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Good day, ladies and gentlemen and welcome to the ParkerVision First Quarter 2018 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Following management's prepared remarks we will host a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded.
It is now my pleasure to hand the conference over to Jean Young, Investor Relations from The Piacente Group. Ma'am, you may begin.
Thank you, Brian. Good afternoon, everyone. Thank you all for joining us today. Before we begin, I’d like to remind you that this conference call will contain forward-looking statements, which involve known and unknown risks and uncertainties about our business and the economy as well as other factors that may cause our actual results to differ materially from expected achievements and anticipated results.
Included in these risks are the company’s ability to maintain technological advances in the marketplace, the ability to secure new customers for our products and technologies, maintaining our patent protection and the outcome of litigation, among others. Given these uncertainties, as well as other factors related to our business, we caution you not to place undue reliance on any forward-looking statements contained on this conference call. Additional information concerning these and other risks can be found in our periodic filings with the U.S. Securities and Exchange Commission.
On today’s call, we will hear from Cindy Poehlman, Chief Financial Officer, who will provide a review of the company’s financial results for the first quarter 2018. Following Cindy’s remarks, Jeffrey Parker, Chief Executive Officer, will provide an update on the company’s business.
Thank you again for joining us. And with that, I’d like to turn the call over to Cindy. Please go ahead.
Thank you, Jean and good afternoon to those of you joining us for ParkerVision’s first quarter 2018 conference call.
We reported a net loss of $4.3 million or $0.19 per share for the first quarter of 2018 compared to a net loss of $4.8 million or $0.32 per share for the first quarter of 2017. The decrease in our net loss is primarily the result of decreases in litigation expenses and engineering prototype costs partially offset by increases in operating costs related to our Milo product and an increase in the estimated fair value of our long-term secured contingent payment obligation payable to our litigation funding partner.
On a non-GAAP basis our adjusted net loss was $3.5 million or $0.15 per share for the first quarter of 2018 compared to $4.3 million or $0.29 per share for the first quarter of 2017. Our revenue remained modest in the first quarter of 2018 with a reported $77,000 in Milo net product revenue. Amazon continues to be the predominant sales channel for Milo sales to date. We anticipate meaningful increases in revenue as our marketing brand awareness and national television sales campaigns launch in the coming weeks which Jeff will speak more about in just a moment.
I am pleased to report that our gross margins as a percentage of revenue increased from 25% for the fourth quarter of last year to 31% for the first quarter of 2018 despite the relatively low unit volumes. Although our gross margin percentage may fluctuate period to period, depending on the sales channel, rebate programs offered and other factors, holistically we expect our margins to continue to improve year-over-year as unit volumes increase, product cost savings measures are implemented and production efficiencies improve.
We continue to work towards transactions to fortify our cash position. In April our litigation funder, Brickell Key Investments has funded an additional $1.5 million to support our continued efforts in both Germany and the United States. As we indicated during our last conference call, we continue to actively pursue longer term financing for our business operations and anticipate that this longer term financing will be in the form of a combination of debt and equity. In the interim we will use amounts available on our ATM and Aspire transactions as well as possibly entering into a short-term debt financing arrangement to fund our near-term operations.
I am available for questions at the end of today's call, but for now, I'll turn the call over to Jeff Parker for his business update.
Hey Cindy, thanks and good afternoon and thanks to those of you who have taken the time to join us on our Q1 conference call update. This comes only six weeks after our last update call, but I think the timing is good to provide some additional color on our progress.
I'll start with an update on our licensing program and the related patent enforcement actions. I'd also like to share some information with regard to my own recent experience and what I'm observing in the United States patent system and possibly new home for better days ahead. I'll then discuss our Milo Wi-Fi product and the latest sales and marketing update and then I'm going to conclude with an update on funding and the activities related to our capital needs.
So we remain optimistic that our litigation in Germany against Apple for their use of Intel chips in smart phones and tablets will have a positive outcome in the near future. As requested by the court, we filed supplemental briefs providing the court with additional detail on how Intel chips in the Apple products infringe ParkerVision's radiofrequency receiver technology in the certain patent.
We believe the supplemental brief is crystal-clear in its proof of infringement. Apple, in both their filed briefs and the court room hearing made a number of statements that we are in agreement with and that we believe fully support the infringement argument. Apple has since tried to take back some of those statements but that only resulted in the court observing that they made knowingly contradictory statements. We remain very optimistic that the court will find for infringement and issue an enforceable injunction.
On the challenge to this patent's validity, there is no prior art [ph] that has been shown that has already been contemplated by the German Patent Office that issued the patent or that isn’t antithetical to the claims invention. In other words, we believe their challenge to our patent which is also referred to as a null reaction, has no merit whatsoever and as a result we do not believe the Munich court will delay an injunction based on the pending nullity challenge.
In the United States we have a conversation in just a couple of days with the District Court in Jacksonville to discuss setting the date for our Markman hearing in that case. This case involves Qualcomm and Apple. Everything necessary to have a Markman hearing has been briefed by both parties answer so we are hopeful for a near term date so that we can get this case underway in earnest.
One last point I'd like to discuss is regarding the U.S. patent system. I attended a conference last week in Washington DC. My motivation to attend this particular conference was to hear first hand from some of the sponsors of the Stronger Patent Act, a Bill that's being proposed in both the Senate and the House by both Democrats and Republicans to bring back the United States patent system that actually protects innovators as they can be counted on by all innovators, but in particular is sensitive to the needs of small business.
Some of what the Bill proposes to bring back injunctions and to curtail what's been called by some of the most knowledge able judges the desk squads at the Patent Board that have been killing patents left and right in these IPR challenges. There is widespread and growing recognition in DC that our patent enforcement symptoms is so ineffective that we now encourage rampant infringement and some of the stories that were told at the conference only reinforced just how out of whack our patent systems here in the United States has gotten.
Consider the following statistics that are now undeniable indicators, that we have undermined our own innovation economy by unwinding protection for patent holders. According to the nonpartisan U.S. Commerce Department, we have now dropped in the world standing to a ranking of number 12 in patents behind Italy and Singapore. The number of startups that are less than one year old have dropped in half to 8% from 16% and the share of workers at these startup firms has dropped from 6% of our economy to 2%.
For the first time in recorded business memory the number of startups shuttering their doors is now greater than those that are being created, a really bad trend. Historically 38% of new patent grants went to the top 1% of patent holders indicating a healthy 62% went to a broader base of innovators. Today that number has now swelled to 53% of the patents now go to 1% of the holders, indicating small innovators are giving up on the patent systems.
A university law school professor tracked 1400 patents that were granted in China and the European Union. They covered inventions for ultrasound, diagnostics for cancer, breast cancer, prostate cancer, ovarian cancer, scanning thermostats, oil drilling equipment and other areas. Every one of these patents that was accepted in the EU and China was rejected by the U.S. Patent Office under the new rules ushered in by the latest court rulings and the last administration's America Invent Act which should be retitled, The Why Bother to Invent Act, yet these same inventions were found patentable elsewhere.
The anecdotal stories at this conference was equally alarming. Stories of even tier one R&D institutions giving up on investments, some directed life-saving inventions because the Patent Office has been busy killing off their patents as the judicial system fails to enforce their rights. Democratic Senator Cummins and Republican Congressman, Stivers are both sponsors of this act and they spoke at the conference.
I cannot get the words of Senator Cummins out of my head as he explained that earlier in his law career he was a General Counsel for a company that strong dependency patents to protect its inventions. He commented that there were years that had this company not been able to get timely injunctions and other relief against patent infringers the company would have gone out of business. Instead the company was able to weather the storms and continue to grow into a large prosperous multinational company. Senator Cummins gets it.
While the stories of what's happening to patent holders were depressing, I look at ParkerVision's own situation where we've been seeking justice for over seven years now. I came away with a strong feeling that the winds are finally shifting. Leaders in our legislative branch on both sides of the aisle recognize that we need to put the system back in place that infringers will have to respect patents or our nation will suffer serious economic consequences that we may never recover from.
ParkerVision has been holding on for this day. We have never given up the fight for our property rights. We must all lobby our Senators and Congressmen to support this Bill and I strongly encourage everybody to do this.
On to products, our Milo Wi-Fi product update. We're just a couple of weeks away from a national retailer's television debut of Milo. This retailer has the potential to move in a single airing more volume than we currently ship in a full quarter by quite a bit. This television sales debut is expected to occur within just a few days give or take of Milo's appearance on the Designing Spaces, home improvement show which airs on Lifetime T.V. Designing Spaces features Milo and a nice segment on the program which will air on May 31, and will be viewable in syndication throughout 150 U.S. stations and up to 0.5 million hotel rooms all throughout the United States.
We are focusing our precious sales and marketing dollars on those investments that we believe will take Milo to the kind of sales growth that will make it a sustainable and profitable business. Until now our marketing dollars have really been like throwing a pebble into an ocean. We get a little ripple and these have allowed us to get enough Milo units into the market to verify the product, tune up our customer service, provide verification for the next steps of product development, but certainly not enough to provide the kind of revenue growth that leads to a sustainable business.
We are now quickly moving towards throwing a boulder into a lake, where we believe we will see the kind of revenue growth that will create a sustainable business opportunity for Milo. The exposure from the national retailer, combined with the Designing Spaces segment is just the beginning. We are rapidly developing our own national T.V., radio, newspaper and PR campaign in partnership with a seasoned direct sales and marketing firm that has developed and launched numerous successful national campaigns over decades. This firm is also making an investment themselves in our program in return for a small share of the revenue generated.
We're targeting the launch of this campaign to occur within a few weeks following the national retailer's launch of Milo with our goal being to continue growing our sales momentum. This campaign is designed to provide Milo a sustainable ongoing revenue business from which we will continue to grow and develop next generation products and what we believe is a significant revenue growth opportunity. I'm also pleased to announce that we will be introducing a new addition to the Milo family in the coming days. The Milo single pack unit which will retail well below the $100 price point is expected to expand our reach to both smaller and larger homes.
The single pack on a standalone basis is targeted at those who want to add another thousand square feet of coverage to their current router and want a product that sets up quick, it's reliable, fills the void between low end boosters and repeaters that often don't work and entire home Wi-Fi systems which may be overkill for the coverage needed. In addition the single pack can be installed as an extension to an existing Milo, thus expanding the coverage area beyond our current Milo three-pack. The Milo single-pack is also cloud based, comes with an easy to use app. It's price point we believe will appeal to an even broader audience of Wi-Fi users and that makes it an excellent complement to the national campaigns that we are now rolling out shortly.
On the funding side, we certainly appreciate our litigation partner Brickell's continued commitment to our program and like Brickell we believe supporting these efforts will have been very worthwhile. We are also actively working on closing a debt funding which is designed to support the existing programs we just covered and which we believe will show results in the near future. We have also been in discussions on a larger funding transaction that in and of itself would provide significant liquidity to the company and further strengthen all of our existing business plans and operations over the longer term.
And so in conclusion, I believe we are on the doorstep of important milestones that can grow shareholder value in the near and longer term, the doorstep of turning on significant revenue growth for our Milo products and the doorstep of achieving a positive outcome from our patent infringement actions. And by the way, for those of you in the New York City area, I'd like to mention I'll be attending the Ladenburg 2018 Tech Expo Conference May 31, it's going to be at the Convene at 101 Park Avenue.
And so now, I'd like to open this call for your questions.
Thank you, Sir. [Operator Instructions] And our first question will come from a line of Jon Hickman with Ladenburg. Your line is now open.
Hi Jeff, how is it going? Can you hear me okay?
Good. Thank you. Yes, perfect.
So, couple of questions. So is Milo - if you didn't do any advertising with the national retailer or this marketing company, is there an upward trend to Milo all by itself?
Jon, there is a flat. There's a flat trend and the reason there is in the fourth quarter we spent some money, not a lot of money, got Milo launched then in the first quarter we continued to do some spend and once we determined that we were going to do this national program, we said look we'd rather shift those funds to something that's sustainable. We never believed that the launch campaign was anything other than just that, a launch.
But to get the kind of revenue out of Milo that we believe we can get, we've got to get exposure on a much bigger basis. So this national campaign that we're working on with a partner firm, I mean it includes thousands of commercials, it’s - these guys have done these kinds of campaigns before and it really gets the reach that we think you need, no matter how good the product is, if people don't know about it you're just lost in the blizzard of products out there.
So I like this very much because we're going to be able to tailor our commercials to what's the Milo advantage, why buy Milo, who is Milo, what is Milo? I think it gives us a real opportunity to make not just a significant sales and revenue increase, but to establish a brand from which we can build additional products that can come to market that are complimentary to the Milo product line itself.
So this is – sorry to interrupt you, but this is, so this is - in my comments I kind of analogized the difference between throwing a pebble in an ocean and a boulder in a lake. I really think we're going to be transitioning quickly to that boulder in the lake that will really make a difference.
Okay, so then if you could elaborate a little bit on the - so in Florida the District Court in two days you're going to meet with the parties are going to get together and the judge is going to set a date for the Markman hearing is that what you said?
That's right, it’s actually a telephone meeting, but the telephone meeting a date will be set for a Markman and there's a few others have keeping details there may be a tech tutorial that will come with the hearing. The judge may have some questions from the parties what's the best way to resolve certain questions that he has, but the primary reason is to set the Markman date, yes.
So, and this is at Qualcomm and Apple right?
Correct.
And then LG is in a different location, right?
Yes, because of a recent reason Supreme Court ruling we moved the LG case to New Jersey, that's right.
Well and Jon the LG case, I don't know if you're saying this,. This is Cindy. The LG case, either they've agreed LG has agreed to abide by the results of the Markman in this Jacksonville case as well as Qualcomm and Apple. So there's really no current activity going on in that case, it's kind of waiting behind the Jacksonville case.
So whatever the Florida judge comes up with that will be the Markman, that will be the definition of the terms for the LG New Jersey thing too?
Exactly, yes.
Okay, thank you. That's it from me.
Okay, thank you.
Thank you, ladies and gentlemen this concludes our question-and-answer session for today. So now it will be my pleasure to hand the conference back over to Jeffrey Parker, Chief Executive Officer for some closing comments or remarks.
Well, folks look it was a short six weeks ago we had our last call, so I appreciate everybody who's attended the call today are listening in and I'm looking forward to attending Ladenburg's conference here in a short couple weeks and to also putting out updates when you can see us on TV which is coming up in just a few weeks from now, so hope you have a great week this week and thanks again. Bye-bye.
Ladies and gentleman, thank you for your participation on today’s conference. This does conclude our program and you may all disconnect. Everybody have a wonderful day.