ParkerVision, Inc.
PARKERVISION INC (Form: 10-Q, Received: 08/15/2016 16:23:55)
  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
 
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

 
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to____________

Commission file number 000-22904

PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
 
Florida
 
59-2971472
(State or other jurisdiction of
 
(I.R.S. Employer Identification No)
incorporation or organization)
   

7915 Baymeadows Way, Suite 400
 Jacksonville, Florida 32256
(Address of principal executive offices)

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

N/A
(Former name, former address and former fiscal year, if changed since last report)

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 of 1934 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 file).  Yes  [X]    No  [  ] .

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 Exchange Act.  (Check one):
 
Large accelerated filer  [  ]
 
Accelerated filer  [  ]
Non-accelerated filer  [  ] (Do not check if a smaller reporting company)
 
Smaller reporting company  [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  [  ]    No  [X]

As of August 8, 2016 12,812,428 shares of the issuer’s common stock, $.01 par value, were outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
3
Item 1.    Condensed Consolidated Financial Statements (Unaudited)
3
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 17
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
 23
Item 4.    Controls and Procedures
 23
PART II - OTHER INFORMATION
24
Item 1.    Legal Proceedings
 24
Item 1A. Risk Factors
 24
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
 24
Item 3.    Defaults Upon Senior Securities
 24
Item 4.    Mine Safety Disclosures
 24
Item 5.    Other Information
 24
Item 6.    Exhibits
 25
SIGNATURES
 26
EXHIBIT INDEX
27
2

PART I - FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements
PARKERVISION, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
   
June 30, 2016
   
December 31, 2015
 
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
1,541,208
   
$
175,401
 
Restricted cash and cash equivalents
   
5,096,806
     
-
 
Available-for-sale securities
   
203,141
     
1,789,947
 
Accounts receivable, net of allowance for doubtful accounts of $4,437 and $0 at June 30, 2016 and December 31, 2015, respectively
   
4,275
     
4,119
 
Inventories
   
170,139
     
160,776
 
Prepaid expenses and other
   
630,571
     
222,370
 
Total current assets
   
7,646,140
     
2,352,613
 
                 
PROPERTY AND EQUIPMENT, net
   
347,829
     
445,543
 
                 
INTANGIBLE ASSETS, net
   
7,115,441
     
7,574,933
 
Total assets
 
$
15,109,410
   
$
10,373,089
 
                 
CURRENT LIABILITIES:
               
Accounts payable
 
$
2,428,330
   
$
2,318,671
 
Accrued expenses:
               
Salaries and wages
   
286,978
     
290,169
 
Professional fees
   
1,910,602
     
1,115,140
 
Other accrued expenses
   
140,373
     
218,962
 
Deferred rent, current portion
   
72,867
     
73,899
 
Deferred revenue
   
19,568
     
20,981
 
Total current liabilities
   
4,858,718
     
4,037,822
 
                 
LONG-TERM LIABILITIES:
               
Capital lease, net of current portion
   
-
     
285
 
Deferred rent, net of current portion
   
16,622
     
52,197
 
Long-term note payable, related party
   
825,000
     
-
 
Secured contingent payment obligation
   
14,971,768
     
-
 
Total long-term liabilities
   
15,813,390
     
52,482
 
Total liabilities
   
20,672,108
     
4,090,304
 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS' EQUITY:
               
Common stock, $.01 par value, 15,000,000 shares authorized, 11,671,519 and 11,015,180 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively*
   
116,715
     
110,152
 
Accumulated other comprehensive income (loss)
   
211
     
(53
)
Warrants outstanding
   
1,634,930
     
1,300,000
 
Additional paid-in capital*
   
336,844,283
     
335,527,356
 
Accumulated deficit
   
(344,158,837
)
   
(330,654,670
)
Total shareholders' (deficit) equity
   
(5,562,698
)
   
6,282,785
 
Total liabilities and shareholders' (deficit) equity
 
$
15,109,410
   
$
10,373,089
 
                 
 
*
Adjusted to reflect the impact of the 1:10 reverse stock split that became effective on March 30, 2016.
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3

PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Revenue
 
$
4,675
   
$
-
   
$
64,095
   
$
-
 
Cost of sales
   
(3,206
)
   
-
     
(41,037
)
   
-
 
Gross margin
   
1,469
     
-
     
23,058
     
-
 
                                 
Research and development expenses
   
1,057,968
     
1,694,357
     
2,010,224
     
3,451,791
 
Selling, general and administrative expenses
   
5,019,046
     
3,140,019
     
9,189,074
     
7,169,630
 
Total operating expenses
   
6,077,014
     
4,834,376
     
11,199,298
     
10,621,421
 
                                 
Interest income
   
5,934
     
1,265
     
10,981
     
13,367
 
Interest expense
   
(16,520
)
   
(9,283
)
   
(34,876
)
   
(10,322
)
Other income
   
2,666
     
-
     
2,666
     
-
 
Loss on changes in fair value
   
(2,284,029
)
   
-
     
(2,306,698
)
   
-
 
Total interest and other
   
(2,291,949
)
   
(8,018
)
   
(2,327,927
)
   
3,045
 
                                 
Net loss
   
(8,367,494
)
   
(4,842,394
)
   
(13,504,167
)
   
(10,618,376
)
                                 
Other comprehensive income (loss), net of tax:
                               
Unrealized gain (loss) on available-for-sale securities
   
925
     
(11,708
)
   
264
     
(11,708
)
Other comprehensive income (loss), net of tax
   
925
     
(11,708
)
   
264
     
(11,708
)
                                 
Comprehensive loss
 
$
(8,366,569
)
 
$
(4,854,102
)
 
$
(13,503,903
)
 
$
(10,630,084
)
                                 
Basic and diluted net loss per common share*
 
$
(0.72
)
 
$
(0.50
)
 
$
(1.17
)
 
$
(1.09
)
                                 
Weighted average common shares outstanding*
   
11,645,040
     
9,764,531
     
11,495,040
     
9,754,331
 
                                 

*
Adjusted to reflect the impact of the 1:10 reverse stock split that became effective on March 30, 2016.
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                       
Net loss
 
$
(8,367,494
)
 
$
(4,842,394
)
 
$
(13,504,167
)
 
$
(10,618,376
)
Adjustments to reconcile net loss to net cash used in operating activities:
                               
Depreciation and amortization
   
326,729
     
343,770
     
654,354
     
686,701
 
Share-based compensation
   
29,416
     
367,602
     
64,745
     
887,260
 
Loss (gain) on disposal of assets
   
705
     
(3,200
)
   
705
     
(3,200
)
Realized loss (gain) on available-for-sale securities
   
-
     
7,060
     
(1,354
)
   
7,060
 
Loss on changes in fair value
   
2,284,029
     
-
     
2,306,698
     
-
 
Changes in operating assets and liabilities:
                               
Accounts receivable, net
   
14,885
     
(20,400
)
   
(156
)
   
(20,400
)
Inventories
   
322
     
(27,410
)
   
322
     
(57,035
)
Prepaid expenses and other assets
   
22,575
     
399,459
     
(98,201
)
   
469,155
 
Accounts payable and accrued expenses
   
2,744,141
     
(47,793
)
   
1,699,076
     
740,245
 
Deferred rent
   
(18,304
)
   
(13,909
)
   
(36,607
)
   
(27,816
)
Deferred revenue
   
(400
)
   
20,000
     
(1,413
)
   
20,000
 
Total adjustments
   
5,404,098
     
1,025,179
     
4,588,169
     
2,701,970
 
Net cash used in operating activities
   
(2,963,396
)
   
(3,817,215
)
   
(8,915,998
)
   
(7,916,406
)
                                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
Purchase of available-for-sale investments
   
(300,445
)
   
(8,325
)
   
(2,001,576
)
   
(945,422
)
Proceeds from sale of investments
   
785,000
     
3,690,000
     
3,590,000
     
8,155,000
 
Proceeds from sale of assets
   
-
     
3,200
     
-
     
3,200
 
Payments for patent costs
   
(62,633
)
   
(302,884
)
   
(105,850
)
   
(466,357
)
Purchases of property and equipment
   
-
     
(10,429
)
   
(1,687
)
   
(47,623
)
Increase in restricted cash and cash equivalents
   
(1,000,000
)
   
-
     
(11,000,000
)
   
-
 
Decrease in restricted cash and cash equivalents
   
2,747,054
     
-
     
5,903,194
     
-
 
Net cash provided by (used in) investing activities
   
2,168,976
     
3,371,562
     
(3,615,919
)
   
6,698,798
 
                                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Net proceeds from issuance of common stock and warrants in public and private offerings
   
(39,762
)
   
-
     
948,744
     
1,298,000
 
Shares withheld for payment of taxes
   
-
     
(16,995
)
   
-
     
(16,995
)
Principal payments on capital lease obligation
   
(414
)
   
(43,177
)
   
(51,020
)
   
(58,479
)
Proceeds from long-term debt financing
   
2,000,000
     
-
     
13,000,000
     
-
 
Net cash provided by (used in) financing activities
   
1,959,824
     
(60,172
)
   
13,897,724
     
1,222,526
 
                                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
1,165,404
     
(505,825
)
   
1,365,807
     
4,918
 
CASH AND CASH EQUIVALENTS, beginning of period
   
375,804
     
729,668
     
175,401
     
218,925
 
CASH AND CASH EQUIVALENTS, end of period
 
$
1,541,208
   
$
223,843
   
$
1,541,208
   
$
223,843
 
                                 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

PARKERVISION, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.  Description of Business

ParkerVision (“we”or the “Company”) is 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.  In addition, we offer engineering consulting and design services, for a negotiated fee, to assist customers in developing prototypes and/or products incorporating wireless technologies.

We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.
 
2.  Liquidity and Going Concern

Our consolidated financial statements 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.

In January 2016, we sold unregistered common stock in a private placement transaction for approximately $1 million (see Note 10).   In addition, in the first half of 2016, we received an aggregate of $13 million in funding from a litigation funding party, Brickell Key Investments (“BKI”).  Of the funding received, $2 million was for general working capital purposes and the remaining $11 million was restricted for payment of legal fees and expenses in connection with our proceedings at the International Trade Commission (“ITC”) and related patent actions, including an international patent infringement action filed in June 2016 (see Note 8).  Our fee arrangements with regard to the ITC and related proceedings provide for fee caps such that our legal fees and expenses to prosecute these actions are not expected to exceed the restricted funds received.

At June 30, 2016, we had cash, cash equivalents, and available-for-sale securities of approximately $1.7 million and restricted cash and cash equivalents of approximately $5.1 million.  In July 2016, we received approximately $3.0 million in gross proceeds from the sale of common stock in a private placement transaction. We used approximately $8.9 million of cash for operations during the six months ended June 30, 2016, of which approximately $5.9 million was funded from restricted cash and cash equivalents for our ITC and related proceedings.  Our unrestricted capital resources at June 30, 2016, along with the additional funds received from the sale of equity securities in July 2016, may not be sufficient to support our working capital requirements for the next twelve months. This raises substantial doubt about our ability to continue as a going concern.

6

Our ability to meet our operating costs for 2016 and beyond is dependent upon our ability to (i) successfully negotiate licensing agreements and/or settlements for the use of our technologies by others and/or (ii) our ability to develop, market and sell existing and new products.  In July 2016, we entered into a patent license and settlement agreement with Samsung Electronics Co., Ltd and its affiliates (“Samsung”).  Funds to be received from Samsung under this agreement will be designated for repayment of our secured contingent payment obligation.  We expect that revenue generated from patent enforcement actions, technology licenses and/or the sale of products in 2016 may not be sufficient to cover our operating expenses and our secured contingent repayment obligations.  Revenues generated from patent-related activities will be used first to satisfy our secured contingent payment obligations.  Thereafter, any remaining revenues from patent-related activities will be subject to prorated contingent payments to third-parties, including legal counsel.

We expect to continue to invest in patent prosecution and enforcement, product development, and sales, marketing, and customer support for our technologies and products.   The long-term continuation of our business plan is dependent upon the generation of sufficient revenues from our technologies and/or products to offset expenses and contingent payment obligations.  In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private debt or equity financing or contingent fee arrangements and/or reduce operating costs.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs will have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.
 
3.  Basis of Presentation

The accompanying unaudited consolidated financial statements for the period ended June 30, 2016 were prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or future years.  Certain reclassifications have been made to prior period amounts to conform to the current period presentation.  All prior period references in these unaudited consolidated financial statements to number of shares, price per share and weighted average shares of common stock have been adjusted on a retroactive basis to reflect the one-for-ten reverse stock split that went into effect on March 30, 2016.  All normal and recurring adjustments which, in the opinion of management, are necessary for a fair statement of the financial condition and results of operations have been included.

The year-end consolidated balance sheet data was derived from audited financial statements for the year ended December 31, 2015, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  These interim consolidated financial statements should be read in conjunction with our latest Annual Report on Form 10-K for the year ended December 31, 2015.

The consolidated financial statements include the accounts of ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH (collectively, “ParkerVision”) after elimination of all significant intercompany transactions and accounts.
7

4.  Accounting Policies

There have been no changes in accounting policies from those stated in our Annual Report on Form 10-K for the year ended December 31, 2015, except as follows:

Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents represent cash on hand and money market investments that are restricted for specific use in payment of legal fees and expenses related to certain of our patent infringement actions.  The restricted money market investments generally have original maturities of three months or less when purchased and are recorded at fair value.  We have determined that the fair value of our restricted money market investments fall within Level 1 in the fair value hierarchy (see Note 11).

Secured Contingent Payment Obligation
We have accounted for our secured contingent repayment obligation as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions.   We have elected to measure our secured contingent payment obligation at its fair value in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured contingent payment obligation falls within Level 3 in the fair value hierarchy which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 11).  Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, is included in the accompanying consolidated statements of comprehensive loss under the heading “Loss on changes in fair value”.

Accounting for Share-Based Compensation
In April 2016, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09,   “Improvements to Employee Share-Based Payment Accounting.”  ASU 2016-09 simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations.  We have elected to account for forfeitures of share-based equity awards as they occur.  The adoption of ASU 2016-09 had no impact on our consolidated financial statements except for the reclassification of the value of shares withheld for payment of taxes in our accompanying consolidated statements of cash flows.

Recent Accounting Pronouncements
In April 2016, we early adopted, on a retrospective basis, FASB ASU 2015-17 “Income Taxes: Balance Sheet Classification of Deferred Taxes (Topic 740)”, issued in November 2015.   ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that all deferred tax liabilities and assets be classified as noncurrent in the consolidated balance sheet.  Given the existence of a full valuation allowance for all periods presented, the adoption of ASU 2015-17 had no effect on our current or prior period consolidated financial statements.

In April 2016, we early adopted FASB ASU 2015-11, “Simplifying the Measurement of Inventory (Topic 330)” issued in July 2015.  ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out method by prescribing inventory be valued at the lower of cost and net realizable value. The adoption of ASU 2015-11 had no impact on our financial position, results of operations or cash flows.

8

In February 2016, the FASB issued ASU 2016-02 “Leases,” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.    Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months.  ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018.  Early adoption is permitted.  We are currently assessing the impact of this update on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15 “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,”  to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures.  ASU 2014-15 is effective for interim and annual periods beginning after December 15, 2016.  Early adoption is permitted.  We are currently assessing the impact of this update on future discussions of our liquidity position in our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09,   “Revenue from Contracts with Customers.”  ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue.  This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized.    ASU 2015-14, “Revenue from Contracts with Customers (Topic 606)”, issued in August 2015, defers adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017.  Early adoption is not permitted.  We do not expect the adoption of ASU 2014-09 to have a material effect on our consolidated financial statements.   

5.  Loss per Common Share

Basic loss per common share is determined based on the weighted-average number of common shares outstanding during each period.  Diluted loss per common share is the same as basic loss per common share as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive.

Options and warrants to purchase 1,525,485 and 1,322,433 shares of common stock were outstanding at June 30, 2016 and 2015, respectively.  In addition, unvested restricted stock units (“RSUs”), representing 0 and 188,564 shares of common stock, were outstanding at June 30, 2016 and 2015, respectively.   These options, warrants and RSUs were excluded from the computation of diluted loss per common share as their effect would have been anti-dilutive.  

6.  Inventories

Inventories consist of the following:
 
   
June 30, 2016
   
December 31, 2015
 
Work-in-process
 
$
126,730
   
$
117,045
 
Finished goods
   
43,409
     
43,731
 
Total inventories
 
$
170,139
   
$
160,776
 
                 
 
9

7.  Intangible Assets

Intangible assets consist of the following:
 
   
June 30, 2016
 
   
Gross Carrying Amount
   
Accumulated Amortization
   
Net Book Value
 
Patents and copyrights
 
$
20,415,480
   
$
13,300,039
   
$
7,115,441
 
Prepaid licensing fees
   
574,000
     
574,000
     
-
 
   
$
20,989,480
   
$
13,874,039
   
$
7,115,441
 
                         
  
   
December 31, 2015
 
   
Gross Carrying Amount
   
Accumulated Amortization
   
Net Book Value
 
Patents and copyrights
 
$
20,309,630
   
$
12,734,697
   
$
7,574,933
 
Prepaid licensing fees
   
574,000
     
574,000
     
-
 
   
$
20,883,630
   
$
13,308,697
   
$
7,574,933
 
                         
 
8.  Long-Term Debt

Note Payable to a Related Party

At June 30, 2016, we had an unsecured promissory note payable to a related party for unpaid legal fees of  $825,000.   Interest on the note is payable monthly on the outstanding principal balance at a rate of 8% per annum.  The note matures on December 31, 2017 and early prepayment of all or any portion of the principal balance is allowed without penalty.  As of June 30, 2016, the estimated fair value of our note payable is approximately $716,000 based on a risk-adjusted discount rate.

Failure to comply with the payment terms of this note constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable.   As of June 30, 2016, we are in compliance with the payment terms of the note.

Secured Contingent Payment Obligation

On February 25, 2016, we entered into a litigation funding arrangement with BKI, a special purpose fund under the management of Juridica Asset Management Limited.  Under the agreement, we received aggregate proceeds of $11 million in exchange for BKI’s right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions.  In connection with the agreement, we issued BKI a warrant to purchase up to 250,000 shares of our common stock at an exercise price of $3.50 per share valued at its estimated fair market value of $155,625 using a discounted Black-Scholes model.

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In May 2016, we received additional proceeds of $2 million from BKI.  In connection with the additional proceeds, we exchanged the original warrant for a new warrant to purchase up to 350,000 shares of our common stock at an exercise price of $2.00 per share.  We estimated the incremental fair value of the new warrant of $179,305 using a discounted Black-Scholes model.  The aggregate fair value of the BKI warrant is $334,930 and is included in shareholders’ equity in the accompanying consolidated balance sheet at June 30, 2016.

Under the agreements, $11 million of the aggregate proceeds are restricted for use in payment of our legal fees and expenses in connection with the legal proceedings filed at the ITC in December 2015 and legal proceedings filed in Germany in June 2016 (the “Funded Actions”).  These proceeds, net of funds used to pay allowable expenses or funds paid on retainer, are recorded as restricted cash and cash equivalents on our accompanying consolidated balance sheet at June 30, 2016.

BKI is entitled to priority payment of 100% of proceeds received from all patent-related actions until such time that BKI has been repaid in full.  After repayment of the funded amount, BKI is entitled to a portion of remaining proceeds up to a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment.  In addition, BKI is entitled to a pro rata portion of proceeds solely from the Funded Actions to the extent aggregate proceeds from the Funded Actions exceed the specified minimum return.

We granted BKI a senior security interest in our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds directly related to Funded Actions.  The security interest is enforceable by BKI in the event that we are in default under the agreement which would occur if (i) we fail, after notice, to pay proceeds to BKI, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without BKI’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement.   As of June 30, 2016, we are in compliance with our obligations under this agreement.

We have elected to measure our secured contingent payment obligation at fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods.  The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive loss until the contingency is resolved.  As of June 30, 2016, the fair value of the obligation is estimated to be $14,971,768 (see Note 11).
 
9.  Share-Based Compensation

There has been no material change in the assumptions used to compute the fair value of our equity awards, nor in the method used to account for share-based compensation from those stated in our Annual Report on Form 10-K for the year ended December 31, 2015, except for the adoption of ASU 2016-09 as discussed in Note 4.
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The following table presents share-based compensation expense included in our consolidated statements of comprehensive loss for the three and six months ended June 30, 2016 and 2015, respectively:

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Research and development expenses
 
$
24,725
   
$
7,014
   
$
51,205
   
$
122,258
 
Selling, general and administrative expenses
   
4,691
     
360,588
     
13,540
     
765,002
 
Total share-based expense
 
$
29,416
   
$
367,602
   
$
64,745
   
$
887,260
 
                                 

As of June 30, 2016, we had approximately $118,000 in unrecognized compensation cost related to unvested share-based compensation awards.  This cost is expected to be recognized over a weighted average period of approximately two years.
 
10.  Stock Authorization and Issuance

On January 25, 2016, we sold 454,546 shares of our common stock at a price of $2.20 per share to an accredited investor in a private placement transaction generating gross proceeds of approximately $1,000,000.  We have no registration obligations with respect to these shares.

On February 25, 2016, we issued a warrant to BKI for the purchase of up to 250,000 shares of our common stock in conjunction with their financing arrangement with us (see Note 8).  The warrant had an exercise price of $3.50 per share, was exercisable for five years from the date of issuance, and had piggy-back registration rights of the underlying warrant shares.  On May 27, 2016, in connection with an additional financing arrangement with BKI (see Note 8), the warrant was exchanged for a new warrant for the purchase of up to 350,000 shares of our common stock at an exercise price of $2.00 per share.  The new warrant is exercisable for five years from the date of issuance and has piggy-back registration rights of the underlying warrant shares.  The shares underlying the warrants were registered on a registration statement that was declared effective on August 2, 2016 (File No. 333-212670).

On March 29, 2016, we effected a one-for-ten reverse stock split of our common stock, and our common stock began trading on the NASDAQ capital market on a post-split basis at the open of business on March 30, 2016. As a result of the reverse stock split, every ten shares of our common stock was combined into one share of our common stock.  No fractional shares of our common stock were issued in connection with the reverse stock split.  Any fractional shares created as a result of the reverse stock split were rounded up to the next largest whole number.  The par value and other terms of our common stock were not affected by the reverse stock split.  However, the number of shares of common stock that we are authorized to issue was proportionately reduced from 150,000,000 shares to 15,000,000.
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11. Fair Value Measurements

ASC 820, “Fair Value Measures” establishes a fair value hierarchy based on three levels of inputs:

·
Level 1:  Quoted prices for identical assets or liabilities in active markets which we can access
·
Level 2:  Observable inputs other than those described in Level 1
·
Level 3:  Unobservable inputs

We determine the fair value of our available-for-sale securities and restricted cash equivalents using a market approach based on quoted prices in active markets (Level 1 inputs).  We measure our secured contingent payment obligation at its estimated fair value using an income approach based on the estimated present value of projected future cash outflows (Level 3 inputs).  Increases or decreases in the unobservable Level 3 inputs would result in higher or lower fair value measurement.

The following tables summarize the fair value of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:

         
Fair Value Measurements
 
   
Total Fair Value
   
Quoted Prices in Active Markets (Level 1)
   
Significant Other Observable Inputs (Level 2)
   
Significant Unobservable Inputs (Level 3)
 
June 30, 2016:
                       
Assets:
                       
Money market funds
 
$
1,011,305
   
$
1,011,305
   
$
-
   
$
-
 
Available-for-sale securities
   
203,141
     
203,141
     
-
     
-
 
Restricted cash equivalents
   
5,096,806
     
5,096,806
     
-
     
-
 
Liabilities:
                               
Secured contingent payment obligation
   
14,971,768
     
-
     
-
     
14,971,768
 
                                 
 
         
Fair Value Measurements
 
   
Total Fair Value
   
Quoted Prices in Active Markets (Level 1)
   
Significant Other Observable Inputs (Level 2)
   
Significant Unobservable Inputs (Level 3)
 
December 31, 2015:
                       
Assets:
                       
Available-for-sale securities
 
$
1,789,947
   
$
1,789,947
   
$
-
   
$
-
 
                                 

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Changes in the fair value of our Level 3 secured contingent payment obligation for the six months ended June 30, 2016 were as follows :
 
   
Secured Contingent Payment Obligation
 
Balance at December 31, 2015
 
$
-
 
Issuance of contingent payment obligation 1
   
12,665,070
 
Fair value adjustment
   
2,306,698
 
Balance at June 30, 2016
 
$
14,971,768
 
         

1- Recorded net of $334,930 fair value assigned to the warrants issued in connection with the transaction (see Note 8). 

12.  Commitments and Contingencies

Legal Proceedings

From time to time, we are subject to legal proceedings and claims which arise in the ordinary course of our business.  These proceedings include patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”) in an attempt to invalidate certain of our patent claims.   These patent-related proceedings are more fully described below.   Although there is at least a reasonable possibility of an unfavorable outcome in any one or more of these matters, we believe that any such outcome is not expected to have a material adverse impact on our financial position, results of operation or liquidity.

ParkerVision vs. Qualcomm, Inc.
On July 20, 2011, we filed a patent infringement action in the United States District Court of the Middle District of Florida (the “Middle District of Florida”) against Qualcomm Incorporated (“Qualcomm”) seeking damages and injunctive relief for infringement of several of our patents related to radio-frequency receivers and the down-conversion of electromagnetic signals.  Qualcomm filed a counterclaim against us alleging invalidity and unenforceability of each of our patents.  In October 2013, a jury found that all of Qualcomm’s accused products directly and indirectly infringed all eleven claims of the four patents asserted by us and awarded us $172.7 million in damages.  The jury also found that Qualcomm did not prove its claims of invalidity for any of the eleven claims of the four patents in the case, and furthermore found that we did not prove our claims of willfulness, which would have allowed enhancement of the jury-awarded damages.  On June 20, 2014, a final district court ruling was issued in which the court overturned the jury’s verdict of infringement thus nullifying the damages award.  We appealed this decision to the U.S. Court of Appeals for the Federal Circuit (“CAFC”) and  Qualcomm filed a counter-appeal on the issues of validity and damages.  On July 31, 2015, the appellate court upheld the district court’s determination of non-infringement and overturned the district court’s decision on validity, ruling that ten of the eleven patent claims in the case were invalid.  On October 2, 2015, the CAFC denied our petition for a rehearing with respect to infringement of the one claim that was not invalidated by the CAFC.  On February 29, 2016, we filed a petition with the Supreme Court of the United States (“Supreme Court”) in this matter.  On March 28, 2016, the Supreme Court denied our petition requesting a review of the appellate court’s decision.  We have no further appeals available to us in this action.
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ParkerVision vs. Qualcomm, HTC, and Samsung
On May 1, 2014, we filed a complaint in the Middle District of Florida against Qualcomm, Qualcomm Atheros, Inc., and HTC (HTC Corporation and HTC America, Inc) (the “Qualcomm Action”) seeking unspecified damages and injunctive relief for infringement of seven of our patents related to RF up-conversion, systems for control of multi-mode, multi-band communications, baseband innovations including control and system calibration, and wireless protocol conversion. On August 21, 2014, we amended our complaint adding Samsung as a defendant.  We also added infringement claims of four additional patents to this case.  On November 17, 2014, certain of the defendants filed counterclaims of non-infringement and invalidity for all patents in the case.  A claim construction hearing was held on August 12, 2015 but no ruling on claim construction has been issued by the court.   In January 2016, the court granted the parties’ joint motion to dismiss claims and counterclaims related to six patents in the case in order to narrow the scope of the litigation.  In February 2016, the court granted the parties’ joint motion to stay these proceedings until resolution of the proceedings at the ITC as discussed below.  In July 2016, we entered into a confidential patent license and settlement agreement with Samsung and, as a result, the court granted our motion to remove Samsung from these proceedings.

Qualcomm Inc. and Qualcomm Atheros, Inc. vs. ParkerVision
On August 27, 2015, Qualcomm, Inc. and Qualcomm Atheros, Inc. filed an aggregate of ten petitions for Inter partes review (“IPR”) with the PTAB seeking to invalidate certain claims related to three of the eleven patents originally asserted in our Qualcomm Action.  We filed preliminary responses to these petitions in December 2015. In March 2016, the PTAB issued decisions denying institution of trial for three of the petitions, all of which relate to our U.S. patent 7,039,372 (“the ‘372 Patent”) and instituting trial for the remaining petitions, all of which relate to our U.S. patent 6,091,940 (the ‘940 Patent”) and U.S. patent 7,966,012 (“the ‘012 Patent”).   The ‘372 Patent and the ‘940 Patent are among the patents asserted in the Qualcomm Action.  On May 2, 2016, we entered a motion disclaiming the challenged claims of the ‘012 Patent and, on May 5, 2016, the PTAB granted our motion and entered an adverse judgment against us with respect to those claims. Our responses to the remaining petitions that were instituted for trial were filed in May 2016 and replies from Qualcomm are due on September 13, 2016.

ParkerVision v. Apple, LG, Samsung and Qualcomm
On December 15, 2015, we filed a complaint with the United States ITC against Apple, Inc., LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics MobileComm U.S.A., Inc., (collectively, “LG”), Samsung and Qualcomm alleging that these companies have engaged in unfair trade practices by unlawfully importing into the U.S. and selling various products that infringe certain of our patents.  We also requested that the ITC bar the defendants from continuing to import and sell infringing products in the U.S.  We filed a corresponding patent infringement complaint in the Middle District of Florida against these same defendants alleging infringement of the same patents.   In January 2016, the ITC instituted an investigation based on our complaint. In February 2016, the district court proceedings were stayed pending resolution of the proceedings at the ITC.  In July 2016, we entered into a confidential patent license and settlement agreement with Samsung and, as a result, Samsung has been removed from both the ITC and related district court action.   The ITC hearing with regard to the remaining defendants was originally scheduled for August 2016, but has been temporarily stayed by the administrative law judge in the case for medical reasons.

ParkerVision v. LG
In June 2016, we filed a complaint in Munich Regional Court against LG Electronics Deutschland GmbH, a German subsidiary of LG Electronics, Inc. alleging infringement of one of our German patents. A hearing in this case is scheduled for November 2016.
15

13.  Subsequent Events

In July 2016, we sold 1,090,909 shares of our common stock at a price of $2.75 per share to an accredited investor in a private placement transaction generating gross proceeds of approximately $3,000,000.  We filed a registration statement on July 25, 2016 to register the resale of the common stock and the registration statement was declared effective on August 2, 2016 (File No. 333-212670).

In July 2016, we also exchanged warrants issued in 2015 to 1624 PV, LLC (“1624”) for a new warrant.  We exchanged three common stock purchase warrants, each entitling 1624 to acquire up to 188,406 shares of our common stock at exercise prices of $15, $25 and $35, respectively for a new warrant entitling 1624 to acquire up to 200,000 shares of our common stock at an exercise price of $3.25 per share with an expiration date of June 16, 2018.  All other terms of the warrant remained unchanged. As a result of this warrant exchange, the number of shares of our common stock subject to warrants decreased by 365,218 shares. As part of the exchange, we agreed to file a post-effective amendment to the previously filed S-3 registration statement (File No. 333-202802) covering the resale of the shares issuable upon exercise of the warrants.  This post-effective amendment was declared effective on August 3, 2016 .

On July 15, 2016, we entered into a patent license and settlement agreement with Samsung.  Under the terms of the agreement, we granted Samsung a perpetual, worldwide license to our current patent portfolio, subject to certain exclusions.   We also agreed to terminate Samsung from the ITC investigation and to dismiss our claims against Samsung in two district court cases (Note 12).   The parties agreed not to disclose the specific financial terms of the agreement.

16

ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public.  This quarterly 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 contained in this Item.  When used in this quarterly report and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “expects”, “will likely result”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify “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 identified in our annual report on Form 10-K for the fiscal year ended December 31, 2015 (the “Annual Report”) and in this Item 2 of Part I of this quarterly report.  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 our intellectual property 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.

Corporate Website

We webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Additionally, we announce investor information, including news and commentary about our business, financial performance and related matters, SEC filings, notices of investor events, and our press and earnings releases, in the investor relations section of our website ( http://ir.parkervision.com ). Investors and others can receive notifications of new information posted in the investor relations section in real time by signing up for email alerts and/or RSS feeds. Further corporate governance information, including our governance guidelines, board committee charters, and code of conduct, is also available in the investor relations section of our website under the heading “Corporate Governance.” The content of our website is not incorporated by reference into this quarterly report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.

Overview

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 have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.
17

We have a three-part growth strategy that includes product and component sales and design services, intellectual property licensing and/or product ventures, and intellectual property enforcement.  We have made significant investments in developing and protecting our technologies and products, the returns on which are dependent upon the generation of future revenues from product sales and/or licensing for realization.

Recent Events

Patent License and Settlement Agreement with Samsung
On July 15, 2016, we entered into a patent license and settlement agreement with Samsung Electronics Co., Ltd. and its affiliates (“Samsung”).  Under the terms of the agreement, we granted Samsung a perpetual, worldwide license to our current patent portfolio, subject to certain exclusions.   We also agreed to terminate Samsung from the U.S. International Trade Commission (“ITC”) investigation and to dismiss our claims against Samsung in two district court cases.   Refer to “Legal Proceedings” in Note 12 to the condensed consolidated financial statements included in this quarterly report for a further discussion of these cases.  The parties agreed not to disclose the specific financial terms of the agreement.

Private Placement
On July 6, 2016, we consummated the sale of 1,090,909 shares of our common stock at a price of $2.75 per shares in a private placement transaction with an accredited investor. The sale of shares generated gross proceeds of approximately $3.0 million which will be used for general working capital purposes.

Warrant Exchange
On July 8, 2016, we entered into an agreement with 1624 PV, LLC (“1624”), for the exchange of all of the warrants held by them.  1624 agreed to exchange three common stock purchase warrants each entitling 1624 to acquire up to 188,406 shares of our common stock at exercise prices of $15, $25 and $35, respectively, and expiring on January 15, 2018, for a new common stock purchase warrant entitling 1624 to acquire up to 200,000 shares of our common stock at an exercise price of $3.25 per share and expiring on June 16, 2018. The new warrant is substantially in the form of the original warrants, except for the changes described above.  As a result of the exchange, the number of shares of our common stock subject to warrants decreased by 365,218 shares.

Litigation Funding
In February 2016, we entered into an agreement with Brickell Key Investments LP (“BKI”), a special purpose fund under the management of Juridica Asset Management Limited, to fund the ITC and related district court action (the “Funded Action.”).  We received $11 million from BKI to be used primarily for payment of legal fees and expenses for the Funded Actions.  Under the terms of the funding agreement, we will reimburse and compensate BKI from gross proceeds generated from our patent assets, including the Funded Actions and our other patent enforcement actions and patent monetization activities, up to an agreed minimum return. Thereafter, BKI is entitled to a prorated portion of proceeds solely from the Funded Actions and only to the extent the proceeds from Funded Actions exceed the specified minimum return.

In May 2016, BKI exercised its right under the agreement to fund an additional $2 million (the “Additional Funds”) to be used to pay our legal fees and expenses in connection with specified international patent enforcement actions. The agreement was amended to provide that one-half of the Additional Funds will be restricted for a specific use with the remainder usable by us for working capital purposes. The amendment also provides that BKI will be compensated for the Additional Funds on substantially the same terms and conditions set forth in the original agreement. The legal fees and expenses for our German complaint filed in June 2016 will be funded with the Additional Funds received from BKI.
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In connection with the BKI agreement, in February 2016, we issued BKI a warrant for the purchase of up to 250,000 shares of our common stock at an exercise price of $3.50 per share. In connection with the amendment to the agreement, on May 27, 2016, we exchanged BKI’s warrant for a new warrant, to purchase up to 350,000 shares of our common stock at an exercise price of $2.00 per share. The new BKI warrant is exercisable for five years from the date of issuance.

We granted BKI a senior security interest in our assets until such time as the specified minimum return has been paid, at which time, the security interest will be released except with respect to the proceeds and patents specific to the Funded Actions. The security interest is enforceable by BKI in the event that we are in default under the agreement.

Funds received from Samsung as a result of our recent patent license and settlement agreement with them are expected to be used to reimburse BKI under the funding agreement.

Reverse Stock Split and NASDAQ Bid Price Compliance
On March 29, 2016, we effected a one-for-ten reverse stock split of our common stock and our common stock began trading on the NASDAQ Capital Market on a post-split basis at the open of business on March 30, 2016.  As a result of the reverse stock split, every ten shares of our common stock was combined into one share of our common stock.  Fractional shares created as a result of the reverse stock split were rounded up to the next largest whole number.  The par value and other terms of our common stock were not affected by the reverse stock split.  However, the number of shares of common stock that we are authorized to issue was proportionately reduced from 150,000,000 shares to 15,000,000.  As a result of our reverse stock split, on April 14, 2016, we regained compliance with the minimum bid price requirement for continued listing on the Nasdaq Stock Market.

Liquidity and Capital Resources

At June 30, 2016, our capital resources consisted of approximately $1.7 million in cash, cash equivalents and available-for-sale securities and approximately $5.1 million in restricted cash and cash equivalents.   The restricted cash and cash equivalents represents the unused portion of the restricted funds received from BKI (see “Recent Events”).   In July 2016, we received approximately $3.0 million in proceeds from the sale of common stock in a private placement transaction.

We used cash for operations of approximately $3.0 million and $8.9 million for the three and six months ended June 30, 2016, respectively, of which $2.7 million and $5.9 million, respectively, was funded from restricted cash and cash equivalents.   Our arrangements with our attorneys for the ITC and related proceedings provide for fee caps such that our legal fees and expenses are not expected to exceed the restricted funds received.  However, our unrestricted capital resources at June 30, 2016, along with the additional funds received from the sale of equity securities in July 2016, may not be sufficient to support our working capital requirements for the next twelve months which raises substantial doubt about our ability to continue as a going concern.

Our repayment obligation to BKI is recorded as a long-term liability in our accompanying consolidated balance sheets and is measured at its estimated fair value at the end of each reporting period.   As of June 30, 2016, the fair value of the obligation is estimated to be $14,971,768.  In addition, we have an unsecured promissory note for $825,000 to a related party that matures on December 31, 2017.
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Our ability to meet our operating costs for 2016 is dependent upon our ability to (i) successfully negotiate licensing agreements and/or settlements for the use of our technologies by others and/or (ii) our ability to develop, market and sell existing and new products.  Revenues generated from patent-related activities will be used first to satisfy our secured contingent payment obligations. Thereafter, any remaining revenues from patent-related activities will be subject to prorated contingent payments to third-parties, including legal counsel.  In July 2016, we entered into a patent license and settlement agreement with Samsung.  Funds to be received from Samsung under this agreement will be designated entirely for repayment of our secured contingent payment obligation to BKI.  In general, we expect that revenue generated from patent enforcement actions, technology licenses and/or the sale of products in 2016 may not be sufficient to cover our operating expenses and our secured contingent repayment obligations.

We expect to continue to invest in patent prosecution and enforcement, product development, and sales, marketing, and customer support for our technologies and products.   The long-term continuation of our business plan is dependent upon the generation of sufficient revenues from our technologies and/or products to offset expenses and contingent payment obligations.  In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private debt or equity financing or contingent fee arrangements and/or reduce operating costs.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs will have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.

Results of Operations for Each of the Three and Six Months Ended June 30, 2016 and 2015

Revenue and Gross Margin
We reported approximately $5,000 and $64,000 in revenue for the three and six months ended June 30, 2016, respectively.  This revenue was primarily for engineering services for wireless product testing.  Our gross margin for the three and six months ended June 30, 2016 was approximately $1,500, or 31% and $23,000, or 36%, respectively.  Our cost of sales includes cost of materials and the cost of labor and overhead incurred under engineering design contracts.  At June 30, 2016, we have deferred revenue of approximately $20,000 representing component product inventory held by a distributor.  We reported no revenue for the three and six months ended June 30, 2015.

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 amounts which have been determined based on the grant date fair value of equity-based awards to our employees and then recorded to expense over the vesting period of the award.

Our research and development expenses decreased approximately $636,000, or 38%, during the three months ended June 30, 2016 when compared to the same period in 2015 and decreased approximately $1,442,000, or 42%, during the six months ended June 30, 2016 when compared to the same period in 2015.  These decreases for both the three and six-month periods are primarily due to a reduction in personnel and related expenses as a result of a June 2015 workforce reduction.
20

Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, sales and marketing, and finance and administrative personnel costs, including our share-based compensation, and costs incurred for insurance, shareholder relations and outside legal and professional services, including litigation expenses.

Our selling, general and administrative expenses increased approximately $1,879,000 or 60%, during the three months ended June 30, 2016 when compared to the same period in 2015.  This is the result of an increase in litigation fees of approximately $2,649,000, partially offset by a decrease in share-based compensation expense of approximately $356,000 and a decrease in personnel and related expenses of approximately $203,000.

Our selling, general and administrative expenses increased approximately $2,019,000 or 28%, during the six months ended June 30, 2016 when compared to the same period in 2015.  This is the result of an increase in litigation fees of approximately $3,359,000 partially offset by a decrease in share-based compensation expense of approximately $765,000 and a decrease in personnel and related expenses of approximately $376,000.

The increase in litigation related fees and expenses for three and six months ended June 30, 2016 is the result of increased patent-related legal activities to support our ITC case and our German litigation (see Note 12 to our condensed consolidated financial statements included in this quarterly report).  These increased costs are funded from our restricted cash and cash equivalents.

The decrease in share-based compensation expense for the three and six months ended June 30, 2016 is primarily the result of a reduction in share-based awards to directors and executives along with a decrease in expense attribution related to executive long-term equity incentive awards from prior years that became fully vested in mid-2015.  The decrease in personnel and related expenses is primarily the result of our June 2015 reduction in workforce.

Loss on Changes in Fair Value
We have elected to measure our secured contingent payment obligation at fair value which is based on significant unobservable inputs.  We estimated the fair value of our secured contingent payment obligation using an income approach based on the estimated present value of projected future cash outflows using a risk-adjusted discount rate.  Increases or decreases in the significant unobservable inputs could result in significant increases or decreases in fair value.

For the three and six months ended June 30, 2016, the fair value of our secured contingent payment obligation increased by approximately $2,284,000 and $2,307,000, respectively.  This increase is a result of changes in the estimated timing and amount of projected future cash outflows based, in part, on the patent license and settlement agreement reached with Samsung in July 2016.

Off-Balance Sheet Transactions, Arrangements and Other Relationships

As of June 30, 2016, we had outstanding warrants to purchase 915,218 shares of our common stock.  The estimated grant date fair value of these warrants of $1,634,930 is included in shareholders’ equity in our consolidated balance sheets.

These warrants include three warrants, each for the purchase of up to 188,406 shares of our common stock at exercise prices of $15, $25 and $35, respectively that were purchased by 1624 on January 15, 2015.  In July 2016, these warrants were exchanged for a single warrant for the purchase of up to 200,000 shares of our common stock at an exercise price of $3.25.
21

The remaining warrant is for the purchase of up to 350,000 shares of our common stock at an exercise price of $2.00 that was issued to BKI in May 2016 and expires in May 2021.

Contractual Obligations

There have been no material changes in our contractual obligations as set forth in our Annual Report, except as follows:

In February, 2016, we converted $825,000 in current liabilities to a related party to an unsecured promissory note.   Interest on the note is payable monthly on the outstanding principal balance at a rate of 8% per annum and the note matures on December 31, 2017.

Also, in February 2016, as amended in May 2016, we entered into a litigation funding agreement with BKI whereby we received proceeds of $13 million in exchange for BKI’s right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions.  The amount and timing of our repayment obligation is dependent upon the amount and timing of proceeds received by us for patent-related activities.  We have recorded this obligation at its estimated fair market value of approximately $15.0 million at June 30, 2016.

Critical Accounting Policies

There have been no changes in accounting policies from those stated in our Annual Report, except as follows:

Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents represent cash on hand and money market investments that are restricted for specific use in payment of legal fees and expenses related to certain of our patent infringement actions.  The restricted money market investments generally have original maturities of three months or less when purchased and are recorded at fair value.

Secured Contingent Payment Obligation
We have accounted for our secured contingent repayment obligation as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions.   We have elected to measure our secured contingent payment obligation at its fair value in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured contingent payment obligation falls within Level 3 in the fair value hierarchy which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows.  Actual results could differ from the estimates made.

Accounting for Share-Based Compensation
In April 2016, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09,   “Improvements to Employee Share-Based Payment Accounting.”  ASU 2016-09 simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations.  We have elected to account for forfeitures of share-based equity awards as they occur.  The adoption of ASU 2016-09 had no impact on our consolidated financial statements except for the reclassification of the value of shares withheld for payment of taxes in our accompanying  consolidated statements of cash flows.
22

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk.

For the three and six months ended June 30, 2016, there were no material changes from the market risk information disclosed under Item 7A of Part II of our Annual Report.  We are exposed to market risk from changes in currency exchange rates that could impact our results of operations and financial position.  We have assets and liabilities denominated in non-functional currencies which are remeasured at each reporting period.  Any gains or losses recognized for changes in currency exchange rates are included as a component of “other income (expense)” in our consolidated statements of comprehensive loss.  We do not consider the market risk from changes in currency exchange rates to be material.

ITEM 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2016, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).   Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of June 30, 2016.  

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings.

Reference is made to the section entitled “Legal Proceedings” in Note 12 to our unaudited consolidated financial statements included in this quarterly report for a discussion of current legal proceedings, which discussion is incorporated herein by reference.

ITEM 1A.  Risk Factors.

There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report.  In addition to the information in this quarterly report, the risk factors disclosed in our Annual Report 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.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

On May 27, 2016, we issued a warrant to BKI in exchange for a warrant previously sold to BKI in February 2016 in connection with their financing arrangement with us.  The warrant is for the  purchase up to 350,000 shares of our common stock at an exercise price of $2.00 per share and is exercisable for five years from the date of issuance.  The warrant provided the holder with piggy-back registration rights and the warrant shares were registered on a Form S-3 registration statement (No. 333-212670) that became effective August 2, 2016. The aggregate fair value of this warrant of $334,930 is included in shareholders’ equity in our consolidated balance sheet at June 30, 2016.   The warrant was offered and sold solely to BKI on a private placement basis under Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 3.  Defaults Upon Senior Securities.

None.

ITEM 4.  Mine Safety Disclosures.

Not applicable.

ITEM 5.  Other Information.

On August 15, 2016, we issued a press release announcing our results of operations and financial condition for the three and six months ended June 30, 2016.  The press release is attached hereto as Exhibit 99.1.

The foregoing information, including the exhibit related thereto, is furnished in response to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any disclosure document of the Registrant, except as shall be expressly set forth by specific reference in such document.
24

ITEM 6.  Exhibits.

3.1
 
Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed March 29, 2016)
     
3.2
 
Bylaws, as amended (incorporated by reference from Exhibit 3.2 of Annual Report on Form 10-K for the year ended December 31, 1998)
     
3.3
 
Certificate of Designations of the Preferences, Limitations, and Relative Rights of Series E Preferred Stock, dated November 21, 2005 (incorporated by reference from Exhibit 4.02 of Form 8-K filed November 21, 2005)
     
3.4
 
Amended and Restated Bylaws (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed August 14, 2007)
     
10.1
 
Amendment to Claims Proceeds Investment Agreement between Registrant and Brickell Key Investments*
     
10.2
 
Form of Warrant Agreement between Registrant and Brickell Key Investments LLP dated May 26, 2016*
     
31.1
 
Section 302 Certification of Jeffrey L. Parker, CEO*
     
31.2
 
Section 302 Certification of Cynthia L. Poehlman, CFO*
     
32.1
 
Section 906 Certification*
     
99.1
 
Earnings Press Release*
     
101.INS
 
XBRL Instance Document*
     
101.SCH
 
XBRL Taxonomy Extension Schema*
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase*
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase*
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase*
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase*
 
*
Filed herewith

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ParkerVision, Inc.
 
Registrant
     
August 15, 2016
By:
/s/ Jeffrey L. Parker
   
Jeffrey L. Parker
    Chairman and Chief Executive Officer
   
(Principal Executive Officer)
     
August 15, 2016
By:  
/s/ Cynthia L. Poehlman
   
Cynthia L. Poehlman
   
Chief Financial Officer
   
(Principal Financial Officer and Principal Accounting Officer)

26

EXHIBIT INDEX

10.1
 
Amendment to Claims Proceeds Investment Agreement between Registrant and Brickell Key Investments
     
10.2
 
Form of Warrant Agreement between Registrant and Brickell Key Investments LLP dated May 26, 2016
     
31.1
 
Section 302 Certification of Jeffrey L. Parker, CEO
     
31.2
 
Section 302 Certification of Cynthia L. Poehlman, CFO
     
32.1
 
Section 906 Certification
     
99.1
 
Earnings Press Release
     
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Taxonomy Extension Schema
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
  
27
 
   
 
(PARKERVISION LOGO)
 
May 26, 2016

Brickell Key Investments LP

Juridica Asset Management Limited
 
 
Re:
Letter Amendment to Claims Proceeds Investment Agreement dated February 24, 2016 ("CPIA") In Conjunction With Brickell Key Investment LP’s Exercise of Rights Under Section 2.5(b) of the CPIA

Dear Corporate Secretary:

This letter amends that certain Claims Proceeds Investment Agreement dated February 24, 2016 (the " CPIA ") between ParkerVision, Inc., a Florida corporation (" ParkerVision "), and Brickell Key Investments LP, a Delaware limited partnership (" Investor "), a copy of which is attached hereto as Exhibit A. All terms not otherwise defined herein shall have their meanings set forth in the CPIA.

On or about the date hereof, Investor has exercised its rights, pursuant to Section 2.5(b) of the CPIA, by making an investment of Two Million Dollars ($2,000,000) (the " Additional Investment ") in that certain enforcement campaign by ParkerVision and / or its subsidiaries and Affiliates over certain patents and Patent Pending Applications in Germany and /or within the Unified Patent Court (once established) (the " German Assertion Program ").

For all purposes, the Additional Investment shall be considered part of the Commitment and the Investment, as such terms are defined under the CPIA, and shall have all rights, entitlements, benefits, privileges and priorities (including under Section 3.4 of the CPIA) thereof; provided   that , the Multiple and IRR Return as to such Additional Investment shall be calculated from the ParkerVision receives such Additional Investment. In consideration for the Additional Investment, ParkerVision agrees that the additional patents and Patent Pending Applications listed in Annex 1 hereto shall, for all purposes, be considered part of the Claims, Scheduled Patents and Claims (Schedule A of the CPIA), Scheduled Patents Proceeds and Assigned Rights under the CPIA, and Investor shall be entitled to a Security Interest over such additional Claims, Scheduled Patents and Scheduled Patents Proceeds as set forth in Section 4 of the CPIA:

The Parties acknowledge and agree that One Million Dollars of the Additional Investment may be used by ParkerVision for working capital purposes, and the remaining One Million Dollars shall be used solely for Claims Costs and Expenses relating to the German Assertion Program.

In addition, as further consideration for the Additional Investment, ParkerVision hereby agrees to exchange Investor’s Warrant dated February 24, 2016 for a warrant to acquire up to 350,000 shares of ParkerVision common stock at an exercise price of $2.00 per share (the " Replacement Warrant "), the form of which is attached hereto as Exhibit B.
 

7915 Baymeadows Way, Suite 400 •  Jacksonville, FL 32256 •  Ph 904 732 6100 •  Fax 904 731 0958

 
(PARKERVISION LOGO)
 
Other than as expressly set forth above, no other terms and conditions of the CPIA are hereby amended, modified or revoked. Any and all disputes hereunder shall be finally determined in accordance with Section 9 of the CPIA.

Sincerely,

PARKERVISION, INC.
 
Name:
Cynthia Poehlman
 
Title:
Chief Financial Officer and Authorized Signatory
 
ACKNOWLEDGED AND AGREED:

BRICKELL KEY INVESTMENTS LP
 
Name:
 
 
Title:
Director for and on behalf of Brickell Key Partners GP Limited, as General Partner of Brickell Key Investments LP
 
  
 
Exhibit 10.2
 
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT. NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

COMMON STOCK PURCHASE WARRANT

PARKERVISION, INC.
 
Warrant No.: [                    ]
Issue Date: May 26, 2016
Warrant Shares: 350,000

This COMMON STOCK PURCHASE WARRANT (this “ Warrant ”) certifies that, for good and valuable consideration, the receipt of which is hereby acknowledged, Brickell Key Investments LP, a Delaware limited liability company (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time or times on or prior to the close of business on the five (5) year anniversary of the Issue Date (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from ParkerVision, Inc., a Florida corporation (the “ Company ”), up to 350,000 shares of Common Stock (the “Warrant Shares”).
 
1.          Definitions . In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings set forth in this Section 1.
 
(a)              Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
 
(b)              Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
 
(c)              Commission ” means the United States Securities and Exchange Commission.

(d)              Common Stock ” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
 
(e)              Common Stock Equivalents ” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
 
(f)              Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
(g)              Person ” means an individual, corporation, limited liability company, partnership, association, joint venture, trust, unincorporated organization, other entity or group (as defined in the Exchange Act).
 
(h)              Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
 
(i)                Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
(j)                Trading Day ” means a day on which the Trading Market is open for trading.
 
(k)              Trading Market ” means the principal market or exchange on which the Common Stock is listed or quoted for trading on the date in question.
 
(l)                Transfer Agent ” means American Stock Transfer & Trust Company, LLC, the current transfer agent of the Company and any successor transfer agent of the Company.
 
2.          Exercise .
 
(a)              General . Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (“ Notice of Exercise ”). Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price (defined below) for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof. Under no circumstances will the Company be required to net cash settle this Warrant upon its exercise.
2

(b)                 Optional Cashless Exercise .   Notwithstanding anything contained herein to the contrary, if a registration statement covering the Warrant Shares that are the subject of the Notice of Exercise (the “ Unavailable Warrant Shares ”) is not available for the resale of such Unavailable Warrant Shares to the public, the registered holder may, in its sole discretion, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate Exercise Price, elect instead to receive upon such exercise the “ Net Number ” of shares of Common Stock determined according to the following formula:
 
Net Number = [(A x B) - (A x C)] / B
 
For purposes of the foregoing formula:
 
A= the total number of shares with respect to which the Warrant is then being exercised.
 
B= the arithmetic average of the Closing Sale Prices of the shares of Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Notice of Exercise.
 
C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
 
(c)                 Exercise Price . The exercise price per share of the Warrant Shares shall be $3.50, subject to adjustment hereunder (the “ Exercise Price ”).
 
(d)                 Mechanics of Exercise .
 
(i)              Delivery of Certificates Upon Exercise . Shares of Common Stock purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company (“ DTC ”) through its Deposit Withdrawal Agent Commission (“ DWAC ”) system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale without volume or manner of sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (x) the delivery to the Company of the Notice of Exercise Form, (y) surrender of this Warrant (if required) and (z) payment of (A) if this Warrant is exercised on a cash basis, the aggregate Exercise Price as set forth above and (B) all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares (such date, the “ Warrant Share Delivery Date ”). This Warrant shall be deemed to have been exercised on the first date on which all of the foregoing have been delivered to the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.
3

(ii)               Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of the certificate for this Warrant, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
 
(iii)              Rescission Rights . If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.
 
(iv)              Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise . If (1) the Company fails to transmit to the Holder (directly or through the Transfer Agent) a certificate or the certificates representing the Warrant Shares pursuant to an exercise (or to credit the account of the Holder’s prime broker at DTC through a DWAC system transaction) on or before the Warrant Share Delivery Date and (2) prior to the time such certificate is received by the registered holder (or such account is credited through a DWAC system transaction), the registered holder, or any third party on behalf of the registered holder or for the registered holder’s account, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the registered holder of shares represented by such certificate (or such DWAC system transaction) (a “ Buy-In ”), then the Company shall pay in cash to the registered holder (for costs incurred either directly by such registered holder or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by such registered holder as a result of the sale to which such Buy-In relates. The registered holder shall provide the Company written notice indicating the amounts payable to the registered holder in respect of the Buy-In.
4

(v)               No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
 
(vi)              Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
 
(vii)             Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
 
(e)                 Holder’s Exercise Limitations . The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.999% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation of this Section 2(e) or may waive the application of this Section 2(e). Any such increase or decrease or waiver will not be effective until the 61 st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
5

3.                    Certain Adjustments .
 
(a)              Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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(b)              Fundamental Transactions . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Warrant, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.
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(c)                 Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
 
(d)                 Notice to Holder .
 
(i)               Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
 
(ii)              Notice to Allow Exercise by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register (defined below) of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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4.                    Limitation on Sales of Warrant Shares . The Holder acknowledges that the Warrant Shares have not been registered under the Securities Act, and agrees that it shall not sell, pledge, distribute, offer for sale, transfer or otherwise dispose of any Warrant Shares, in the absence of (i) an effective registration statement under the Securities Act as to such Warrant Shares and registration or qualification of such Warrant Shares under any applicable “blue sky” or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Without limiting the generality of the foregoing, unless the resale of the Warrant Shares shall have been effectively registered under the Securities Act, the Warrant Shares issued upon exercise of this Warrant shall be imprinted with a legend in substantially the following form:
 
This security has been acquired for investment and has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or applicable state securities laws. This security may not be sold, pledged or otherwise transferred in the absence of such registration or pursuant to an exemption therefrom under the Securities Act and such laws, supported by an opinion of counsel, reasonably satisfactory to the Company and its counsel, that such registration is not required.
 
5.                    Transfer of Warrant .
 
(a)              Transfer . Subject to compliance with any applicable state and federal securities laws and the provisions of this Warrant, this Warrant and all rights hereunder may be transferred, in whole or in part, by surrendering this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
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(b)              New Warrants . This Warrant may be divided upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 5(a), as to any transfer which may be involved in such division, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
 
(c)              Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
 
6.                    Registration Rights . If, at any time during the five (5) year period commencing on May 27, 2016, the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account, other than a registration statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the holder(s) of this Warrant and any Warrant Shares as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holder(s) of this Warrant and any Warrant Shares in such notice the opportunity to register the sale of such number of Warrant Shares (the “ Registrable Securities ”) as such holders may request in writing within five (5) days following receipt of such notice (a “ Piggy-Back Registration ”). The Company shall cause such Registrable Securities to be included in such registration statement and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof . All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.  If the managing underwriter or underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company in writing that the dollar amount or number of shares of Registrable Securities which the holder(s) thereof desire to sell, taken together with all other securities which the Company desires to sell and all other securities, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights which the holders thereof desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering, then the Company may remove from such registration statement any Registrable Securities that the managing underwriters shall reasonably request.  Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the registration statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a registration statement at any time prior to the effectiveness of the registration statement. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, including the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities, but the Holders shall pay any and all underwriting commissions related to the Registrable Securities.
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7.                    Miscellaneous .
 
(a)              No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
 
(b)              Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
 
(c)              Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
 
(d)              Authorized Shares . The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
 
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
 
(e)              Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.
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(f)              Non-waiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies.
 
(g)             Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. Except as otherwise provided of in this Warrant, the address for such notices and communications shall be as follows: if to (A) the Company, 7915 Baymeadows Way, Suite 400, Jacksonville, Florida 32256, Attention: Chief Financial Officer, and (B) the Holder, Brickell Key Investments LP, 11 New Street, St. Peter Port, Guernsey  GY1 2PF, Attention: Corporate Secretary, with copies to Juridica Asset Management Limited, 11 New Street, St. Peter Port, Guernsey  GY1 2PF, Attention: Corporate Secretary .
 
(h)             Limitation of Liability . No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
 
(i)               Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
 
(j)               Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder.
 
(k)              Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
 
(l)               Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
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(m)              Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
 
********************
 
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
 
 
PARKERVISION, INC.
 
 
 
 
By:
 
 
 
Name: Cynthia L. Poehlman
Title: Chief Financial Officer
15

NOTICE OF EXERCISE

To:              ParkerVision, Inc.
 
(1)   The undersigned hereby elects to exercise Warrant No. (the “ Warrant ”) with respect to ____________ shares of common stock of the Company (the “ Warrant Shares ”), pursuant to the terms of the Warrant, and tenders herewith or will tender within the time period specified in the Warrant payment of the exercise price in full (or has elected below to exercise the Warrant on a cashless basis), together with all applicable transfer taxes, if any. If the Warrant is being exercised in full, the Warrant is attached hereto or will be delivered within the time period specified in the Warrant.
 
(2)   Payment of Exercise Price:
 
[  ]
Payment shall take the form of lawful money of the United States in accordance with the terms of the Warrant.
[  ]
Payment shall take the form of a cashless exercise in accordance with the terms of the Warrant.
(3)   Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
 

 
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
 

 

 

 
[SIGNATURE OF HOLDER]
 
Name of Holder:
 
   
Signature:
 
   
Name of Signatory (if entity):
 
   
Title of Signatory (if entity):
 
   
Date:
 
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ASSIGNMENT FORM

(To assign the foregoing warrant, execute this form and supply required information.
Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to:
 

 
whose address is:
 

 

 
  Dated: ______________, _______
   
 
Name of Holder
   
 
Signature
   
 
Name of Signatory (if entity)
   
 
Title of Signatory (if entity)
   
 
Address of Holder:
   
   
   
 
Signature Guaranteed:
 
 
 
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the
 
17
 
EXHIBIT 31.1

SECTION 302 CERTIFICATION
I, Jeffrey L. Parker, certify that:
 
1. I have reviewed this Quarterly Report on Form 10-Q of ParkerVision, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons fulfilling the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2016
Name:
/s/ Jeffrey L. Parker
  Title:
Chief Executive Officer (Principal Executive Officer)
 
 
EXHIBIT 31.2

SECTION 302 CERTIFICATION
I, Cynthia L. Poehlman certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of ParkerVision, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a  material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s  most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report)  that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons fulfilling the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 15, 2016
Name :
/s/Cynthia L. Poehlman
  Title:
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
 
 
EXHIBIT 32.1

SECTION 906 CERTIFICATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ParkerVision, Inc. (the “Company”) on Form 10-Q, for the period ended June 30, 2016 as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Dated: August 15, 2016
Name:
/s/ Jeffrey L. Parker
  Title:
Chief Executive Officer (Principal Executive Officer)
 
Dated: August 15, 2016
Name:
/s/ Cynthia L. Poehlman
  Title:
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
 
 
 
PARKERVISION REPORTS SECOND QUARTER 2016 RESULTS
 
Management to Host Conference Call and Webcast Today at 4:30 p.m. ET
 
JACKSONVILLE, Fla., August 15, 2016 –   ParkerVision, Inc. (NASDAQ:PRKR) , a developer and marketer of semiconductor technology solutions for wireless applications, today announced results for the three and six months ended June 30, 2016.
 
Second Quarter 2016 Summary and Recent Developments
 
· Entered into a patent license and settlement agreement with Samsung Electronics Co., Ltd. and its affiliates (“Samsung”) in July 2016.  The financial terms are confidential; however funds received from Samsung under this agreement will be used to reduce ParkerVision’s repayment obligation to BKI.
 
· Filed a complaint in Munich Regional Court against a German subsidiary of LG Electronics, Inc. alleging infringement of one of ParkerVision’s German patents.  The hearing in this case is schedule for November 2016.

· Received $2 million from Brickell Key Investments (“BKI”) in May 2016 to be used for legal fees and expenses in connection with international patent infringement proceedings and for general working capital purposes.  These proceeds are in addition to the $11 million received from BKI in the first quarter of 2016, which are primarily for payment of fees and expenses in our proceedings at the International Trade Commission.
 
· Sold 1,090,909 shares of our common stock at a price of $2.75 per share in a private placement transaction with an accredited investor in July 2016.  The sale of shares generated gross proceeds of approximately $3.0 million which will be used for general working capital purposes.
 
Jeffrey Parker, Chairman and Chief Executive Officer, commented, “With the recent patent license to Samsung, we achieved an important milestone of initiating ParkerVision s international licensing program in 2016.  Based on our discussions, we believe other companies in the industry are seeing the value in securing authorized use of our patented innovations, which could result in additional intellectual property licenses in the near-term.  Our licensing program complements other opportunities to work with customers in bringing products to market that incorporate ParkerVision innovations. While we encourage authorized users of our technologies to create products incorporating our innovations, we are also exploring the opportunity to provide expertise and technical services to assist companies in developing new product advancements enabled by our technologies.
 
Parker continued, “We continue to carefully manage our cash, using only $3 million in cash for operations during the first half of this year excluding the cash used for patent enforcement actions that are funded by our restricted capital. Much of this cash use reflects the continued investment in product development, and we plan to introduce later this year new Wi-Fi products, including products for IoT, that will improve the Wi-Fi user experience in homes and small buildings.
 

Second Quarter and First Half 2016 Financial Results

· Net loss for the second quarter of 2016 was $8.4 million, or $0.72 per common share, compared with a net loss of $4.8 million, or $0.50 per common share, for the second quarter of 2015.
 
· Net loss for the first half of 2016 was $13.5 million, or $1.17 per common share, compared with a net loss of $10.6 million, or $1.09 per common share, for the first half of 2015.
 
· The increase in net loss in 2016 when compared to 2015 is the result of (i) a $2.3 million increase in the estimated fair value of the Company’s secured contingent payment obligation and (ii) increases in litigation fees and expenses that are paid from restricted cash and cash equivalents.
 
o The funds received from BKI are recorded as a secured contingent payment obligation and included in long-term liabilities.     ParkerVision elected to measure this obligation at fair value based on projected future cash outflows.  For the first half of 2016, the fair value which includes imputed interest payable on this obligation, increased by approximately $2.3 million.  The increase in fair value, which is recorded as a loss, is a result of favorable changes in our expectations for the timing of repayment of this obligation.
 
· Cash used for operations was approximately $8.9 million in the first half of 2016, compared to $7.9 million for the same period in 2015.   The cash used for operations in the first half of 2016 included $5.9 million funded from restricted cash and cash equivalents for payment of legal fees and expenses.
 
· At June 30, 2016, restricted cash and cash equivalents of approximately $5.1 million represent the unused portion of the funds received from BKI that are restricted for a specific use.
 
· Cash and available-for-sale securities totaled approximately $1.7 million at June 30, 2016.
 
Conference Call
 
The Company will host a conference call and webcast on August 15, 2016 at 4:30 p.m. Eastern to review its second quarter 2016 financial results. The conference call will be accessible by telephone at 1-877-561-2750 , at least five minutes before the scheduled start time.  International callers should dial 763-416-8565 . The conference call may also be accessed by means of a live webcast on our website at http://ir.parkervision.com/events.cfm . The conference webcast will also be archived and available for replay on our website at www.parkervision.com for a period of 90 days.
 

About ParkerVision
 
ParkerVision, Inc. designs, develops and markets its proprietary radio-frequency (RF) technologies that enable advanced wireless solutions for current and next generation communications networks. Protected by a highly-regarded, worldwide patent portfolio, the Company’s solutions for wireless transfer of RF waveforms address the needs of a broad range of wirelessly connected devices for high levels of RF performance coupled with best-in-class power consumption. For more information please visit www.parkervision.com (PRKR-I)
 
Safe Harbor Statement
 
This press release contains forward-looking information.  Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made.  Such statements are subject to certain risks and uncertainties which are disclosed in the Company’s SEC reports, including the Form 10-K for the year ended December 31, 2015 and the Forms 10-Q for the quarters ended March 31, 2016 and June 30, 2016. These risks and uncertainties could cause actual results to differ materially from those currently anticipated or projected.
 
       
Contact:
     
Cindy Poehlman
   
Don Markley
Chief Financial Officer
or
The Piacente Group
ParkerVision, Inc.
   
212-481-2050, parkervision@tpg-ir.com
904-732-6100, cpoehlman@parkervision.com
     
 

(TABLES FOLLOW)
 
ParkerVision, Inc.
Summary of Results of Operations (unaudited)

 
 
Balance Sheet Highlights (in thousands)
 
 
 
 
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