the holder or for public resale by the holder.  The amount of common stock available for the sales may have an adverse impact on our ability to raise capital and may affect the price and liquidity of the common stock in the public market.  In addition, the issuance of these shares of common stock will have a dilutive effect on current shareholders’ ownership.
 
The bid price of our common stock has been below the minimum requirement for the NASDAQ Capital Market and there can be no assurance that we will continue to maintain compliance with the minimum bid price requirement for trading on that market or another national securities exchange.
 
On November 2, 2011, we received a notice from the NASDAQ Stock Market stating that, for the last 30 consecutive business days, the closing bid price for our common stock had been below the minimum of $1 per share required for continued inclusion on the exchange. The notification letter stated that we would be afforded 180 calendar days, or until April 30, 2012 to regain compliance with the minimum bid price requirement.  In order to regain compliance with the NASDAQ minimum bid price requirement, the closing bid price for shares of our common stock had to remain at $1 per share or more for a minimum of ten consecutive trading days.  On March 23, 2012, we received notice from the NASDAQ Stock Market that we had regained compliance with the minimum bid price requirement.  There can be no assurance, however, that we will be able to maintain compliance.  If we are unable to do so and our common stock is no longer listed on NASDAQ or another national securities exchange, the liquidity and market price of our common stock may be adversely affected.
 
We may not be able to deliver shares of common stock upon exercise of our public warrants if such issuance has not been registered or qualified or deemed exempt under the securities laws of the state of residence of the holder of the warrant.
 
On March 3, 2009, November 3, 2010, and March 30, 2011, we sold warrants to the public in offerings registered under shelf registration statements.  The issuance of common stock upon exercise of these warrants must qualify for exemption from registration under the securities laws of the state of residence of the warrant holder.  The qualification for exemption from registration may differ in different states.  As a result, a warrant may be held by a holder in a state where an exemption is not available for such exercise and we may be precluded from issuing such shares.  If our common stock continues to be listed on the NASDAQ Capital Market or another national securities exchange, an exemption from registration in every state for the issuance of common stock upon exercise of these warrants would be available.  However, we cannot assure you that our common stock will continue to be so listed.  As a result, these warrants may be deprived of any value, the market for these warrants may be limited and the holders of these warrants may not be able to obtain shares of common stock upon exercise of the warrants if the common stock issuable upon such exercise is not qualified or otherwise exempt from qualification in the jurisdictions in which the holders of the warrants reside.
 
Provisions in the certificate of incorporation and by-laws could have effects that conflict with the interest of shareholders.
 
Some provisions in our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us.  For example, the board of directors has the ability to issue preferred stock without shareholder approval, and there are pre-notification provisions for director nominations and submissions of proposals from shareholders to a vote by all the shareholders under the by-laws.  Florida law also has anti-takeover provisions in its corporate statute.
 
We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase the company without prior consultation with the board of directors and management which may conflict with the interests of some of the shareholders.
 
On November 17, 2005, the board of directors adopted a shareholder protection rights plan which called for the issuance, on November 29, 2005, as a dividend, of rights to acquire fractional shares of preferred stock.  The rights are attached to the shares of common stock and transfer with them.  In the future the rights may become exchangeable for shares of preferred stock with various provisions that may discourage a takeover bid.  Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of the company more costly.  The principal objective of the plan is to cause someone interested in acquiring the company to negotiate with the board of directors rather than launch an unsolicited bid.  This
 
 
11

 
 
plan may limit, prevent, or discourage a takeover offer that some shareholders may find more advantageous than a negotiated transaction.  A negotiated transaction may not be in the best interests of the shareholders.
 
Item 1B.  Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our headquarters are located in a 14,000 square foot leased facility in Jacksonville, Florida.  We have an additional leased facility in Lake Mary, Florida primarily for engineering design activities.   We believe our properties are in good condition and suitable for the conduct of our business.  Refer to “Lease Commitments” in Note 11 to our financial statements included in Item 8 for information regarding our outstanding lease obligations.

Item 3. Legal Proceedings.

Refer to “Legal Proceedings” in Note 11 to our financial statements included in Item 8 for a discussion of current legal proceedings.

Item 4.  Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information
 
Our common stock is traded on NASDAQ under the symbol “PRKR.”   Listed below is the range of the high and low sale prices of the common stock for the last two fiscal years, as reported by NASDAQ.
 
   
2011
   
2010
 
   
High
   
Low
   
High
   
Low
 
Quarter ended March 31
  $ 0.97     $ 0.44     $ 2.50     $ 1.55  
Quarter ended June 30
    0.95       0.55       2.08       1.19  
Quarter ended September 30
    1.47       0.46       1.36       0.66  
Quarter ended December 31
    1.08       0.80       0.74       0.35  

Holders

As of March 25, 2012, we had 128 holders of record and we believe there are approximately 3,500 beneficial holders of our common stock.

Dividends

To date, we have not paid any dividends on our common stock.  The payment of dividends in the future is at the discretion of the board of directors and will depend upon our ability to generate earnings, our capital requirements and financial condition, and other relevant factors.  We do not intend to declare any dividends in the foreseeable future, but instead intend to retain all earnings, if any, for use in the business.
 
 
12

 
 
Sales of Unregistered Securities

In November 2011, we issued 200,000 Restricted Stock Units (“RSUs”) to a consultant as payment for services.  The RSUs vest in equal monthly increments over a six month period beginning December 31, 2011.  Upon thirty days’ notice, the consulting agreement may be terminated and any unvested portion of the RSUs will be cancelled. The consultant will receive one share of common stock for each RSU that vests.   As of December 31, 2011, an aggregate of 33,333 RSUs have vested and a total of $28,666 in compensation cost related to these RSUs has been recognized in share-based compensation expense.

In November 2011, we also issued 800,000 RSUs to the same consultant as a performance incentive. These RSUs will vest only upon achievement of certain market conditions, as measured based on the closing price of our common stock during a period ending on the earlier of (i) December 31, 2012 or (ii) thirty days following termination of the related consulting agreement.  As of December 31, 2011, no portion of the RSU has vested and we have recognized no compensation expense related to this award.

The RSUs were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, as the vendor is a sophisticated investor, with such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment.

Issuer Repurchase of Equity Securities

None.

Item 6.  Selected Financial Data.

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview

We are in the business of innovating fundamental wireless technologies.   We design, develop and market our proprietary RF technologies and products for use in semiconductor circuits for wireless communication products.    Since 2005, we have generated no product or royalty revenue from our wireless technologies.  We are heavily reliant on our relationship with VIA since our RF transmit product interfaces directly to VIA’s CDMA baseband processors.  We are currently working with VIA and one of their largest OEM mobile handset customers on the design and test of a handset solution incorporating our technology, the successful completion of which, we believe, will lead to the incorporation of our technology into one or more of this OEM’s products.  The design and test process is being conducted primarily in Asia at VIA and/or the handset OEM’s facilities and, as a result, we have committed significant resources in personnel, travel and related costs for our engineering and sales team to this design and test process.

We are also currently engaged in patent litigation with Qualcomm for their alleged infringement of a number of our patents that relate to a portion of our receiver IP.  We believe the outcome of this litigation is critical to our ability to generate meaningful revenue from certain of our receiver technologies, and we intend to devote substantial resources to this litigation.  The trial is scheduled to begin on August 5, 2013.   Although our litigation team is working on a partial contingency basis, we expect to incur significant costs for legal and expert fees related to this litigation.

Our current capital resources will not be sufficient to meet our working capital needs for 2012.  Furthermore, we expect that the implementation of significant cost reduction measures in order to reduce our cash needs would jeopardize our operations and future growth plans.  Our independent registered certified public accounting firm has included in their audit report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
 
 
13

 
 
We believe our technology has substantial advantages over competing technologies, especially in the third generation, or 3G, and fourth generation, 4G, mobile handset standards and applications.  We have made significant investments in developing our technologies and products, the returns on which are dependent upon the generation of future revenues for realization.

Liquidity and Capital Resources

At December 31, 2011, we had working capital of approximately $4.5 million, a decrease of approximately $1.6 million from working capital of $6.1 million at December 31, 2010.  The change in working capital was a result of the use of approximately $11.4 million in cash for operations, along with the investment of approximately $0.7 million in patents and other long-lived assets in 2011.  This use of cash was offset by approximately $10.9 million in proceeds from the sale of equity securities and the exercise of warrants in 2011.  Proceeds from the sale of equity securities are invested in available for sale securities and our use of cash is funded from the sale of these securities.  At December 31, 2011, we were not subject to any significant commitments to make additional capital expenditures.

For the year ended December 31, 2010, we used cash of approximately $11.2 million for operations and invested approximately $0.8 million in patents and other long-lived assets.  This use of cash was offset by approximately $5.0 million in proceeds from the sale of equity securities in 2010.

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

Any revenue generated from the sale of our integrated circuits to VIA’s customers in 2012 will not be sufficient to cover our operational expenses for 2012, and we expect that our continued losses and use of cash will be funded from available working capital.  In addition, we expect that available working capital will be used for initial production start-up costs, including test programs and production tooling, and for litigation expenses to defend our intellectual property.
 
Our current capital resources will not be sufficient to support our liquidity requirements through 2012.  Furthermore, we believe significant cost reduction measures would jeopardize our operations and future growth plans, including our ability to support initial production of our products.
 
We may be able to meet future liquidity needs through the issuance of additional equity securities under our outstanding shelf registration statement or through short or long-term debt financing, although there can be no assurance that such financing will be available to us.  We currently have no significant long-term debt obligations.
 
The long-term continuation of our business plan through 2012 and beyond is dependent upon the generation of sufficient revenues from our technologies and products to offset expenses.  In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private financing and/or further reduce operating costs.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or further reduce operating costs could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.
 
 
14

 
Results of Operations for Each of the Years Ended December 31, 2011, 2010, and 2009

Revenues and Gross Margins

We had no product or royalty revenues for the years ended December 31, 2011, 2010, or 2009.   We recognized approximately $64,000 in service revenue in each of the years ended December 31, 2010 and 2009 under a fixed-price service contract with ITT.  The contract was for the purpose of incorporating our commercially developed d2p integrated circuits into a highly integrated transceiver for demonstration of device performance to one of ITT’s military customers.

Cost of sales for engineering services includes the direct labor costs, as well as overhead and other indirect costs including depreciation and allocated facilities costs.   Indirect costs are allocated to cost of sales on a direct labor hour basis.  For the years ended December 31, 2010 and 2009, we recognized gross margins on the ITT service contract of $17,000, or 27%, and $10,000, or 15%, respectively.

We anticipate completion of a handset solution for one of VIA’s handset customers in 2012, which we expect will result in the incorporation of our technology into one or more of this OEM’s products.  To the extent that our technology is incorporated in the form of IC’s supplied by us, additional working capital will be needed in 2012 to support production start-up costs including test programs and production tooling.

Research and Development Expenses

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

Research and development expenses decreased approximately $0.5 million, or 5.2% from 2010 to 2011.  This decrease was primarily due to decreases in employee share-based compensation, depreciation and amortization expenses, and prototype costs, offset by increases in outside engineering design fees, travel costs, and other professional fees.

Share-based compensation costs to executive and other research and development employees decreased by approximately $495,000 from 2010 to 2011.  The decrease in share-based compensation is primarily the result of 2008 executive and other employee awards from prior periods becoming fully vested by mid-year 2011.   Although new executive and employee awards were granted in 2011, the grant-date fair value of these awards is significantly lower than the 2008 awards due to the type of award and the market price of our common stock on the award date.   Depreciation and amortization expense decreased by approximately $330,000 from 2010 to 2011 primarily as the result of decreased amortization on third-party licenses related to prototype designs.   Prototype production and materials costs decreased by approximately $205,000 from 2010 to 2011, primarily as a result of reduced prototype runs of our integrated circuits at the IBM and TSMC foundries in 2011 as we focused our resources on implementing our integrated circuits into designs for VIA customers.

Outside engineering design fees increased by approximately $315,000 from 2010 to 2011.  Increases in outside engineering services are a result of timing of various projects related to supporting mobile handset designs by VIA customers and readying products for production.  Personnel travel increased by approximately $260,000 from 2010 to 2011, primarily as a result of increased domestic and international travel to provide technical support to VIA and their handset customers for our CDMA-based product during 2011.
 
 
15

 
 
Research and development expenses decreased by approximately $4.6 million, or 34.2%, from 2009 to 2010.   This decrease was primarily due to decreases in outside engineering design fees, prototype costs, software licensing and support costs, and share-based compensation expense.

Engineering design fees decreased from 2009 to 2010 by approximately $2,850,000 as a result of the completion of certain development programs late in 2009 and more limited design projects undertaken in 2010.  Prototype production and materials costs decreased from 2009 to 2010 by approximately $360,000 primarily as a result of the limited number of design projects undertaken in 2010.  Software licensing and support decreased approximately $180,000 from 2009 to 2010 as a result of changes in the software tools necessary to support our product designs.  Share-based compensation costs to executive and other research and development employees decreased by approximately $770,000 from 2009 to 2010.  This decrease was primarily a result of equity awards granted in 2007 and 2008 that became fully vested in 2009 or early 2010 with limited new equity awards being granted during that same period.

The markets for our products and technologies are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions.  Our ability to successfully develop and introduce, on a timely basis, new and enhanced products and technologies will be a significant factor in our ability to grow and remain competitive.  We are committed to continue investing in our technology and product development and therefore we anticipate that we will use a substantial portion of our working capital for research and development activities in 2012.

Marketing and Selling Expenses

Marketing and selling expenses consist primarily of personnel costs, including share-based compensation and travel costs, and outside professional fees which consist of various consulting and legal fees related to sales and marketing activities.

Marketing and selling expenses decreased by approximately $0.2 million, or 12.0%, from 2010 to 2011.  This decrease was primarily due to a decrease in share-based compensation expense of approximately $240,000, offset by an increase in personnel travel expenses of approximately $40,000 as a result of increased sales support to VIA and certain of their customers.   The decrease in share-based compensation is primarily the result of the 2008 executive and other employee awards from prior periods becoming fully vested by mid-year 2011.   Although new executive and employee awards were granted in 2011, the grant-date fair value of these awards is significantly lower than the 2008 awards due to the type of award and the market price of our common stock on the award date.

Marketing and selling expenses decreased by approximately $0.4 million, or 21.3%, from 2009 to 2010.  This decrease was primarily due to reductions in personnel costs, including a decrease in share-based compensation expense.  Marketing and sales personnel and related costs, excluding share-based compensation, decreased from 2009 to 2010 by approximately $200,000 primarily as result of the transfer of certain technical marketing employees to product development functions during 2010 and reductions in travel costs related to those employees.  The decrease in share-based compensation expense of approximately $210,000 was primarily the result of a reduction in expense attributed to employee equity awards from 2004 through 2008 that became fully vested in 2009 and early 2010 with limited new equity awards being granted during that same period.

General and Administrative Expenses

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

Our general and administrative expenses increased by approximately $0.2 million, or 4.0%, from 2010 to 2011.  This increase was due primarily to increases in outside professional fees partially offset by decreases in
 
 
16

 
 
employee share-based compensation expense.

Outside professional fees increased approximately $755,000 from 2010 to 2011 primarily as a result of legal and other expert professional services related to our patent litigation against Qualcomm initiated in July 2011.  Share-based compensation decreased by approximately $555,000 from 2010 to 2011 primarily as a result of prior period executive awards becoming fully vested by mid-year 2011.   Although new executive and employee awards were granted in 2011, the grant-date fair value of these awards is significantly lower than the 2008 awards due to the type of award and the market price of our common stock on the award date.

Our general and administrative expenses decreased by approximately $1.3 million, or 22.6%, from 2009 to 2010.  This decrease was due primarily to decreases in share-based compensation expense and outside professional fees.

Share-based compensation expense decreased approximately $1,300,000 from 2009 to 2010.  This decrease was primarily the result of equity awards granted from 2004 through 2008 to executive and other employees that became fully vested in 2009 or early 2010 with limited new equity awards being granted during that same period.   In addition, our 2009 share-based compensation expense included approximately $325,000 related to equity awards to our outside directors who waived all cash compensation for 2009.  In 2010, the cash portion of our directors’ compensation program resumed which resulted in increased directors’ cash fees of approximately $210,000.  Our outside professional fees decreased by approximately $220,000 due to a reduction in outside legal and accounting services incurred for the period.

Interest and Other Income

Interest and other income consist of interest earned on our investments, net gains realized upon the sale of available for sale securities, and other miscellaneous income.  Interest and other income remained relatively unchanged from 2010 to 2011.  From 2009 to 2010, interest and other income increased approximately $70,000 as a result of changes in investment vehicles during 2010.
 
Loss and Loss per Common Share

Our net loss decreased approximately $0.5 million, or $0.11 per share, from 2010 to 2011.  This decrease was the result of a $0.5 million, or 3.1%, reduction in operating expenses and, with respect to the loss per share, a 40% increase in weighted average shares outstanding for the period.

Our net loss decreased approximately $6.5 million, or $0.30 per share, from 2009 to 2010.  This decrease was primarily a result of a $6.4 million, or 29.7%, reduction in operating expenses and, with respect to the loss per share, a 30% increase in weighted average shares outstanding for the period.

Critical Accounting Policies

We believe that the following are the critical accounting policies affecting the preparation of our financial   statements:

Intangible Assets

Patents, copyrights and other intangible assets are amortized using the straight-line method over their estimated period of benefit.  We estimate the economic lives of our patents and copyrights to be fifteen to twenty years.  We estimate the economic lives of other intangible assets, including licenses, based on estimated technological obsolescence, to be two to five years, which is generally shorter than the contractual lives.  Periodically, we evaluate the recoverability of our intangible assets and take into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists (“Triggering Event”).  Based on our cumulative net losses and negative cash flows from operations to date, we assess our working capital needs on an annual basis.  This annual assessment of our working capital is considered to be a Triggering Event for purposes of evaluating the recoverability of our intangible assets.  As
 
 
17

 
a result of our evaluation at December 31, 2011, we determined that no impairment exists with regard to our intangible assets.

Accounting for Share-Based Compensation

We calculate the fair value of share-based equity awards to employees, including restricted stock, stock options and RSU’s, on the date of grant and recognize the calculated fair value, net of estimated forfeitures, as compensation expense over the requisite service periods of the related awards. The fair value of share-based awards is determined using various valuation models which require the use of highly subjective assumptions and estimates including (i) how long employees will retain their stock options before exercising them, (ii) the volatility of our common stock price over the expected life of the equity award, and (iii) the rate at which equity awards will ultimately be forfeited by the recipients.  Changes in these subjective assumptions can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized as expense in the statements of operations and comprehensive loss.

Income Taxes

The provision for income taxes is based on loss before taxes as reported in the accompanying statements of operations and comprehensive loss.  Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized.  Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.

Off-Balance Sheet Transactions, Arrangements and Other Relationships

As of December 31, 2011, we have outstanding warrants to purchase 5,352,043 shares of common stock that were issued in connection with the sale of equity securities in various private placement transactions in 2000, 2009, 2010, and 2011.  These warrants have exercise prices ranging from $0.54 to $56.66 per share with a weighted average exercise price of $5.27 and a weighted average remaining contractual life of approximately 3.5 years.  The estimated aggregate fair value of these warrants at their date of issuance of $8,649,786 is included in shareholders’ equity in our balance sheets.  Refer to “Non Plan Options/Warrants” in Note 8 to our financial statements included in Item 8 for information regarding the outstanding warrants.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.
 
 
18

 
Item 8.  Financial Statements and Supplementary Data.
 
Index to Financial Statements
 
Page
   
MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
20
   
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
21
   
FINANCIAL STATEMENTS:
 
   
Balance Sheets - December 31, 2011 and 2010
22
   
Statements of Operations and Comprehensive Loss - for the years ended December 31, 2011, 2010 and 2009
23
   
Statements of Shareholders’ Equity - for the years ended December 31, 2011, 2010 and 2009
24
   
Statements of Cash Flows - for the years ended  December 31, 2011, 2010 and 2009
26
   
Notes to Financial Statements - December 31, 2011, 2010 and 2009
27
   
FINANCIAL STATEMENT SCHEDULE:
 
   
Schedule II – Valuation and Qualifying Accounts
69
   
Schedules other than those listed have been omitted since they are either not required, not applicable or the information is otherwise included.
 
 
 
19

 
 
Management’s Report on Internal Controls over Financial Reporting
 
The Board of Directors and Shareholders
ParkerVision, Inc.
Jacksonville, Florida

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in  Internal Control — Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under that framework, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.   A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

This Annual Report does not include an attestation report of the Company’s independent registered certified public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered certified public accounting firm pursuant to the Sarbanes-Oxley Act of 2002, as amended and the rules of the SEC promulgated thereunder, which permit the Company to provide only management’s report in this Annual Report.
 
 
20

 
 
Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and
Shareholders of ParkerVision, Inc.:

In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ParkerVision, Inc. at December 31, 2011 and 2010, and the results of its   operations and its cash flows for each of the three years in the period ended December 31, 2011   in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related   financial statements.  These financial statements and the financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.  We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ PricewaterhouseCoopers LLP
Jacksonville, Florida
March 30, 2012

 
21

 
 
PARKERVISION, INC.

BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

   
2011
   
2010
 
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 213,438     $ 213,398  
Available for sale securities
    5,026,398       6,315,911  
Prepaid expenses and other
    661,788       553,976  
Total current assets
    5,901,624       7,083,285  
                 
PROPERTY AND EQUIPMENT, net
    351,285       537,177  
                 
INTANGIBLE ASSETS, net
    9,004,263       9,408,093  
                 
OTHER ASSETS, net
    584,799       567,148  
Total assets
  $ 15,841,971     $ 17,595,703  
                 
CURRENT LIABILITIES:
               
Accounts payable
  $ 613,806     $ 238,783  
Accrued expenses:
Salaries and wages
    252,928       306,037  
Professional fees
    404,069       190,574  
Other accrued expenses
    16,867       95,510  
Deferred rent, current portion
    75,804       118,456  
Total current liabilities
    1,363,474       949,360  
                 
LONG TERM LIABILITIES
               
Capital lease, net of current portion
    0       11,649  
Deferred rent, net of current portion
    137,878       42,986  
Total long term liabilities
    137,878       54,635  
Total liabilities
    1,501,352       1,003,995  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS' EQUITY:
               
Common stock, $.01 par value, 100,000,000 shares authorized, 67,573,775 and 52,752,036 issued and outstanding at December 31, 2011 and 2010, respectively
    675,738       527,520  
Accumulated other comprehensive loss
    (10,418 )     (7,816 )
Warrants outstanding
    8,649,786       16,534,516  
Additional paid-in capital
    246,842,116       226,780,738  
Accumulated deficit
    (241,816,603 )     (227,243,250 )
Total shareholders' equity
    14,340,619       16,591,708  
Total liabilities and shareholders' equity
  $ 15,841,971     $ 17,595,703  
 

 
The accompanying notes are an integral part of these financial statements.
 
 
22

 
 
PARKERVISION, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
 
   
2011
   
2010
   
2009
 
                   
Engineering services revenue
  $ 0     $ 63,735     $ 64,412  
Cost of sales
    0       46,401       54,440  
Gross margin
    0       17,334       9,972  
                         
Research and development expenses
    8,423,683       8,882,730       13,504,799  
Marketing and selling expenses
    1,449,501       1,646,779       2,092,148  
General and administrative expenses
    4,802,503       4,616,105       5,962,309  
Total operating expenses
    14,675,687       15,145,614       21,559,256  
                         
Interest and other income
    108,050       109,187       36,085  
Interest expense
    (5,716 )     (8,426 )     (16,412 )
Total interest and other income and interest expense
    102,334       100,761       19,673  
                         
Net loss
    (14,573,353 )     (15,027,519 )     (21,529,611 )
                         
Other comprehensive loss, net of tax:
                       
Unrealized loss on available for sale securities
    (2,602 )     (7,816 )     0  
Other comprehensive loss
    (2,602 )     (7,816 )     0  
                         
Comprehensive loss
  $ (14,575,955 )   $ (15,035,335 )   $ (21,529,611 )
Basic and diluted net loss per common share
  $ (0.24 )   $ (0.35 )   $ (0.65 )
 

 
The accompanying notes are an integral part of these financial statements.
 
 
23

 
 
PARKERVISION, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

   
2011
   
2010
   
2009
 
Common shares – beginning of year
    52,752,036       41,160,335       26,716,080  
Issuance of common stock upon exercise of options warrants
    687,461       0       20,000  
Issuance of common stock in public and private offerings
    13,823,477       11,412,122       14,244,963  
Share-based compensation
    310,801       179,579       179,292  
Common shares – end of year
    67,573,775       52,752,036       41,160,335  
                         
Par value of common stock – beginning of year
  $ 527,520     $ 411,603     $ 267,161  
Issuance of common stock upon exercise of options and warrants
    6,875       0       200  
Issuance of common stock in public and private offerings
    138,235       114,121       142,449  
Share-based compensation
    3,108       1,796       1,793  
Par value of common stock – end of year
  $ 675,738     $ 527,520     $ 411,603  
                         
Accumulated other comprehensive loss – beginning of year
  $ (7,816 )   $ 0     $ 0  
Change in unrealized loss on available for sale securities
    (2,602 )     (7,816 )     0  
Accumulated other comprehensive loss – end of year
  $ (10,418 )   $ (7,816 )   $ 0  
                         
Warrants outstanding – beginning of year
  $ 16,534,516     $ 17,767,663     $ 17,335,777  
Exercise of warrants
    (174,804 )     0       (21,000 )
Expiration of warrants
    (8,126,544 )     (2,324,306 )     0  
Issuance of warrants in connection with public offering
    416,618       1,091,159       452,886  
Warrants outstanding – end of year
  $ 8,649,786     $ 16,534,516     $ 17,767,663  
                         
Additional paid-in capital – beginning of year
  $ 226,780,738     $ 217,919,771     $ 189,193,386  
Issuance of common stock upon exercise of options warrants
    498,867       0       58,300  
Issuance of common stock in public and private offerings
    10,001,901       3,810,952       23,676,222  
Share-based compensation
    1,434,066       2,725,709       4,991,863  
Expiration of warrants
    8,126,544       2,324,306       0  
Additional paid-in capital – end of year
  $ 246,842,116     $ 226,780,738     $ 217,919,771  
                         
Accumulated deficit – beginning of year
  $ (227,243,250 )   $ (212,215,731 )   $ (190,686,120 )
Net loss
    (14,573,353 )     (15,027,519 )     (21,529,611 )
Accumulated deficit – end of year
  $ (241,816,603 )   $ (227,243,250 )   $ (212,215,731 )
 
The accompanying notes are an integral part of these financial statements.
 
 
24

 
 
PARKERVISION, INC.
 
STATEMENTS OF SHAREHOLDERS' EQUITY
 
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
 
   
2011
   
2010
   
2009
 
Total shareholders’ equity – beginning of year
  $ 16,591,708     $ 23,883,306     $ 16,110,204  
Issuance of common stock upon exercise of options and warrants
    330,938       0       37,500  
Issuance of common stock and warrants in private and public offerings
    10,556,754       5,016,232       24,271,557  
Share-based compensation
    1,437,174       2,727,505       4,993,656  
Comprehensive loss
    (14,575,955 )     (15,035,335 )     (21,529,611 )
Total shareholders’ equity – end of year
  $ 14,340,619     $ 16,591,708     $ 23,883,306  
 

 
The accompanying notes are an integral part of these financial statements.
 
 
25

 
 
PARKERVISION, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010, and 2009

   
2011
   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net loss
  $ (14,573,353 )   $ (15,027,519 )   $ (21,529,611 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation and amortization
    1,327,794       1,689,218       1,741,199  
Share-based compensation
    1,437,174       2,727,505       4,993,656  
Loss (gain) on sale of equipment and other assets
    0       47,366       (1,332 )
Realized loss (gain) on available for sale securities
    1,671       (5,187 )     0  
Changes in operating assets and liabilities:
                       
Accounts receivable
    0       101,305       (101,305 )
Prepaid and other assets
    (125,463 )     (82,022 )     347,035  
Accounts payable and accrued expenses
    470,962       (515,857 )     (201,851 )
Deferred rent
    52,240       (68,878 )     (112,608 )
Deferred revenue
    0       (50,733 )     50,733  
Total adjustments
    3,164,378       3,842,717       6,715,527  
Net cash used in operating activities
    (11,408,975 )     (11,184,802 )     (14,814,084 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Purchase of available for sale securities
    (9,439,760 )     (11,818,540 )     0  
Proceeds from redemption of available for sale securities
    10,725,000       5,500,000       0  
Purchase of property and equipment
    (128,221 )     (129,845 )     (74,878 )
Purchase of licenses
    0       0       (100,000 )
Payment for patent costs
    (609,851 )     (637,607 )     (818,369 )
Proceeds from sale of property and equipment
    0       0       185,977  
Net cash provided by (used in) investing activities
    547,168       (7,085,992 )     (807,270 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
Net proceeds from issuance of common stock in public and private offerings
    10,556,754       5,016,232       24,271,557  
Proceeds from exercise of options and warrants
    330,938       0       37,500  
Principal payments on capital lease obligation
    (25,845 )     (22,652 )     (11,750 )
Net cash provided by financing activities
    10,861,847       4,993,580       24,297,307  
                         
NET CHANGE IN CASH AND CASH EQUIVALENTS
    40       (13,277,214 )     8,675,953  
CASH AND CASH EQUIVALENTS, beginning of year
    213,398       13,490,612       4,814,659  
CASH AND CASH EQUIVALENTS, end of year
  $ 213,438     $ 213,398     $ 13,490,612  
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
Cash paid for interest expense
  $ 5,716     $ 8,426     $ 16,412  
Cash paid for income taxes
  $ 0     $ 0     $ 0  
SUPPLEMENTALSCHEDULE OF NON-CASH ACTIVITIES:
                       
Key-man life insurance premiums (Note 3)
  $ 45,780     $ 45,780     $ 45,780  
Purchase of equipment under capital lease (Note 5)
  $ 0     $ 0     $ 71,896  
                         
 
The accompanying notes are an integral part of these financial statements.

 
26

 

PARKERVISION, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011, 2010 and 2009

1.
THE COMPANY AND NATURE OF BUSINESS

We were incorporated under the laws of the state of Florida on August 22, 1989 and currently operate in a single segment - wireless technologies and products.  Effective September 30, 2010, we dissolved our wholly-owned subsidiary, D2D, LLC.  This subsidiary had no operations and its dissolution had no impact on our current or prior financial statements.

We are in the business of innovating fundamental wireless technologies.   We design, develop and market our proprietary RF technologies and products for use in semiconductor circuits for wireless communication products.   Our business is expected to include licensing of our intellectual property and/or the sale of integrated circuits based on our technology for incorporation into wireless devices designed by our customers.   In addition, from time to time, we offer engineering consulting and design services to our customers, for a negotiated fee, to assist them in developing prototypes and/or products incorporating our technologies.

2.  LIQUIDITY AND GOING CONCERN

The accompanying financial statements as of and for the year ended December 31, 2011 were prepared assuming we would continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business.  These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern.

We have incurred losses from operations and negative cash flows in every year since inception and have utilized the proceeds from the sale of our equity securities to fund our operations.   For the year ended December 31, 2011, we incurred a net loss of approximately $14.6 million and negative cash flows from operations of approximately $11.4 million.  At December 31, 2011, we had an accumulated deficit of approximately $241.8 million and working capital of approximately $4.5 million.  We expect that revenue for 2012, if any, will not be sufficient to cover our operational expenses for 2012, and that our expected continued losses and use of cash will be funded from available working capital.  Our current capital resources include cash, cash equivalents and available for sale securities of approximately $5.2 million at December 31, 2011.  We believe these current capital resources will not be sufficient to support our liquidity requirements through 2012 and further cost containment measures, if implemented, may jeopardize our operations and future growth plans.  These circumstances raise substantial doubt about our ability to continue to operate as a going concern.

We believe we may be able to meet our future liquidity needs through the issuance of equity securities under our outstanding shelf registration statement or through short or long-term debt financing, although there can be no assurance that such financing will be available to us.  We currently have no significant long-term debt obligations.

We operate in a highly competitive industry with rapidly changing and evolving technologies.  Many of our potential competitors have substantially greater financial, technical and other resources.  We have made significant investments in developing our technologies and products, the returns on which are dependent upon the generation of future revenues for realization.  The long-term continuation of our business plan through 2012 and beyond is dependent upon the generation of sufficient revenues from our technologies and products to offset expenses.  In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private financing and/or further reduce operating costs.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or further reduce

 
27

 
 
operating costs could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
Our financial statements are prepared in accordance with generally accepted accounting principles.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires us 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 us include the volatility, forfeiture rate and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes.   Actual results could differ from the estimates made.  We periodically evaluate 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.

Cash and Cash Equivalents
We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased.

Available for Sale Securities
Available for sale securities are intended to be held for indefinite periods of time and are not intended to be held to maturity. These securities are recorded at fair value and any unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss until realized. Our available for sale securities at December 31, 2011 and 2010 consisted of mutual funds that invest primarily in short-term municipal securities with an average effective maturity of one year or less. All dividends and realized gains are recognized as income as earned and immediately reinvested.  The Company has determined that the fair value of its available for sale securities fall within Level 1 in the fair value hierarchy (See Note 14).

Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the following estimated useful lives:

Manufacturing and office equipment
 
5-7 years
Leasehold improvements
 
Remaining life of lease
Furniture and fixtures
 
7 years
Computer equipment and software
 
3-5 years

The cost and accumulated depreciation of assets sold or retired are removed from their respective accounts, and any resulting net gain or loss is recognized in the accompanying statements of operations and comprehensive loss.  The carrying value of long-lived assets is reviewed on a regular basis for the existence of facts, both internally and externally, that may suggest impairment. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of the assets exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the assets.
 
 
28

 

Long-lived assets to be sold are classified as held for sale in the period in which there is an approved plan for sale of the assets within one year, and it is unlikely that the plan will be withdrawn or changed.  Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less estimated costs to sell.

Intangible Assets
Patents, copyrights and other intangible assets are amortized using the straight-line method over their estimated period of benefit.  We estimate the economic lives of our patents and copyrights to be fifteen to twenty years.  We estimate the economic lives of other intangible assets, including licenses, based on estimated technological obsolescence, to be two to five years, which is generally shorter than the contractual lives.   Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists.

Key-man Life Insurance
Other assets include the cash surrender value of key-man life insurance policies that we maintain for two of our named executive officers.  In 2011, 2010 and 2009, we paid the premiums on these policies, in the amount of approximately $46,000 annually, through the use of annual policy dividends and loans against the cash surrender value of one policy.  At December 31, 2011, the balance of the policy loan, totaling approximately $44,000, including approximately $2,200 in unpaid interest on the loan, is recorded as a reduction in the cash surrender value of the policy.  The aggregate net cash surrender value of these policies as determined by the insurance carrier was approximately $562,000 and $544,000 at December 31, 2011 and 2010, respectively.

Accounting for Share-Based Compensation
We have various share-based compensation programs which provide for equity awards including stock options, RSUs and restricted stock. We calculate the fair value of employee share-based equity awards on the date of grant and recognize the calculated fair value, net of estimated forfeitures, as compensation expense over the requisite service periods of the related awards.  We estimate the fair value of each equity award using the Black-Scholes option valuation model or the Monte Carlo simulation fair value model for awards that contain market conditions.  These valuation models require the use of highly subjective assumptions and estimates including (i) how long employees will retain their stock options before exercising them, (ii) the volatility of our common stock price over the expected life of the equity award, and (iii) the rate at which equity awards will ultimately be forfeited by the recipients.  Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note 8.  Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

Revenue Recognition
We did not recognize any product or royalty revenue in 2011, 2010, or 2009.   We account for service revenue when there is persuasive evidence of an arrangement, services have been rendered, the fee is fixed or determinable, and collection of the resulting receivable is reasonably assured.  We use the percentage-of-completion method of accounting for cost reimbursement-type contracts which specify a certain billable fee amount.  Revenues are recognized as costs are incurred assuming that collection is reasonably assured.  Our cost of sales includes the direct labor costs of personnel providing services under these contracts, as well as indirect costs such as depreciation and allocated facilities costs.

Research and Development Expenses
Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third party contractors, prototype expenses, maintenance costs for software development tools, depreciation, amortization, and an allocated portion of facilities costs.

Loss per Common Share
Basic loss per common share is determined based on the weighted-average number of common shares outstanding during each year.  Diluted loss per common share is the same as basic loss per common share as all potential common shares are excluded from the calculation, as their effect is anti-dilutive.  The weighted-average number of common shares outstanding for the years ended December 31, 2011, 2010, and 2009, was

 
29

 
 
60,038,857, 42,960,229, and 32,963,816, respectively.

Options and warrants to purchase 11,105,288, 9,315,516, and 6,019,121, shares of common stock were outstanding at December 31, 2011, 2010, and 2009, respectively.   In addition, unvested RSUs representing 1,104,377 and 300,602 shares of common stock were outstanding at December 31, 2011 and 2010, respectively.  These options, warrants and RSUs were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive.

Leases
Our facilities are leased under operating leases.  For those leases that contain rent escalations or rent concessions, we record the total rent payable during the lease term on a straight-line basis over the term of the lease with the difference between the rents paid and the straight-line rent recorded as a deferred rent liability in the accompanying balance sheets.

Income Taxes
The provision for income taxes is based on loss before taxes as reported in the accompanying statements of operations and comprehensive loss.  Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized.  Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.

Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-05 “Presentation of Comprehensive Income” (“ASU 2011-05”).  ASU 2011-05 allows an entity to present the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The updated guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in shareholders’ equity.  ASU 2011-05 does not change the components that are recognized in net income or other comprehensive income under current accounting guidance.  ASU 2011-05 also requires reclassification adjustments to avoid double counting of items in comprehensive income that are presented as a part of net income for a period that also has been presented as part of other comprehensive income in that period or earlier periods.  However, the requirement for presentation of these reclassification adjustments was deferred in December 2011 with the FASB’s issuance of ASU 2011-12 “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of  Reclassifications of Items Out of Other Comprehensive Income in ASU 2011-05”.  The new guidance is effective on a retrospective basis for financial statements issued for fiscal periods beginning after December 15, 2011 and early adoption is permitted.  As of December 31, 2011, we have retrospectively adopted this guidance which had no material impact on our financial statements.

In May 2011, the FASB issued Accounting Standards Update 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”).   ASU 2011-04 provides a consistent definition of fair value to ensure fair value measurement and disclosure requirements are similar between U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards.  This guidance is effective for interim and annual periods beginning on or after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our financial statements.

4.   PREPAID EXPENSES AND OTHER
 
Prepaid expenses and other current assets consisted of the following at December 31, 2011 and 2010:
 
 
 
30

 

   
2011
   
2010
 
Prepaid insurance
  $ 401,087     $ 405,693  
Tenant improvement allowance receivable
    124,072       0  
Other current assets
    136,629       148,283  
    $ 661,788     $ 553,976  
                 

5.   PROPERTY AND EQUIPMENT, NET

Property and equipment, at cost, consisted of the following at December 31, 2011 and 2010:

   
2011
   
2010
 
Equipment and software
  $ 8,001,521     $ 8,633,164  
Leasehold improvements
    806,915       779,343  
Furniture and fixtures
    494,561       494,561  
      9,302,997       9,907,068  
Less accumulated depreciation and amortization
    (8,951,712 )     (9,369,891 )
    $ 351,285     $ 537,177  
                 

Depreciation expense related to property and equipment was $314,113, $428,631, and $502,748, in 2011, 2010, and 2009, respectively.

In July 2009, we purchased office equipment under a capital lease and recorded a corresponding capital lease obligation of approximately $72,000.  The lease has a three-year term with monthly payments of approximately $2,400 and an annual stated interest rate of 13.5%.  The principal payments are reflected as cash outflows from financing activities in the accompanying statements of cash flows.  Depreciation expense included $14,371, $14,371 and $6,063 in 2011, 2010 and 2009, respectively, related to this capital lease.  Accumulated depreciation as of December 31, 2011 and 2010 included $34,806 and $20,435, respectively, related to this capital lease obligation.

6.   INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 2011 and 2010:

   
2011
 
   
Gross Carrying Amount
   
Accumulated Amortization
   
Net Value
 
Patents and copyrights
  $ 17,284,255     $ 8,279,992     $ 9,004,263  
Prepaid licensing fees
    554,000       554,000       0  
    $ 17,838,255     $ 8,833,992     $ 9,004,263  
                         
   
 
2010
 
   
Gross Carrying Amount
   
Accumulated Amortization
   
Net Value
 
Patents and copyrights
  $ 16,674,404     $ 7,266,311     $ 9,408,093  
Prepaid licensing fees
    694,000       694,000       0  
    $ 17,368,404     $ 7,960,311     $ 9,408,093  
                         

Periodically, we evaluate the recoverability of our intangible assets and take into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists (“Triggering Event”).  Based on our cumulative net losses and negative cash flows from operations to date,
 
 
31

 

we assess our working capital needs on an annual basis.  This annual assessment of our working capital is considered to be a Triggering Event for purposes of evaluating the recoverability of our intangible assets.  As a result of our evaluation at December 31, 2011, we determined that no impairment exists with regard to our intangible assets.

Patent costs represent legal and filing costs incurred to obtain patents and trademarks for product concepts and methodologies that we have developed.  Capitalized patent costs are amortized over the estimated lives of the related patents, ranging from fifteen to twenty years.  Prepaid licensing fees represent costs incurred to obtain licenses for use of certain technologies in future products.  Prepaid license fees are amortized over their estimated economic lives, generally two to five years.

Amortization expense for the years ended December 31, 2011, 2010, and 2009 is as follows:

         
Amortization Expense
 
   
Weighted average estimated life
(in years)
   
2011
   
2010
   
2009
 
                         
Patents and copyrights
    17     $ 1,013,681     $ 977,208     $ 936,569  
Prepaid licensing fees
    2       0       283,379       301,882  
  Total amortization
          $ 1,013,681     $ 1,260,587     $ 1,238,451  
                                 

Future estimated amortization expenses for other assets that have remaining unamortized amounts as of December 31, 2011 are as follows:

2012
 
$     993,611
2013
 
969,833
2014
 
947,128
2015
 
852,866
2016
 
816,624
2017 and thereafter
 
4,424,201
 
7.   INCOME TAXES AND TAX STATUS

A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 34% for the years ended December 31, 2011, 2010, and 2009 is as follows:

   
2011
   
2010
   
2009
 
Tax benefit at statutory rate
  $ (4,954,940 )   $ (5,109,356 )   $ (7,320,067 )
State tax benefit
    (510,067 )     (525,963 )     (753,536 )
Increase in valuation allowance
    5,722,492       5,836,548       8,216,530  
Research and development credit
    (272,117 )     (263,589 )     (375,401 )
Capital loss
    (38,439 )     0       0  
Other
    53,071       62,360       232,474  
    $ 0     $ 0     $ 0  
                         

Our deferred tax assets and liabilities relate to the following sources and differences between financial accounting and the tax bases of our assets and liabilities at December 31, 2011 and 2010:
 
 
32

 
 
   
2011
   
2010
 
Gross deferred tax assets:
           
   Net operating loss carry-forward
  $ 80,863,960     $ 76,504,457  
   Research and development credit
    7,317,337       7,184,010  
   Capital loss carry-forward
    38,439       0  
   Patents and other
    1,684,365       1,649,995  
   Fixed assets
    142,690       111,613  
   Stock compensation
    2,492,458       3,279,669  
   Accrued liabilities
    53,722       74,884  
      92,592,971       88,804,628  
      Less valuation allowance
    (92,592,971 )     (88,804,628 )
      0       0  
Gross deferred tax liabilities:
               
    Fixed assets
    0       0  
 
    0       0  
Net deferred tax asset
  $ 0     $ 0  
                 

No current or deferred tax provision or benefit was recorded for 2011, 2010, and 2009 as a result of current losses and full deferred tax valuation allowances for all periods.  We have recorded a valuation allowance to state our deferred tax assets at their estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income.

At December 31, 2011, we had cumulative net operating losses (“NOL”), research and development (“R&D”) tax credit carry-forwards and capital loss carry-forwards for income tax purposes of $219,289,530, $7,317,337 and $102,504, respectively, which expire in varying amounts from 2012 through 2031.  The cumulative NOL carry-forward is net of $9,051,925 in carry-forwards from 1993 through 1996 which expired unused from 2008 through 2011.  The cumulative R&D tax credit carry-forward is net of $259,552 in credits from 1995 and 1996 that expired unused in 2010 and 2011.

Our ability to benefit from the our tax credit carry-forwards could be limited under certain provisions of the Internal Revenue Code if our ownership changes by more than 50%, as defined by Section 382 of the Internal Revenue Code of 1986 (“Section 382”).

Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  We have identified our Federal and Florida tax returns as our only major jurisdictions, as defined.  The periods subject to examination for those returns are the 1996 through 2011 tax years. 

Under Section 382, an ownership change may limit the amount of NOL, capital loss and R&D credit carry-forwards that can be used annually to offset future taxable income and tax, respectively.  In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.  We conduct a study annually of our ownership changes.  Based on the results of our studies, we have determined that we do not have any ownership changes on or prior to December 31, 2011 which would result in limitations of our NOL, capital loss or R&D credit carry-forwards under Section 382.

At December 31, 2011, we had an unrecognized tax benefit of approximately $1.4 million.  A reconciliation of the amount recorded for unrecognized tax benefits for the years ended December 31, 2011, 2010, and 2009 is as follows:

 
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For the years ended December 31,
 
 
2011
 
2010
 
2009
Unrecognized tax benefits – beginning of year
  $ 1,369,614   $ 1,369,614   $ 1,369,614  
  Gross increases – tax positions in prior period
    -     -     -  
  Change in Estimate
    -     -     -  
Unrecognized tax benefits – end of year
  $ 1,369,614   $ 1,369,614   $ 1,369,614  
                     

Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of a valuation allowance.   Approximately $0.47 million, net of tax effect, of the unrecognized tax benefit is related to excess tax benefits related to share-based compensation which would be recorded as an adjustment to equity rather than a decrease in earnings, if reversed.

Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of our income tax expense.  We do not have any accrued interest or penalties associated with any unrecognized tax benefits.  For the years ended December 31, 2011, 2010, and 2009, we did not incur any income tax-related interest income, expense or penalties.   

8.   SHARE-BASED COMPENSATION:

We did not capitalize any expense related to share-based payments.  The following table presents share-based compensation expense included in our statements of operations and comprehensive loss for the years ended December 31, 2011, 2010, and 2009, respectively:

   
Year ended December 31,
 
   
2011
   
2010
   
2009
 
Research and development expense
  $ 706,734     $ 1,199,442     $ 1,967,780  
Sales and marketing expense
    121,384       362,518       576,539  
General and administrative expense
    609,056       1,165,545       2,449,337  
  Total share-based expense
  $ 1,437,174     $ 2,727,505     $ 4,993,656  
                         

As of December 31, 2011, there was $4,240,971 of total unrecognized compensation cost, net of estimated forfeitures, related to all non-vested share-based compensation awards.  That cost is expected to be recognized over a weighted-average period of 2.57 years.

Stock Incentive Plans

1993 Stock Plan
We adopted a stock plan in September 1993 (the “1993 Plan”).  Our ability to issue grants under this plan ended as of September 10, 2003.  The 1993 Plan, as amended, provided for the grant of options and other stock awards to employees, directors and consultants, not to exceed 3,500,000 shares of common stock.
  
2000 Performance Equity Plan
We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provides for the grant of options and other stock awards to employees, directors and consultants, not to exceed 5,000,000 shares of common stock.  The 2000 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted share awards, stock bonuses and various stock benefits or cash.  Prior to July 2010, the 2000 Plan also provided for awards of incentive stock options.   Forfeited and expired options under the 2000 Plan become available for reissuance.   At December 31, 2011, 701,616 shares of common stock were available for future grants.

2008 Equity Incentive Plan
We adopted an equity incentive plan in August 2008 (the “2008 Plan”).  The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed

 
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500,000 shares of common stock.  The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards.  Forfeited and expired options under the 2008 Plan become available for reissuance.  At December 31, 2011, 16,566 shares of common stock were available for future grants.

2011 Long-Term Incentive Equity Plan
We adopted a long-term incentive equity plan in September 2011 (the “2011 Plan”).  The 2011 Plan provides for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 5,000,000 shares of common stock.  The Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards.  Forfeited and expired options under the 2011 Plan become available for reissuance.  At December 31, 2011, 2,750,000 shares of common stock were available for future grants.

Restricted Stock Awards
Restricted stock awards are issued as executive and employee incentive compensation and as payment for services to others.  The value of the award is based on the closing price of our common stock on the date of grant.  Restricted stock awards are generally immediately vested.   We had no unvested restricted stock awards at December 31, 2011, 2010, or 2009 and no restricted stock awards were forfeited during 2011, 2010, or 2009.

Restricted Stock Units
RSUs are issued as incentive compensation to executives, employees, and non-employee directors as well as payment for services to consultants.   Each RSU represents a right to one share of our common stock, upon vesting.  The RSUs are not entitled to voting rights or dividends, if any, until vested.  RSUs generally vest over a three year period for employee awards, a one year period for non-employee director awards and the life of the related service contract for third-party awards.  The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period.   In the case of RSUs issued to consultants, the fair value is recognized based on the closing price of our common stock on each vesting date.

Plan-Based RSUs
The following table presents a summary of RSU activity under the 1993, 2000, 2008, and 2011 Plans (collectively, the “Stock Plans”) as of December 31, 2011:

   
Non-vested Shares
 
   
Shares
   
Weighted-Average Grant-Date Fair Value
 
Non-vested at January 1, 2010
    300,602     $ 10.97  
Granted
    162,750       0.89  
Vested
    (325,042 )     10.20  
Forfeited
    (600 )     10.13  
Non-vested at December 31, 2011
    137,710       0.89  
                 

The total fair value of RSUs vested under the Stock Plans for the year ended December 31, 2011 is $396,641.

Non-Plan RSUs
In November 2011, we issued 200,000 RSUs to a consultant as payment for services.  The shares vest equally over a six month period and the shares underlying the RSU are unregistered.  Upon thirty days’ notice, the consulting agreement may be terminated and any unvested portion of the RSUs will be cancelled.  As of December 31, 2011, an aggregate of 33,333 RSUs have vested and a total of $28,666 in compensation cost related to these RSUs has been recognized in share-based compensation expense.

In November 2011, we also issued 800,000 RSUs to a consultant as a performance incentive. These RSUs
 
 
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will vest only upon achievement of certain market conditions, as measured based on the closing price of our common stock during a period ending on the earlier of (i) December 31, 2012 or (ii) thirty days following termination of the related consulting agreement.  The shares underlying this RSU are unregistered.   As of December 31, 2011, no portion of the RSU has vested and we have recognized no compensation expense related to this award.

Stock Options and Warrants
Stock options are issued as incentive compensation to executives, employees, and non-employee directors as well as payment for services to consultants.  In addition, we have granted warrants to investors in connection with securities offerings (see Note 9).  Stock options and warrants are generally granted with exercise prices at or above fair market value of the underlying shares at the date of grant.

Plan-Based Options
Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans.  The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2011:

   
Shares
   
Weighted-Average Exercise Price
   
Weighted-Average Remaining
Contractual Term
   
Aggregate Intrinsic Value ($)
 
Outstanding at beginning of year
    3,220,496     $ 10.75              
Granted
    2,725,665       0.88              
Exercised
    0       0              
Forfeited
    (751 )     2.99              
Expired
    (442,166 )     21.80              
Outstanding at end of year
    5,503,244       4.97       4.46     $ 61,007  
Exercisable at end of year
    2,908,367     $ 8.60       2.43     $ 27,904  
                                 

The weighted average fair value of option shares granted during the years ended December 31, 2011, 2010, and 2009 was $0.66, $0.50, and $1.82, respectively.  The total fair value of option shares vested during the years ended December 31, 2011, 2010, and 2009, was $192,959, $160,962, and $2,437,770, respectively.

The fair value of options granted under the Stock Plans is estimated using the Black-Scholes option pricing model.  Generally, fair value is determined as of the grant date.  In the case of option grants to third parties, the fair value is estimated at each interim reporting date until vested.

The fair value of option grants under the Stock Plans for the years ended December 31, 2011, 2010, and 2009 respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:

 
Year ended December 31,
 
2011
 
2010
 
2009
Expected option term 1
5 to 6 years
 
6 to 6.5 years
 
3 to 7 years
Expected volatility factor 2
92.0% to 97.7%
 
84.1% to 88.1%
 
84.3% to 91.1%
Risk-free interest rate 3
0.9% to 2.0%
 
1.5% to 3.3%
 
1.3% to 3.4%
Expected annual dividend yield
0%
 
0%
 
0%
           

1
The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding.  For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes.   For consultants, the expected term was determined based on the contractual life of the award.

2
The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant.
 
 
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3
The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date.

Non-Plan Options and Warrants
Options granted outside the Stock Plans represent options issued as payment for services to consultants.  These non-plan options are for unregistered shares of our common stock which contain “piggy-back” registration rights on subsequent registration statements, if applicable.  We have not registered any of the shares underlying the non-plan options awarded in 2011, 2010 or 2009.   Warrants issued in connection with offerings of securities are also issued outside of the Stock Plans.  The shares underlying the warrants have been registered on a registration statement.  The following table presents a summary of non-plan option and warrant activity for the year ended December 31, 2011:

   
Shares
   
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Term
 
Aggregate Intrinsic Value ($)
 
Outstanding at beginning of year
    6,095,020     $ 9.01          
Granted
    907,412       0.88          
Exercised
    (687,461 )     0.54          
Forfeited
    0       0          
Expired
    (712,927 )     37.64          
Outstanding at end of year
    5,602,044       5.09  
3.52 years
  $ 1,174,526  
Exercisable at end of year
    5,552,044     $ 5.13  
3.51 years
  $ 1,174,526  
                           

The aggregate intrinsic value of warrants exercised during 2011 and 2009 was $232,269 and $21,700 respectively.  The aggregate fair value of non-plan options and warrants vested during the years ended December 31, 2011, 2010, and 2009 was $470,383, $1,134,193, and $499,326, respectively.  This includes the grant date fair value of warrants issued in connection with the sale of equity securities during the years ended December 31, 2011, 2010, and 2009, of $416,618, $1,091,159, and $452,886, respectively, which is included in the accompanying statements of shareholders’ equity.

Non-plan options and warrants outstanding at December 31, 2011 and 2010 include warrants issued in connection with the sale of equity securities in various public and private placement transactions from 2000 to 2011 that represent 5,352,043 and 5,945,020 shares, respectively (see Note 9).  The estimated fair value of these warrants as of December 31, 2011 and 2010 are included in shareholders’ equity in the accompanying balance sheets.

The fair value of non-plan options and warrants for the years ended December 31, 2011, 2010, and 2009, respectively, was estimated using the Black-Scholes option-pricing model at each measurement date with the following assumptions:

 
Year ended December 31,
 
2011
 
2010
 
2009
Expected option term 1
4 to 5 years
 
4 to 5 years
 
4.5 to 5 years
Expected volatility factor 2
89.4% to 100.2%
 
88.7% to 94.2%
 
85.0% to 85.4%
Risk-free interest rate 3
0.9% to 2.4%
 
1.1% to 2.6%
 
2.0% to 2.7%
Expected annual dividend yield
0%
 
0%
 
0%
           

1
The expected term was determined based on the remaining contractual life of the award on the measurement date.

2
The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected life of the award.
 
 
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3
The risk-free interest rate for periods equal to the expected term of the award is based on the U.S. Treasury yield curve in effect at the measurement date.

Options and Warrants by Price Range
The options and warrants outstanding at December 31, 2011 under all plans, including the non-plan options and warrants, have exercise price ranges, weighted average contractual lives, and weighted average exercise prices as follows:

     
Options and Warrants Outstanding
   
Options and Warrants Exercisable
 
Range of
Exercise Prices
   
Number Outstanding at December 31, 2011
   
Wtd. Avg. Exercise Price
   
Wtd. Avg. Remaining Contractual Life
   
Number Exercisable at December 31, 2011
   
Wtd. Avg. Exercise Price
   
Wtd. Avg. Remaining Contractual Life
 
$ 0.54 - $0.82       4,004,502     $ 0.55       4.01       3,883,099     $ 0.55       3.94  
$ 0.88 - $1.63       3,367,412     $ 0.90       6.22       871,578     $ 0.89       4.70  
$ 1.88 - $2.98       511,320     $ 2.09       2.60       511,320     $ 2.09       2.60  
$ 2.99 - $4.66       478,514     $ 3.34       3.95       450,874     $ 3.36       3.93  
$ 4.67 - $7.08       538,960     $ 5.73       1.91       538,960     $ 5.73       1.91  
$ 7.25 - $10.98       1,188,184     $ 8.99       1.95       1,188,184     $ 8.99       1.95  
$ 11.10 - $19.50       277,921     $ 14.89       1.68       277,921     $ 14.89       1.68  
$ 19.99 - $31.00       209,000     $ 25.35       0.10       209,000     $ 25.35       0.10  
$ 35.41 – 56.66       529,475     $ 46.79       0.39       529,475     $ 46.79       0.39  
        11,105,288     $ 5.03       3.99       8,460,411     $ 6.32       3.14  
                                                     

Upon exercise of options and warrants under all plans, we issue new shares of our common stock.   For shares issued upon exercise of warrants or equity awards granted under the Stock Plans, the shares of common stock are registered.   For shares issued upon exercise of non-plan RSU or option awards, the shares are not registered.  Cash received from option and warrant exercises for the years ended December 31, 2011, 2010, and 2009, was $330,938, $0, and $37,500, respectively.  No tax benefit was realized for the tax deductions from exercise of the share-based payment arrangements for the years ended December 31, 2011, 2010, and 2009 as the benefits were fully offset by a valuation allowance (see Note 7).

9.   STOCK AUTHORIZATION AND ISSUANCE
 
Preferred Stock
We have 15,000,000 shares of preferred stock authorized for issuance at the direction of the board of directors.  As of December 31, 2011, we had no outstanding preferred stock.

On November 17, 2005, our board of directors designated 100,000 shares of authorized preferred stock as the Series E Preferred Stock in conjunction with its adoption of a Shareholder Protection Rights Agreement (Note 10).
 
Common Stock and Warrants
We have filed two shelf registration statements with the SEC for purposes of providing flexibility to raise funds from the offering of various securities over a period of three years, subject to market conditions.   Securities offered under the shelf registration statements may be used to fund working capital, capital expenditures, vendor purchases, and other capital needs.
 
The first shelf registration statement (the “January 2009 Shelf”) was filed on January 5, 2009 (File No. 333-156571) and declared effective on January 20, 2009 for the offering of up to $25 million in securities.  We have issued an aggregate of approximately $19.6 million in securities under the January 2009 Shelf, including the offerings discussed below.  The January 2009 Shelf expired in January 2012.
 
The second shelf registration statement (the “September 2009 Shelf”) was filed on September 14, 2009 (File
 
 
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No. 333-161903) and was declared effective on September 30, 2009 for the offering of up to $50 million in securities.  We have issued an aggregate of approximately $27 million in securities under the September 2009 Shelf, including the offerings discussed below.

The following table presents a summary of equity offerings for the years ended December 31, 2011, 2010, and 2009 (in thousands, except for per share amounts):
 
Date
 
Transaction
 
# of Common Shares/ Units Sold (in 000’s)
 
Price per Share/Unit
 
# of Warrants Issued (in 000’s)
 
Exercise Price per Warrant
 
Net Proceeds
(in 000’s) (1)
 
Offering as % of Out-standing Common Stock (2)
                             
September 14, 2011
 
September 2009 Shelf offering to two institutional investors
 
7,800
 
$0.88
 
n/a
 
n/a
 
$6,500
 
11.6%
                             
                             
    September 2009  
3,332
 
$0.71
 
n/a
 
n/a
       
March 30, 2011
 
Shelf offering to a limited number of institutional
 
 
         
 
 
$4,100
 
10.2%
   
and other investors (3)
 
2,691
 
$0.81
 
807
 
$0.88
       
                             
                             
November 19, 2010
 
January 2009 Shelf offering to one of our beneficial shareholders
 
2,830
 
$0.42
 
n/a
 
n/a
 
$1,100
 
5.4%
                             
                             
November 3, 2010
 
January 2009 Shelf offering a limited number of institutional and other investors (4)
 
8,583
 
$0.51
 
4,291
 
$0.54
 
$3,900
 
17.2%
                             
                             
November 16, 2009
 
September 2009 Shelf underwritten offering (5)
 
8,000
 
$2.00
 
n/a
 
n/a
 
$14,600
 
19.4%