ParkerVision 2009 Q2 Conference Call

 

2009.08.10

 

Ron Stabiner

Cindy Poelhman

Jeff Parker

Phil Anderson with Pinnacle Fund

IRA Nathan with Nathan Financial

Charles Bellows with White Pine Capital

 

Bob:  Thanks so much for holding everyone. Welcome to the ParkerVision second quarter 2009 earnings conference call. Just a quick reminder, today's call is being recorded. And now I'll send things over to our host, Ron Stabiner, vice‑president of the Wall Street group. Please go ahead, sir.

Ron Stabiner:  Thank you. Before we get started, I would like to remind listeners that this conference call will contain forward‑looking statements, which involve known and unknown risks and uncertainties about our business and the economy and other factors that may cause actual results to differ materially for our expected achievements and anticipated results. Including these factors is the ability to maintain technological advantages in the marketplace, the ability to increase manufacturing capacity to meet demands, achieving timely market introduction and acceptance of product, maintaining our patent protection and the availability of capital, among others.

Given these uncertainties and other factors in our business, listeners are cautioned not to place undue reliance on any forward looking statements contained within this conference call. Additional materials concerning these and other risks can be found in our filings with the Securities and Exchange Commission.

On today's call, we will hear first from Cindy Poehlman, chief financial officer of ParkerVision, followed by Jeff Parker, chief executive officer, who will provide an update on the business of the company. And with that, I will now turn the call over to Cindy Poehlman. Please go ahead, Cindy.

Cindy Poehlman:  Thank you, Ron. And thanks to those of you who are joining us today for our 2009 second quarter conference call. We reported today a 5.8 million, or 17 cents per share, net loss for the second quarter of 2009. This compares to a 5.8 million, or 22 cents per share, net loss for the same quarter in 2008. On the year‑to‑date basis, for the first six months of 2009, we reported a net loss of 10.9 million, or 35 cents per share, compared to 10.7 million, or 41 cents per share, in 2008. We did not recognize any revenue this past quarter from our licensing customers. We will provide you an update a bit later this call with regard to our expectations for the start‑up revenue in the second half of this year. But, before we get to that, I'd like to briefly discuss our operating expenses and our cash usage for the first half of 2009.

Our total operating expenses for the first half were comparable to 2008, with operating expenses of approximately 11 million in the first half of both years. The blend of cash and noncash expense, however, varies greatly between years. Approximately 25 percent of our operating expense was comprised of noncash 123R compensation expense in '09, compared to only 14 percent in '08.

This increase in noncash compensation results from a number of factors including the elimination of certain cash‑based incentives for our employees in favor of equity‑based awards. In addition, our board of directors opted to take equity in the form of stock options in lieu of their cash compensation for director and committee fees for fiscal '09.

From a cash flow perspective, we ended the quarter with approximately $7.5 million in cash after using roughly $3.3 million in cash for operations for the second quarter. Year‑to‑date thus far in '09, our cash usage for operating and investing activities combined has averaged approximately $3.5 million per quarter, which is in line with our expectations.

Management is confident that it can maintain the necessary liquidity levels to support our business goals for 2009 and beyond. Our expectation is that anticipated initial revenues will begin to offset a portion of our cash needs in the second half of this year. Additionally, we continue to explore measures for reducing our operating cash needs including base financing, capital equipment leases and similar arrangements.

I'll be available to address any questions you may have at the end of today's call, but for now, I'll turn things over to our CEO, Jeff Parker, who will provide an update on our business development. Jeff?

[3:58]

Jeff Parker:  Thank you, Cindy, and good afternoon to you. Thanks for joining us for our second quarter update. During our previous call, I reported that our focus for this year, 2009, is one of product execution. Specifically, this means assisting our customers in whatever it takes to complete their ParkerVision‑enabled product offering and to help them in a way that will speed those products to market. By ensuring successful product execution, this will generate revenue in the near term, as well as enable expanded growth opportunities for ParkerVision, as other potential customers continue to watch our progress. As they watch that progress, they will see affirmatively that the technology delivers not a single, but a host of benefits that are important to both their existing and future products. Benefits that we've predicted and have been talking about for a number of years now will soon be demonstrable in mobile handsets in the marketplace.

So, I know you're anxious to hear specifics about where we're at with the first sample phones that we've been co‑developing with our chipset customer partner. And I'm equally anxious to bring you this update. Some of you have emailed that you'd like to also hear more about how things are developing with LG Innotek, and there's been a lot of progress there as well to talk about.

And in our last call, I reported that I see revenue from ITT's effort ‑ starting in the second half of this year ‑ which is still what I see. So, I'll provide some color on what's happening on that front as well.

So, right to a topic that I know is of high interest, as it should be, let's talk about how we're doing in the completion of sample phones that incorporate d2p for our first chipset customer. I'm pleased that the completion of the first sample phones is very close, within the range of days to perhaps a couple of weeks. Some of you have asked what's taken a few weeks longer than we originally anticipated. And I think this is a good time to provide you some detail on this sample phone program and how this phone is being developed.

First of all, these phones are being co‑developed, meaning that both ourselves and our customer are working together to make these phones a reality. The design of the phone is owned by our customer. This basic design is in high volume production already. It's used by at least one of the top five handset companies that I'm aware of, and perhaps more, as our chipset customer sells to three of the top five tier‑one handset OEMs. Variations on this basic phone design can be purchased both in Asia as well as in the United States.

As it turns out, this particular phone design is not the one we started working on when I originally informed you of sample phones being developed. Our customer decided to change from the original phone reference design to this one for a variety of good reasons, some of which deal with higher‑volume opportunities and with broader geographic market usage. While this added some time to completing the first phones, I believe we will have gone a little slower to ultimately go a lot faster. And that's a decision that I respect and supported.

So, I mentioned that this phone is being co‑developed, meaning that it is taking both our companies to get this done. But, here's a little more about that topic. The overall layout of the phone, meaning the circuit board design, the chipset placement, feature selections ‑ those are all done by our customer. The RF portion of this phone is being designed by ParkerVision. Most of the phone parts are provided by our customer. The software that operates this phone, and which is specific to each and every phone model built, is created by our customer.

Ultimately, we've taken responsibility for the first phone build, since our RF portion is the new kid on the block. As you can see, there's a lot of cooperation that's required to get this phone designed and built. While the phones are still a work in process, what I can tell you is the following. The first preproduction module packages that incorporate our technology are completed and successfully tested.

This showcases a level of integration that's never been practical before, which is where the entire transmit function ‑ everything from the baseband processor to the amplified RF output ‑ is in one single package. This is made possible by the high efficiency of the d2p technology.

The final production version of this packaging advantage will shrink with it's currently used in states‑released radio portions of the phone today by at least 50 percent in size.

These phone samples will soon allow our customers to showcase our technological benefits in a completed phone that it will conclusively demonstrate the performance and battery lifesaving in an indisputable physical implementation.

[8:56]

And so now, let's talk about what happens once the phone samples are in hand. The purpose of going at these lengths to building phones was the idea of our customer, their view being the quickest and shortest way for them to generate orders and revenue for both companies.

I have been told recently that while they had earlier determined to sample these phones to a couple of their largest customers who they felt to generate the first orders that they've now extended that list to a half a dozen customers.

Our belief is that a sample of these phones that some of the customers will be quick to want incorporate the benefit and will turn orders around quickly. To that end and in parallel to building of these sample phones we've also been  assisting our customer in setting up the manufacturing processes, which includes production, testing, packaging and the like; so that they can begin to ramp with as little delay as possible.

Our goal being a manufacturing run for fulfillment of the first royalty bearing orders this year, the milestones that you should look for next include announcements about circulation of the sample handsets for targeted customers, initiation of production by our customer and collection of revenue and royalties payable to us under our contract.

Our enthusiasm for our relationship with this customer only continues to grow, as they experience continues growth in their own market segment and continues to view our technology as providing them even further opportunities to capture additional market share. With the completion of handsets that incorporate our technology we are arriving at a key milestone that many of you then supporting for a number of years now and that I believe will become an inflection point of growth for ParkerVision.

So now, let's talk about the progress with our other customer that targeted the mobile handset market - LG Innotek. This is the sister company of LG electronics. Since our last call LGI has created and started to circulate to their customers spec sheets and sales presentations for the HEDGE phone module, that are being co‑developed with the spec sheet being co‑branded with both LG Innotek and powered by ParkerVision on the banner.

This co‑branding of course is very exciting to us because of LGI's reputation for extensive engineering, quality manufacturing capabilities and a world class marketing sales and distribution network. These joint sales efforts have generated interest already for more than one Tier-one handset OEM for the use of this d2p HEDGE module.

Based on the d2p HEDGE demo platform which we'll be delivering to LGI shortly, they have been actively promoting our jointly developed HEDGE solution. And already have meetings set up for this month with important Tier-one customers regarding the HEDGE products.

The HEDGE demonstration platform is comprised of a complete phone system and incorporates a baseband processor from a leading system provider. The platform will be capable of making real time phone calls. Something that is notable about this and that because our d2p technology is a platform technology, meaning that we don't have to reinvent the technology every time we move from one phone application to another. We enjoy a lot of reuse from one phone type application to the next.

It is notable that the timeframe to develop the HEDGE application for LGI will be roughly half as long as it took us to develop similar product for our first chipset customer, even though the HEDGE application is significantly more complicated.

So, in parallel, we are developing the HEDGE demo platform, we've being building a silicon chip that LGI will ultimately incorporate into their own HEDGE module.

Just as a reminder, HEDGE is a multi‑mode, multi‑band solution that is one of and in fact probably one of the and probably the fastest growing phone category. The latest industry forecast are predicting sales of approximately of 340 millions units of WEDGE and HEDGE solutions in 2010, growing into over 600 million units in 2013. We believe that HEDGE solution translates into a total available market revenue opportunity for ParkerVision of over two billion dollars annually based on the 2013 WEDGE/HEDGE forecast.

[13:29]

LGI sister company, LG electronics alone currently joins about 10 percent of the overall sell market and they've been growing their market share. This year, it will shift over a 100 million overall handsets. We expect the second half 2009 activities will secure the first design wins for LGI and ParkerVision in the HEDGE marketplace. And at this will create the initial orders and revenues from these products in the first half of 2010.

[14:02]

So, now let's turn our update to the progress we are making with ITT. The enthusiasm that we see from ITT and their key customers is generating expanded opportunities program from both firms to incorporate d2p products into ITT’s customers. We indicated previously that we anticipated revenue from our ITT relationship in the second half of 2009 and this expectation hasn't changed.

ITT has now targeted a number of different programs with their customers and I believe at least one and likely two of these programs will be turned loose in contracts by their customers this year. Also, the growing interaction between ITT and their customers on these programs, we believe will lead to additional design wins.

Because of the nature of this customer with their military and government applications, we're a bit restrained in the level of detail that we are able to share with you. But we should have more updates over the following month that to give you more tangible insight into the programs with ITT and their customers that incorporate d2p technology.

So, in summary, you should look for updates in successful programs that ITT is won with d2p as well as a start of revenue generated by these successes in the second half of this year.

So now, I'd like to discuss how those customers updates impact our financial expectations for the balances this year and beyond. We anticipate that the combined revenue for our customers will start to offset ourexpenses during the remaining two quarters of 2009. But, it's not expected that those revenues will exceed cash expenses during the balance of this year.

As Cindy mentioned earlier, we continue to control our cash usage and are in control of the liquidity requirements necessary to meet our operational goals. One of the activities that I've personally have undertaken is to solicit investment from potential strategic investors as well as looking at more traditional financing such as lines of credit and the like.

The last thing I want to touch on is the longer term prospects for ParkerVision. Obviously, we are all laser focused on the short term as we near the inflection point of revenue generation from our innovative technology. And we are expending a significant percentage of our resources on supporting and assisting our existing customer base. However, many of these efforts we are engaged in today will benefit future customers as well.

We are involved in sales and marketing efforts with our existing customers and we expect those efforts to drive additional business to those customers. At the same time, we continue to cultivate business relationships with other potential customers and/or influencers including some of the key handset OEMs.

As our technology begins to emerge in products and the benefits of our technology are realized in commercial devices shipping in volume, it definitely becomes easier for new customers to adopt our solutions. More importantly the feedback that we continue to receive is that the product that we’ve developed and those that are in development with our existing customers are right in line with the needs of the industry, and are arriving at just the right time.

By the way, if you take a look at our website, we just recently did an update, to reflect some of those applications that are focused on and the product solutions that are being developed. We’ve definitely seen increased interest from a number of parties, some of whom will most likely become customers of existing customers, creating a win‑win situation for all parties.

Others may enter into direct customer relationships with ParkerVision. We said for some time now, that we believe success breeds success. We remain confident that this will prove true, for ParkerVision in both the long run as well as near‑term, as we are very enthusiastic, not only with regard to the business growth we see, but also the longer‑term prospects as well.

So, in conclusion, we remain on track with our existing three customers, we are excited about the near‑term prospects of seeing our technology and product in the mobile handset market. We expect the second half of this year revenue to begin to offset our operating cash requirements and we are pro‑actively managing our liquidity needs.

We anticipate material revenue expansion through 2010 and beyond and we remain extremely excited about the prospects for ParkerVision.

So, Bob, let's go ahead and open up our call for questions please.

Bob:  Thank you, sir. Ladies and gentleman, at this time if you would like to ask any questions or have any comments, simply press *1. Just a quick reminder, if you're joining us using a speakerphone this afternoon, please make sure that your mute function is turned off, to allow your signal to reach our equipment. Again, *1 please, for questions, and we'll pause for just a moment.

[18:50]

Bob:  Excuse me, Jeff, nothing coming in at this time, just want to remind everyone *1, please. We do have a couple of questions coming in now. The first to Phil Anderson with Pinnacle Fund.

Phil Anderson:  Good afternoon, Jeff and Cindy.

Jeff:  Hello Phil.

Cindy:  Hi Phil.

Phil:  You're reading kind of quickly, so I have a number of clarifying questions to ask. I wanted to jump to the end of your statement. Did you say that the anticipated combined revenues from your customers will exceed our cash costs by the end of the calendar year?

Jeff:  No, I said, "we do not believe that we will exceed our cash use by the end of the year," although they will begin to offset some of the cash use.

Phil:  They won't necessarily go cash positive by the end of the year, but they'll begin to contribute to covering the overhead?

Jeff:  That's right, exactly.

Phil:  Fine. Again, you were going kind of fast in your prepared remarks. As related to the products for undisclosed customer number one, you mentioned something about the size reduction, can you elaborate on that? I didn't quite take your meaning.

Jeff:  Sure. Yeah. What I mean is, if you look at the sample phone that we're finishing up now, it's currently a version of the shipping phone and if you look at the amount of circuit board space that the RF portion of that phone requires, and you compare that amount of circuit board space to what we will be consuming with our implementation in the volume production implementation, we use less than 50 percent of the space that's currently required.

Phil:  Can you give us a sense of the associated cost savings with reducing that space by 50 percent and reducing, I'm assuming, the bill-of-materials considerably, as well?

Jeff:  You know Phil, I don't have it off the top of my head, but basically, what you're doing is you're replacing a number of individual packages and a whole bunch of discrete supporting components ‑ off the top of my head, I don't have the number, but I'm guessing it's over 100 supporting parts, maybe 200 supporting parts, somewhere in that range ‑ with one major package, which is what we've developed for the customer and a handful of supporting parts, and a couple of small supporting [parts or packages?].

Phil:  Are the power amplifiers eliminated?

Jeff:  Remember now, we eliminated the power amplifiers in favor of d2p, meaning that d2p integrates the power amplification into its process. That's inside. Inside this package, that we developed along with our customer, is all the transmit functions, all the receive functions and some of the interface and some housekeeping things that have to go in there. That's what's currently done today in multiple packages and lots of important discrete components.

I think not only is the size savings notable, but I think when this gets into production we're going to see another level of visibility as to what the actual manufactured cost benefits.

We believed for some time now, that when you can put all this together in the same package and it's produced and tested as a complete system, which is today done on the phone line, where these individual little sub‑systems are tested, and some of these things yield OK and some of them are not going to make it, which causes a yield problem on the production line. We're going to eliminate a lot of that yield issue. That's going to be a very nice manufacturing yield improvement, which is going to translate into cost savings. We'll have in the future some more visibility for you on that.

Phil:  What is your sense is to how the yield can be improved, or maybe the flip‑side of that is, do you have a sense on a percentage basis of how the waste can be reduced?

Jeff:  To some degree, we've been told that there are yield losses that are attributable to the radio, the RF portion of the mobile handset, that are somewhat in the ‑ let's say ‑ low single digit range. You realize, on a low single‑digit, they're throwing away an entire phone board. So, they may have some component that's worth "X" dimes or "X" quarters that's causing an entire phone board to have to be discarded. If you can shave that low single‑digit down to an even lower number, and we think we can shave it down dramatically ‑ I don't want to give you numbers yet until we actually get on the production line ‑ that's a significant savings.

That's what we'll be talking about more in the future; we can give you some more visibility. But, I think we need to get on the production line and, actually, see how that plays out.

Phil:  I don't know that you touched on increase in battery life or  increase in talk time for the first customer. Can you give us some comments on that, or has the product met or exceeded the specs which the customer had been given by ParkerVision.

Jeff:  So, we've been able to test the d2p portion of the solution and we've been able to see the realization of the energy savings that we had predicted. Those savings are right there, right where we thought they would be. When these phones are completely finished, they'll be off tested for talk time improvements, but I can tell you based on what I've seen in the savings of energy on the d2p, we're going to hit those increased talk times that we had predicted. And it's going to be meaningful.

Again, I would rather give it to you after we’ve gone out and tested it, but they're going to be significant, though.

Phil:  Hopefully the answer here is that it's insignificant, but can you elaborate on...

Jeff:  I mean the talk total, go ahead.

Phil:  Can you elaborate on the... You gave a laundry list of contributions that our customer, who is co‑developing the product, is making to the phone ‑ which is the layout, the design, the parts and the software. Is it just putting these things together and getting them to work efficiently as a unit, which is taking so long? Can you give us a bit more color as to what ‑ not that it's necessarily so long ‑ what gives you confidence ‑ you mentioned a couple of days, a couple of weeks; can you share how you have confidence to make a two to fourteen‑day prediction?

Jeff:  Yeah, I mean, we've already got phones that are largely assembled. We've been able to test most of the circuits on that. A lot of what is left to be done is going to be software and maybe a little bit of circuit tweaking. I don't believe there's a single technological hurdle, I think this was just a normal bringing up a product kind of time frames.

We're very fortunate that we've got a team, and our company is very experienced and having worked through very complex products and bringing those up. I have a lot of confidence in that team, not only in their ability to do this, but in their dedication and the long hours they're working to get this done.

I, myself, have been involved with a number them in complex products. There's nothing that we see between here and there that will stop us from getting it done, it's just the work you got to go through, the detail work, "dot your 'I's and cross your 'T's."

Certainly we want to make sure that everything on this phone, which is a complex phone, is in working order so when our customers sample these for their customers, there's no embarrassment, there's no problems. You want these things sampled, you want these customers getting them, testing and going, "we love them," and ordering D2p.

Phil:  It sounds great, a nice way to wrap up this summer. A better way to wrap up the summer would be able to see a phone and make a phone call on it. Will you be doing investor road shows, in the not‑too‑distant future then with the phone?

Jeff:  I expect as I start traveling around, I will have one of these phones with me and I will be happy to demonstrate this to as many people who are interested in seeing it as possible. Yeah, we'll definitely be showing this as soon as we got them.

Phil:  I have one more question and then I'll jump back in the queue, presuming that there is a queue that's developed now. You mentioned three press releases or events that the shareholders could look toward, I want to make sure got these right. First that we would see a press release from the company saying that the handset has been completed and our customers was shipping it out to their customers.

Jeff:  Yep, I think that it's been completed and our customers are satisfied with those and is now moving them along to their customers.

Phil:  The second one, I couldn't understand you, I was typing too quickly. I think the third one was revenue, in other words the company has been able to recognize royalty revenue.

Jeff:  The second one is that they started to ramp up their production.

Phil:  They've ramped up production. So, we would see ‑ today is the middle of August ‑ it's your expectation that sometime, based upon what our customer is telling you, that sometime in the next 45 days that ParkerVision will be able to recognize royalty revenue from our contribution to the phones being shipped to whomever is assembling the phones for final delivery.

Jeff:  It just depends on how quick those customer turnaround orders for them. I don't want to give a forecast, other than I say, "we think it will happen this year." Let's leave that broadly at that.

Phil:  OK. It sounds great, Jeff, it's a great advancement. It all seems to be coming together, all three prongs coming together right now. Sounds super, I'll get back in the queue.

Jeff:  Thanks Phil, for your support and your questions. Bob, is there another question?

Bob:  Just to remind everyone, star one please will be moving next now to Ira Nathan, with Nathan financial.

[28:30]

Ira Nathan:  Ah, yes, Jeffry, how are you?

Phil:  Fine, Ira. Fine, thank you.

Ira:  Good. Since we're at the point where ‑ by your language ‑ we're getting into days or weeks until this product will be released commercially - the handset. What is the mystery of who the customer is, at this point? Why is it so important to keep that under your hats?

Jeff:  It's important because that's our contractual obligation. Part of the agreement with them is that the relationship is confidential until they deem otherwise. I can tell you, Ira, in this industry, I can point to a number of companies who sell components to ‑ as an example ‑ there are several tier one handset OEMs; not that we're talking about one of those right now, but I'm using this as an anecdote. There're several tier one handset OEMs that I'm aware of, who have relationships with some of their important component suppliers, who never allow their names to be used in press releases. We have a VP of engineering who came from a long, very good career at Hewlett‑Packard. He likes to retell the story about one of the devices they developed there, that ultimately made it into very high volume into cell phones, in fact last year, they shipped their one billionth unit. He told me, the first customer we had ‑ which is today, by the way, one of the top five handset OEMs ‑ never allowed them to use their names. Eventually, those components got out of the marketplace, there are companies that do formal tear-down reports and open these things up and they do a scoping of those and they make a report that explains what components are used, where they come from and that's how a lot of this information is sometimes derived.

In our case, I hope our customer will say some day, "Hey you guys have delivered on the promise and we're very happy with the relationship, and we're willing to share our name about our relationship."

That honestly, Ira, it's up to them.

Ira:  So even after you start shipping to their customers, there is no guarantee that you'll be able to release the name?

Jeff:  That's right. That's exactly right. Now, do I think that it could be found in a tear‑down report somewhere down the road? Wouldn't be surprising to me if that's one of the ways that it could be derived. Could be that they're willing to be more visible. Honestly, at this point, Ira, you know what I want for us? I want for us to have volumes of phones shipping with d2p, and I'll take that over their coming out with their name any day of the week. I think what we're all here for, hopefully, is, if you need a d2p, to become a broadly adopted technology in the mobile handset space. Whoever's using the product, it will be who it is.

Ira:  The next question I have, if you care to comment on, if you could give us when you anticipate being cash flow neutral.

Jeff:  As we said in our ‑ I guess it was our last conference call ‑ our target for that was three to five quarters from last quarter. So, that takes us up until the middle of next year. That's still the goal, that's still the target. I can tell you that we also are beginning to see quite a bit of interest in ParkerVision products and technology from other companies that we currently have relationships with. Some of those conversations are delving into the possibilities of us developing certain products for certain companies. How that plays a role ‑ because I'm trying to keep our operating infrastructure here constrained to what it currently is, it's a very tight little group doing a whole lot of work, of what we would normally have a bigger team doing ‑ we'll probably have some interesting balancing acts to deal with down the road.

I'm assuming that once we see revenue generation and the growth of that, the right decisions to balance all of that. But, that's been our goal, and it still remains our goal. Stay tuned.

Ira:  Thank you. Best luck in achieving your goals.

Jeff:  Thank you very much. Bob?

Bob:  Moving on now to Charles Bellows, with White Pine Capital.

[32:56]

Charles Bellows:  Yeah, Jeff. Explain to me, I'm looking at the cash, you've got $7+ millions, you're burning about $3.1, correct?

Jeff:  That's right.

Charles:  So, you're now just about through the third quarter. So, assuming you're burning at that same rate, we're down at $3.5 at the end of this quarter. Given your comments, you're talking about getting the product out and demonstrated really to the customer, hopefully by the end of August ‑ if I put dates around things. So, probably no real revenue generated until the fourth quarter; is that correct?

Jeff:  From that relationship, I think that's right, but we're hopeful that there's some ITT business that will come in before that.

Charles:  But, ITT seems to keep dragging and we don't see anything. So, tell me what you're going to do ‑ down at three million, with basically a quarter left, you've already had people taking stock and cutting expenses as much as you can. I assume, if you're still trying to hold things. What are you going to do? What do you have in place? How many banks are you talking to? I mean, you're running out of cash. And we've been here before.

Jeff:  Well, we have and I think that at this particular point, we've probably never been in a better position than we are today. And I think we'll never be in a better position, than we'll be in the next coming weeks and couple of months. And the reason for that is, I think when you have tangible product and you see orders from that product. And you've moved the company from being a "technology provider that is coming, it's going to be here soon, it's being developed" to a "here it is, this is what it does." There's tangible, physical, indisputable evidence of that. I think we're going to have a lot of opportunities for different financing methods and that's what I've been pursuing. And even some of the strategic investing opportunities I've been pursuing personally, as people are hearing where we are and they're able to see tangible evidence of that, there's just a different attitude toward wanting to be a partner in a company like this for certain kinds of strategic investors. So, I think right now, we stay heads down, get the product out.

Your comment on ITT... I have to tell you, ITT has actually brought some of their customers to our facility recently. We've had direct eyeball to eyeball meetings with them. And their customers have explained to us, "Hey, here's where we are in contracts. It's coming. It's going to be there. It's taking a little bit longer than we had hoped just due to logistic reasons of how some of these agencies work." But, I believe that will happen. And I think between those activities and the products coming out, we're going to have a lot of different ways to move this company forward financially.

Charles:  So just in... I don't want to put words, but I want to make sure I understand it. If in fact you start getting those orders in, do you have any costs associated with a ramp up in orders?

Jeff:  No. That's on our customer's nickel. Remember, they're a licensee. So, what we'll do...

Charles:  So you got nothing but you have if I recall correctly a 60 day delay or longer for the true up of your getting any revenue. Correct?

Jeff:  In terms of what?

Charles:  From your partners. Let's assume they start shipping, their first shipment goes to a customer September 1. You don't get any revenue on that for a period of time. Correct?

Jeff:  Well, it's actually a 45‑day true up. And there are some other things in our agreement that will send some capital up from cash to ParkerVision upon them hitting certain milestones. That will also occur, I believe, this year.

Charles:  So milestones by the fact of having it accepted?

Jeff:  Accepted and some production beginning.

Charles:  Production. OK. And also, could you define for me what you mean by a strategic partner? Is this further dilution?

Jeff:  It depends. These conversations are taking on different avenues. Some of it could be us developing something for somebody that happens to be paid for by that company. Others might be willing to loan the company some money in return for us doing certain things for their product line. I mean, there's a whole span of things, there's a whole range of things are getting discussed.

Charles:  OK. Thanks.

Jeff:  Thank you, sir.

Bob:  Just a final reminder. Star 1, please for any further questions. We'll go back to Phil Anderson with a follow‑up question.

[38:02]

Phil:  Jeff, I wanted to expand on the previous owner's question regarding when we get paid for work. Can you run through where we are with the undisclosed cellular customer now? Let's say they receive an order at the end of September, beginning of October, what is the drill from there? What is our contribution and when can we book delivery on that contribution? And when can we expect to receive cash from having delivered that contribution?

Jeff:  Phil, basically our contribution is helping them get in production. We've been working on getting the test programs, the manufacturing, all of that set up so that when they get orders they can turn that on as quickly as possible. Once they begin shipping, that's when it's counted as units that ParkerVision will get paid royalties on. There's a relatively small number of those. I don't want to go into the specific details of it. But, a small number of those builds and we do get a payment upfront, a royalty payment upfront. And there's a 45 day true up on what they ship for us to do an accounting of what they've shipped. So, I don't know if that helps you or not. Does that give you the visibility you're looking for?

Phil:  Yes. No, actually it does. With LG, so we're going to be delivering them this testing platform in the relatively near future. I just want to make sure I have my understanding correctly. They're then going to take that testing platform to their customers; I think you mentioned that you believe they have meetings set up already this month. So, there are people waiting for the product. It's not like LG is calling them up, "Hey, surprise, we have this great new phone based on ParkerVision." But, the customers are waiting for it. They've been told. They've seen the spec sheets. Can you talk just a bit about the sales cycle that you would expect through LG? And when our contribution would be shipped to LG? And again when we may be able to book revenue from that and be able to invoice and receive cash?

Jeff:  I think, Phil, that's a first half 2010 revenue event - and based on those events that you're asking about. So, LG is going to be showing these demos to some of their customers. They're going to be showing how that translates into the kind of production module they're developing. They've got a lot of credibility with these customers, so I think they'll get a lot of traction with those discussions. And our belief is it will happen that some of those customers will say, "OK. We're going to design this into certain handset products and we want to get into the cycle with you to have it designed specifically for a corporation's certain phone model." And I think by the time they get to those kinds of conversations, scope out the module, talk about any modifications that may want to be made to specific handset companies, applications, et cetera, we'll be asked to ship silicon for those modules some time, I think, in the first half of 2010. And that's when we'll see revenue from this relationship. Before then, it's primarily getting the designs wins together, starting now.

Phil:  And who actually is going to be producing the silicon for LG?

Jeff:  It's a combination of IBM and TSMC for us.

Phil:  OK. When LG secures a design win from one of their customers, is that an event that ParkerVision will be able to share with the shareholders?

Jeff:  Oh, I think so. I think that will definitely be a material event.

Phil:  OK. Good. Thanks very much, Jeff.

Jeff:  OK.

Bob:  Mr. Parker, we have no further questions. I'll turn the conference back to you for any closing comments.

Jeff:  Folks, look. I appreciate your tuning in today to listen to our Q2 update. I'm very anxious to bring you more news of the phone sampling in a little bit more detail and all of the specifics around that. And I appreciate your support. And as I said earlier in this dialogue, I believe this company has never been in a better position to move forward. And I think we just stay heads down and get the product out. And we will have a lot of different ways for this company to find its way to funding itself going forward. So, thank you so much for your support. And I look forward to our next update. Bye‑bye.

Bob:  [inaudible 42:21] our conference call. Thank you for joining us. Wish you all a great afternoon. Goodbye.

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