UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under §240.14a-12
SPHERIX INCORPORATED |
(Name of Registrant as Specified In Its Charter) |
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6430 Rockledge Drive, Suite 503
Bethesda, MD
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON FEBRUARY 22, 2016
January 15, 2016
To our Stockholders:
You are cordially invited to
attend a special meeting of stockholders (the “Special Meeting”) of Spherix Incorporated, a Delaware corporation (the
“Company,” “we” or “us”), to be held on February 22,
2015, at 12:00 p.m. Eastern time, at the offices of Nixon Peabody LLP, 437 Madison Avenue, 24th Floor, New York, NY
10022, for the following purposes, as more fully described in the accompanying proxy statement (the “Proxy Statement”):
| (1) | To approve an amendment to our Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), attached as Appendix A to this Proxy Statement, to effect a reverse stock split of our common stock,
within a range of 1-for-12 to 1-for-24, as will be elected by our Board of Directors (the “Board”) prior to thre time
of filing such Certificate of Amendment with the Delaware Secretary of State; |
| (2) | Subject to approval of Proposal No. 1 above, to approve an amendment to the Certificate of Incorporation,
attached as Appendix B to this Proxy Statement, to reduce the total number of shares of common stock that the Company is authorized
to issue from 200 million shares of Common Stock to 100 million shares of Common Stock; |
| (3) | To approve an amendment to Spherix Incorporated 2014 Equity Incentive Plan (the “2014 Plan”),
attached as Appendix C to this Proxy Statement, to increase the number of shares of common stock authorized to be issued pursuant
to the 2014 Plan from 4,161,892 to 8,250,000 (disregarding the effect of any reverse stock split); |
| (4) | To authorize the adjournment of the Special Meeting if necessary or appropriate, including to solicit
additional proxies in the event that there are not sufficient votes at the time of the Special Meeting or adjournment or postponement
thereof to approve any of the foregoing proposals; and |
| (5) | To transact such other business, if any, as may properly come before the Special Meeting or any
adjournment or postponement of the meeting. |
Pursuant to our bylaws, our Board
has fixed the close of business on January 15, 2016 as the record date (the “Record Date”) for determination of stockholders
entitled to notice and to vote at the Special Meeting and any adjournment thereof. Holders of our common stock, Series D Convertible
Preferred Stock, Series D-1 Convertible Preferred Stock and Series H Convertible Preferred Stock are entitled to vote at the Special
Meeting. This notice, the Proxy Statement and proxy card will be first sent or made available to stockholders on or about
January 15, 2016.
Your vote is important. Whether
or not you plan to attend the Special Meeting, please vote your shares by promptly completing, signing and returning the enclosed
proxy card using the enclosed envelope. The enclosed envelope requires no postage if mailed within the United States. You may also
vote your shares over telephone or the internet in accordance with the instructions on the proxy card. Any stockholder attending
the Special Meeting may vote in person, even if you have already returned a proxy card or voting instruction card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert J. Vander
Zanden
Robert J. Vander Zanden
Chairman of the Board
6430 Rockledge Drive, Suite 503
Bethesda, MD
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 22, 2016
Your proxy is solicited by the
Board of Directors (the “Board”) for use at the Special Meeting to be held on February 22, 2016, at 12:00 p.m. Eastern
time, at the offices of Nixon Peabody LLP, 437 Madison Avenue, 24th Floor, New York, NY 10022. Our Company’s principal
executive office is located at 6430 Rockledge Drive, Suite 503, Bethesda, MD, and its telephone number is 703-992-9260.
At the Special Meeting, you will be asked to consider
and vote upon the following matters:
| (1) | To approve an amendment to our Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), attached as Appendix A to this Proxy Statement, to effect a reverse stock split of our common stock,
within a range of 1-for-12 to 1-for-24, as will be elected by our Board prior to thre time of filing such Certificate of Amendment
with the Delaware Secretary of State; |
| (2) | Subject to approval of Proposal No. 1 above, to approve an amendment to the Certificate of Incorporation,
attached as Appendix B to this Proxy Statement, to reduce the total number of shares of common stock that the Company is authorized
to issue from 200 million shares of Common Stock to 100 million shares of Common Stock; |
| (3) | To approve an amendment to Spherix Incorporated 2014 Equity Incentive Plan (the “2014 Plan”),
attached as Appendix C to this Proxy Statement, to increase the number of shares of common stock authorized to be issued pursuant
to the 2014 Plan from 4,161,892 to 8,250,000 (disregarding the effect of any reverse stock split); and |
| (4) | To authorize the adjournment of the Special Meeting if necessary or appropriate, including to solicit
additional proxies in the event that there are not sufficient votes at the time of the Special Meeting or adjournment or postponement
thereof to approve any of the foregoing proposals. |
In addition, if you grant a proxy, your
shares will be voted in the discretion of the proxy holder on any proposal for which you do not register a vote and any other business
that properly comes before the Special Meeting or any adjournment or postponement thereof.
The Board has fixed the
close of business on January 15, 2016 as the record date (the “Record Date”) for determining stockholders
entitled to notice of and to vote at the Special Meeting and any adjournment thereof. The notice of the Special Meeting (the
“Notice”), this Proxy Statement and the proxy card will be first sent or made available to stockholders on or
before January 15, 2016.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON FEBRUARY 22, 2016: THE NOTICE, PROXY STATEMENT AND PROXY CARD ARE AVAILABLE
AT WWW.PROXYVOTE.COM.
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I Receiving these Materials?
This Proxy Statement and the
accompanying materials are being provided for the solicitation of proxies by our Board for the Special Meeting to be held on February
22, 2016.
What Is Included in these Materials?
These materials include the Notice, the Proxy Statement
and a proxy card.
What is the Purpose of the Special Meeting?
At the Special Meeting, stockholders will consider
and vote upon:
•
Approval of an amendment to our Certificate
of Incorporation, as amended (the “Certificate of Incorporation”), attached as Appendix A to this Proxy Statement,
to effect a reverse stock split of our common stock, within a range of 1-for-12 to 1-for-24, as will be elected by our Board of
Directors (the “Board”) prior to thre time of filing such Certificate of Amendment with the Delaware Secretary of State;
•
Subject to approval of Proposal No.
1 above, approval of an amendment to the Certificate of Incorporation, attached as Appendix B to this Proxy Statement, to reduce
the total number of shares of common stock that the Company is authorized to issue from 200 million shares of Common Stock to 100
million shares of Common Stock;
•
Approval of an amendment to Spherix
Incorporated 2014 Equity Incentive Plan (the “2014 Plan”), attached as Appendix C to this Proxy Statement, to
increase the number of shares of common stock authorized to be issued pursuant to the 2014 Plan from 4,161,892 to 8,250,000 (disregarding
the effect of any reverse stock split); and
•
Authorizing the adjournment of the Special
Meeting if necessary or appropriate, including to solicit additional proxies in the event that there are not sufficient votes at
the time of the Special Meeting or adjournment or postponement thereof to approve any of the foregoing proposals.
In addition, if you grant a proxy, your
shares will be voted in the discretion of the proxy holder on any proposal for which you do not register a vote and any other business
that properly comes before the Special Meeting or any adjournment or postponement thereof.
How do Proxies Work?
Our Board is asking for your
proxy. This means you authorize persons selected by us to vote your shares at the meeting in the way you instruct and, with regard
to any other business that may properly come before the meeting, as they think best.
I Share an Address with Another Stockholder, and
We Received Only One Paper Copy of the Proxy Materials. How May I Obtain An Additional Copy of the Proxy Materials?
Our Company has adopted a procedure
called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and
the Proxy Statement to multiple stockholders who share the same address unless we have received contrary instructions from one
or more of the stockholders. This procedure reduces our printing and mailing costs, and the environmental impact of our special
and annual meetings. Stockholders who participate in householding will continue to be able to access and receive separate proxy
cards. Upon written or oral request, we will deliver promptly a separate copy of the Notice and the Proxy Statement to any
stockholder at a shared address to which we delivered a single copy of any of these documents.
To receive a separate copy of
the Notice and the Proxy Statement, you may contact us at the following address and phone number:
Spherix Incorporated
6430 Rockledge Drive, Suite 503
Bethesda, MD 20817
Attention: Corporate Secretary
Telephone: 703-992-9260
Stockholders who hold shares in “street
name” (as described below) may contact their brokerage firm, bank, broker-dealer or other similar organization to request
information about householding.
Who Is Entitled to Vote?
Our Board has fixed the close of business
on January 15, 2016 as the Record Date for a determination of stockholders entitled to notice of, and to vote at, the Special Meeting
or any adjournment thereof. You can vote at the Special Meeting if you held shares of our common stock (the “Common Stock”),
Series D Convertible Preferred Stock, (the “Series D Preferred Stock”), Series D-1 Convertible Preferred Stock (the
“Series D-1 Preferred Stock”) or Series H Convertible Preferred Stock (the “Series H Preferred Stock”)
(collectively the “Voting Capital”) as of the close of business on January 15,
2016. Our outstanding classes of Voting Capital presently have following number of votes, in the case of preferred stock subject
to the beneficial ownership limitations described below:
Series D Preferred Stock – ten
votes per share;
Series D-1 Preferred Stock – ten
votes per share; and
Series H Preferred Stock – ten
votes per share
Beneficial ownership limitations on
our preferred stock prevents the conversion or voting such preferred stock if the number of shares of Common Stock to be issued
pursuant to such conversion or to be voted would exceed, when aggregated with all other shares of Common Stock or other voting
stock owned by such holder at such time, the number of shares of Common Stock which would result in such holder beneficially owning
(as determined in accordance with Section 13(d) of the Securities Exchange Act, as amended, and the rules thereunder, or the Exchange
Act) more than:
4.99% of all the Common Stock outstanding
at such time, in the case of Series D Preferred Stock;
9.99% of all the Common Stock outstanding
at such time, in the case of Series D-1 Preferred Stock; and
4.99% of all the Common Stock outstanding
at such time, in the case of Series H Preferred Stock
As of January 15, 2016, no stockholder’s
ownership of our preferred stock has violated the ownership limitations set forth above and, as a result, no reductions of voting
rights have been made.
On January 15, 2016, there were 48,259,430
shares of Common Stock outstanding, 4,725 shares of Series D Preferred Stock outstanding, 834 shares of Series D-1 Preferred Stock
outstanding and 381,967 shares of Series H Preferred Stock outstanding.
A list of stockholders of record
entitled to vote at the meeting will be available for inspection at our principal executive offices located at 6430 Rockledge Drive,
Suite 503, Bethesda, MD 20817 for a period of at least 10 days prior to the meeting and during the meeting. The stock transfer
books will not be closed between the record date and the date of the meeting.
What Is the Difference Between Holding Shares as
a Record Holder and as a Beneficial Owner (Holding Shares in Street Name)?
If your shares are registered
in your name with our transfer agent, Vstock Transfer, LLC, you are the “record holder” of those shares. If
you are a record holder, these proxy materials have been provided directly to you by the Company.
If your shares are held in a
stock brokerage account, a bank or other holder of record, you are considered the “beneficial owner” of those shares
held in “street name.” If your shares are held in street name, these proxy materials have been forwarded
to you by that organization. As the beneficial owner, you have the right to instruct this organization on how to vote
your shares.
Who May Attend the Meeting?
Record holders and beneficial
owners may attend the Special Meeting. If your shares are held in street name, you will need to bring a copy of a brokerage
statement or other documentation reflecting your stock ownership as of the Record Date.
How Do I Vote?
Stockholders of Record
For your convenience, our record holders have four
methods of voting:
| 1. | Vote by Internet. In addition to the location noted above, the Special Meeting will also
be available via the Internet at www.virtualshareholdermeeting.com/SPEX. You will be able to attend the Special Meeting online,
vote your shares electronically and submit your questions during the Special Meeting by visiting www.virtualshareholdermeeting.com/SPEX. |
| 2. | Vote by mail. Mark, date, sign and mail promptly the enclosed proxy card (a postage-paid
envelope is provided for mailing in the United States). |
| 3. | Vote by telephone. You may vote by proxy by calling the toll free number found on the vote
instruction form. |
| 4. | Vote in person. Attend and vote at the Special Meeting. |
Beneficial Owners of Shares
Held in Street Name
For your convenience, our beneficial owners have four
methods of voting:
| 1. | Vote by Internet. In addition to the location noted above, the Special Meeting will also
be available via the Internet at www.virtualshareholdermeeting.com/SPEX. You will be able to attend the Special Meeting online,
vote your shares electronically and submit your questions during the Special Meeting by visiting www.virtualshareholdermeeting.com/SPEX. |
| 2. | Vote by mail. Mark, date, sign and mail promptly your vote instruction form (a
postage-paid envelope is provided for mailing in the United States). |
| 3. | Vote by telephone. You may vote by proxy by calling the toll free number found on the vote
instruction form. |
| 4. | Vote in person. Obtain a valid legal proxy from the organization that holds your shares
and attend and vote at the Special Meeting. |
If you vote by Internet or by
telephone, please DO NOT mail your proxy card.
If you are a registered stockholder
and attend the meeting, you may deliver your completed proxy card in person. “Street name” stockholders who wish to
vote at the meeting will need to obtain a proxy from the institution that holds their shares.
How Will My Shares Be Voted?
All shares entitled to vote and
represented by a properly completed, executed and delivered proxy received before the Special Meeting and not revoked will be voted
at the Special Meeting as you instruct in a proxy delivered before the Special Meeting. If you do not indicate how your shares
should be voted on a matter, the shares represented by your proxy will be voted as the Board recommends on each of the enumerated
proposals and with regard to any other matters that may be properly presented at the Special Meeting and all matters incident to
the conduct of the meeting. All votes will be tabulated by the inspector of elections appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
Is My Vote Confidential?
Yes, your vote is confidential.
The only persons who have access to your vote are the inspector of elections, individuals who help with processing and counting
your votes, and persons who need access for legal reasons. Occasionally, stockholders provide written comments on their
proxy cards, which may be forwarded to our Company’s management and the Board.
What Constitutes a Quorum?
To carry on business at the Special
Meeting, we must have a quorum. A quorum is present when a majority of the shares entitled to vote, as of the Record
Date, are represented in person or by proxy. Thus, holders of at least 24,129,716
shares must be represented in person or by proxy to have a quorum. Your shares will be counted towards the quorum only
if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person
at the Special Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. Shares
owned by us are not considered outstanding or considered to be present at the Special Meeting. If there is not a quorum
at the Special Meeting, our stockholders may adjourn the meeting.
What is a Broker Non-Vote?
If your shares are held in a
street name, you must instruct the organization who holds your shares how to vote your shares. If you do not provide voting instructions,
your shares will not be voted on any non-routine proposal. This vote is called a “broker non-vote.” If
you sign your proxy card but do not provide instructions on how your broker should vote, your broker will vote your shares as
recommended by our Board.
Proposal 1, the amendment of our Certificate of Incorporation to effect a reverse stock split of our Common
Stock, and Proposal 2, an amendment of our Certificate of Incorporation to reduce the total number of shares of Common Stock that
we are authorized to issue, are “routine” matters on which your broker can exercise voting discretion. All other proposals
are considered non-routine and therefore brokers cannot use discretionary authority to vote shares on other proposals to be considered
at the Special Meeting if they have not received instructions from their clients. Please submit your vote instruction
form so your vote is counted.
What is an Abstention?
An abstention is a stockholders
affirmative choice to decline to vote on a proposal. Abstentions are not included in the tabulation of the voting results
of any of the proposals and, therefore, do not affect these proposals, but are included for purposes of determining whether a quorum
has been reached.
How Many Votes Are Needed
for Each Proposal to Pass?
Proposal |
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Vote Required |
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Broker
Discretionary
Vote Allowed |
Amendment of our Certificate of Incorporation to effect a reverse stock split of our Common Stock |
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A
majority of the outstanding Voting Capital |
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Yes
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Subject to approval of the proposal to effect a reverse stock split above, amendment of the Certificate of Incorporation to reduce the total number of shares of Common Stock that the Company is authorized to issue |
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A
majority of the outstanding Voting Capital |
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Yes |
Approval of an amendment to the 2014 Plan to increase the number of shares of common stock authorized to be issued pursuant to the 2014 Plan from 4,161,892 to 8,250,000 |
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A majority of the votes cast |
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No |
Adjournment of the Special Meeting |
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A majority of the votes cast |
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No |
What Are the Voting Procedures?
You may vote in favor of or against
a proposal, or you may abstain from voting on a proposal. You should specify your respective choices on the accompanying
proxy card or your vote instruction form.
All shares represented by proxy
will be voted at the Special Meeting in accordance with the choices specified on the proxy, and where no choice is specified, in
accordance with the recommendations of the Board. Thus, where no choice is specified, the proxies will be voted for
an amendment of our Certificate of Incorporation to effect a reverse stock split of our Common Stock, subject to approval of Proposal
1, for an amendment of our Certificate of Incorporation to reduce the total number of shares of common stock that
the Company is authorized to issue, for an approval of an amendment to the 2014 Plan to increase the number of shares
of common stock authorized to be issued pursuant to the 2014 Plan and for an adjournment of the Special Meeting,
if necessary or appropriate.
Is My Proxy Revocable?
You may revoke your proxy and
reclaim your right to vote at any time before it is voted by giving written notice to our Corporate Secretary, by delivering a
properly completed, later-dated proxy card or vote instruction form or by voting in person at the Special Meeting. All
written notices of revocation and other communications with respect to revocations of proxies should be addressed to: Spherix Incorporated,
6430 Rockledge Drive, Suite 503, Bethesda, MD 20817, Attention: Secretary. Revocations of proxies must be received prior to the
time of the Special Meeting to serve as an effective revocation of that proxy.
Who Is Paying for the Expenses
Involved in Preparing and Mailing this Proxy Statement?
All of the expenses involved
in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be paid by us. In
addition to the solicitation by mail, proxies may be solicited by our officers and other employees by telephone or in person. Such
persons will receive no compensation for their services other than their regular salaries. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners
of the shares held of record by such persons, and we may reimburse such persons for reasonable out of pocket expenses incurred
by them in so doing.
Do I Have Dissenters’ Rights of Appraisal?
Our stockholders do not have
appraisal rights under Delaware law or under our governing documents with respect to the matters to be voted upon at the Special
Meeting.
How can I find out the Results
of the Voting at the Special Meeting?
Preliminary voting results will
be announced at the Special Meeting. Final voting results will be published in a Current Report on Form 8-K, which we will
file with the SEC within four business days after the meeting.
What Interest Do Officers
and Directors Have in Matters to Be Acted Upon?
Our Board members and executive
officers are eligible to receive grants under the terms of the 2014 Plan. Accordingly, our members of the board of directors and
executive officers have a substantial interest in Proposal 3. Other than Proposal 3, our Board members and executive officers do
not have any interest in any other Proposal that is not shared by all other stockholders.
Is There an Advisory Vote
on Executive Compensation?
No. At our 2013 annual meeting
of stockholders (held in February 2014), our stockholders approved a proposal that we shall have an advisory vote on executive
compensation once every three years. Thus, our next advisory vote on executive compensation will take place at our 2016 annual
meeting of stockholders.
PROPOSAL
1:
TO AMEND OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUR
COMMON STOCK WITHIN A RANGE OF
REVERSE SPLIT RATIOS
Stockholders are being asked
to approve an amendment to our Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect
a reverse stock split of our Common Stock within a range of 1-for-12 to 1-for-24, as will be selected by our Board prior to the
time of filing such Certificate of Amendment with the Delaware Secretary of State, and subject to the Board’s authority to
abandon such amendment (the “Amendment”).
On January 14, 2016, our
Board adopted resolutions approving and authorizing the Amendment and directing that the Amendment be submitted to a vote of the
stockholders at the Special Meeting.
The form of the proposed Amendment
is attached to this Proxy Statement as Appendix A. The Amendment will effect a reverse stock split of our Common
Stock within a range of, 1-for-12 to 1-for-24 shares to be selected by our Board following stockholder approval. Our Board, in
its discretion, may select the reverse split ratio upon receipt of stockholder approval or may elect to abandon the reverse stock
split if our Board determines in its discretion not to proceed with the reverse stock split. We believe that the availability of
a range of split ratios will provide the Company with the flexibility to implement the reverse stock split in a manner designed
to maximize the anticipated benefits for us and our stockholders. In determining the reverse stock split ratio to implement, if
any, following the receipt of stockholder approval, our Board may consider, among other things, factors such as:
- the historical trading price and trading
volume of our Common Stock;
- the then prevailing trading price and
trading volume of our Common Stock and the anticipated impact of the reverse stock split on the trading market for our Common Stock;
- our ability to continue our listing
on the NASDAQ Capital Market;
- our capitalization (including the number
of shares of Common Stock issued and outstanding);
- the expected liquidity of our Common Stock after the reverse stock split;
- which of the reverse split ratios would
result in the greatest overall reduction in our administrative costs; and
- prevailing general market and economic
conditions
To avoid the existence of fractional
shares of our Common Stock, stockholders who would otherwise hold fractional shares as a result of the reverse stock split will
be entitled to receive cash (without interest or deduction) in lieu of such fractional shares from our transfer agent, upon receipt
by our transfer agent of a properly completed and duly executed transmittal letter and, where shares are held in certificated form,
the surrender of all old certificates for our Common Stock (“Old Certificates”), in an amount per share equal to the
product obtained by multiplying (a) the closing price per share of our Common Stock on the Effective Date for the reverse
stock split as reported on the NASDAQ Capital Market by (b) the fraction of the share owned by the stockholder, without interest.
At the close of business on the
Record Date, we had 48,259,430 shares of Common Stock issued and outstanding. Based on the number of shares of Common Stock currently
issued and outstanding, immediately following the completion of the reverse stock split, and, for illustrative purposes only, assuming
a 1-for-15 reverse stock split, we would have approximately 3,217,295 shares of Common Stock issued and outstanding (without giving
effect to the treatment of fractional shares). The actual number of shares outstanding after giving effect to the reverse stock
split will depend on the reverse split ratio that is ultimately selected by our Board.
If the reverse stock split is effected,
we intend to also reduce the total number of shares of Common Stock that the Company is authorized to issue from 200 million shares
of Common Stock to 100 million shares of Common Stock, as described in and subject to the approval by the stockholders of Proposal
No. 2 below, and if the reverse stock split is not approved or the Board decides not to effect it, then any related reduction
in the total number of authorized shares will not occur.
Board
Discretion to Implement the Reverse Stock Split
Should we receive the required
stockholder approval of Proposal No. 1, our Board will have the authority to file the amendment to our Certificate of Incorporation
with the Secretary of State of the State of Delaware and thereby implement the reverse stock split. The Board will have the authority
to take such action at any time prior to our 2016 Annual Meeting of Stockholders. The Board intends to take such action only upon
a determination by the Board that such action is in our and our stockholders’ best interests. Such determination shall be
based upon a number of factors, including:
- the then-existing and expected trading prices for our Common
Stock;
- the existing and expected marketability and liquidity of
our Common Stock;
- our ability to continue
our listing on the NASDAQ Capital Market; and
- the then-prevailing market and economic conditions.
Notwithstanding receipt of the required
stockholder approval of Proposal No. 1, our Board may, in its sole discretion, abandon the proposed amendment to our Certificate
of Incorporation and determine not to effect the reverse stock split, as permitted under Section 242(c) of the Delaware General
Corporation Law. If the Board determines not to implement the reverse stock split prior to the 2016 Annual Meeting of Stockholders,
we would be required, once again, to seek stockholder approval to implement a reverse stock split.
Reasons for the
Reverse Stock Split
Our Board authorized the reverse split
of our Common Stock with the primary intent of increasing the price of our Common Stock in order to meet the NASDAQ Stock Market’s
price criteria for continued listing on the NASDAQ Capital Market. Our Common Stock is publicly traded and listed on the NASDAQ
Capital Market under the symbol “SPEX.” Our Board believes that, in addition to increasing the price of our Common
Stock, the reverse stock split would make our Common Stock more attractive to a broader range of institutional and other investors.
Accordingly, for these and other reasons discussed below, we believe that effecting the reverse stock split is in the Company’s
and our stockholders’ best interests.
On March 24, 2015, we received a letter
(the “Notice”) from the Listing Qualifications Staff of The NASDAQ Stock Market LLC (“NASDAQ”) notifying
us that, based upon the closing bid price of our Common Stock for the last 30 consecutive business days, our Common Stock no longer
meets the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2).
In accordance with Nasdaq’s Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until September 21, 2015,
to regain compliance with the Rule. After determining that we would not be in compliance with the Rule by September 21, 2015, we
notified Nasdaq and applied for an extension of the cure period, as permitted under the original notification. In accordance with
Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq granted a second grace period of 180 calendar days, or until March 21, 2016, to regain
compliance with the minimum closing bid price requirement for continued listing. In order to regain compliance, the minimum closing
bid price per share of our Common Stock must be at least $1.00 for a minimum of ten consecutive business days.
In addition to bringing the price of
our Common Stock back above $1.00, we also believe that the reverse stock split will make our Common Stock more attractive to a
broader range of institutional and other investors, as we believe that the current market price of our Common Stock may affect
its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage
houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced
stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those
policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than
commissions on higher-priced stocks, the current average price per share of common stock can result in individual stockholders
paying transaction costs representing a higher percentage of their total share value than would be the case if the share price
were substantially higher. However, some investors may view the reverse stock split negatively since it reduces the number of shares
of common stock available in the public market.
Certain
Risks Associated with the Reverse Stock Split
Reducing the number of outstanding shares
of our Common Stock through the reverse stock split is intended, absent other factors, to increase the per share market price of
our Common Stock. However, other factors, such as our ability to successfully accomplish our business goals, market conditions
and the market perception of our business may adversely affect the market price of our Common Stock. There can be no assurance
that the total market capitalization of our Common Stock after the implementation of a reverse stock split will be equal to or
greater than the total market capitalization before a reverse stock split or that the per share market price of our Common Stock
following a reverse stock split will increase in proportion to the reduction in the number of shares of our Common Stock outstanding
before the reverse stock split.
There can be no assurance that the market
price per new share of our Common Stock after a reverse stock split will remain unchanged or increase in proportion to the reduction
in the number of old shares of our Common Stock outstanding before a reverse stock split. For example, based on the closing price
of our Common Stock on January 14, 2016 of $0.1275 per share, if the Board were to implement the reverse stock split and utilize a
ratio of 1-for-15, we cannot assure you that the post-split market price of our common stock would be $1.91 (that is, $0.1275 ×
15) per share or greater. In many cases, the market price of a company’s shares declines after a reverse stock split.
Accordingly, the total market capitalization
of our Common Stock after a reverse stock split when and if implemented may be lower than the total market capitalization before
the reverse stock split. Moreover, in the future, the market price of our Common Stock following a reverse stock split may not
exceed or remain higher than the market price prior to the reverse stock split.
If the reverse stock split is
consummated, we will have more authorized shares available for issuance than we do currently and, therefore, there is a
greater ability for the Common Stock to be diluted with further issuances. Even if the proposal to decrease our authorized
shares of Common Stock is also approved, the Company will have more authorized shares than it did previously on a
split-adjusted basis. The Company currently has no plans, proposals or arrangements, written or otherwise, at this time to
issue any of the newly available shares of Common Stock. Additionally, if the holders of our options, warrants or convertible
preferred stock were to successfully contest our adjustment to their shares issuable, conversion prices or exercise prices,
it may result in our being required to issue more shares of Common Stock, or accept lower consideration for those shares of
Common Stock, than we anticipate.
Furthermore, the liquidity of our capital
stock may be harmed by the proposed reverse split given the reduced number of shares that will be outstanding after the reverse
stock split, particularly if the stock price does not increase as a result of the reverse stock split. In addition, the proposed
reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our Common Stock, creating
the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting
sales. If we effect a reverse stock split, the resulting per-share stock price may not attract institutional investors and may
not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of our Common Stock may not improve.
Furthermore, while our Board proposes
the reverse stock split to bring the price of our Common Stock back above $1.00 in order to comply with the NASDAQ Stock Market
listing standards and ensure the continued listing of our Common Stock on the NASDAQ Capital Market, there is no guarantee that
the price of our Common Stock will not decrease in the future, or that for any other reason our Common Stock will not remain in
compliance with the NASDAQ Stock Market listing standards. Furthermore, there can be no guarantee that the closing bid price of
our Common Stock will remain at or above $1.00 for ten consecutive business days, which would be required to cure our current listing
standard deficiency.
Effects of the
Reverse Stock Split
Effect of the Reverse Stock Split on Registration and
Voting Rights
If the reverse stock split is
approved and implemented, the principal effect will be to proportionately decrease the number of outstanding shares of our Common
Stock based on the reverse stock split ratio selected by our Board, as described below under “—Effect on Issued
and Outstanding Shares of Common Stock.”
Our Common Stock is currently registered
under Section 12(b) of the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act.
The reverse stock split will not affect the registration of our Common Stock under the Exchange Act or the listing of our Common
Stock on the NASDAQ Capital Market. Following the reverse stock split, our Common Stock will continue to be listed on the NASDAQ
Capital Market under the symbol “SPEX,” although it will be considered a new listing with a new CUSIP number.
Proportionate voting rights and
other rights of the holders of our Common Stock will not be affected by the reverse stock split, other than as a result of the
treatment of fractional shares as described below. For example, a holder of 2% of the voting power of the outstanding shares of
our Common Stock immediately prior to the effectiveness of the reverse stock split will generally continue to hold 2% of the voting
power of the outstanding shares of our Common Stock after the reverse stock split. The number of stockholders of record will not
be affected by the reverse stock split (except to the extent any are cashed out as a result of holding fractional shares). If approved
and implemented, the reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares
of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in
odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares.
Our Board believes, however, that these potential effects are outweighed by the benefits of the reverse stock split.
Effectiveness of Reverse Stock Split
The reverse stock split, if approved
by our stockholders, would become effective upon the filing and effectiveness (the “Effective Time”) of the Certificate
of Amendment with the Secretary of State of the State of Delaware. Our Board intends to take such action only upon a determination
by the Board that such action is in our and our stockholders’ best interests and will have the authority to do so at any
time prior to our 2016 Annual Meeting of Stockholders. In addition, our Board reserves the right, notwithstanding stockholder approval
and without further action by the stockholders, to elect not to proceed with the reverse stock split if, at any time prior to filing
the Certificate of Amendment, our Board, in its sole discretion, determines that it is no longer in our Company’s best interests
and the best interests of our stockholders to proceed with the reverse stock split.
Effect on the Company’s Equity Incentive Plans
We have equity incentive plans
designed primarily to provide equity-based incentives to employees and directors, including the 2014 Plan, the 2013 Equity
Incentive Plan and the 2012 Equity Incentive Plan (collectively, the “Plans”). We currently have 1,473,104 shares
available for issuance under the Plans, however an additional $120,000 in shares have already been authorized by our
compensation committee to be issued pursuant to certain employment agreements. Accordingly, if the reverse stock split is approved by
our stockholders and our Board of Directors decides to implement the reverse stock split, as of the Effective Date, the
number of shares available for issuance and the exercise price under the Plans will be proportionately adjusted using the
reverse stock split ratio selected by our Board of Directors. Our Board of Directors has also authorized us to effect any
other changes necessary, desirable or appropriate to give effect to the reverse stock split, including any applicable
technical, conforming changes. For example, if a 1-for-15 reverse stock split is effected, the 1,473,104 shares of our Common
Stock that remained available for issuance under the Plans would be adjusted to equal approximately 98,207 shares, which may
be further adjusted to the number of shares available for issuance under the 2014 Plan if our stockholders approve Proposal
No. 3 below to increase the number of shares available for issuance under the 2014 Equity Incentive Plan. In addition, the
exercise price per share under each outstanding stock option would be increased by fifteen (15) times and the number of
shares subject to each outstanding stock option would be decreased by fifteen (15) times, such that upon an exercise, the
aggregate exercise price payable by the optionee to we would remain the same. To the extent the reverse stock split would
entitle holders of options to purchase fractional shares, the number of shares for which the option is exercisable will be
rounded down to the nearest whole share.
Effect on Issued and Outstanding
Shares of Common Stock
Shares of Common Stock issued and outstanding
at the time that the reverse stock split is completed will be affected by the reverse stock split. The number of shares of Common
Stock issued and outstanding as of the Record Date is 48,259,430.
Depending on the ratio
for the reverse stock split determined by the Board of Directors, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 or 24
shares of existing Common Stock will be combined into one new share of Common Stock. The number of shares of Common Stock
issued and outstanding will therefore be reduced, depending upon the reverse stock split ratio determined by the Board. The
table below shows the number of issued and outstanding shares of Common Stock as of the Record Date that will result from the
listed hypothetical reverse stock split ratios (without giving effect to the treatment of fractional shares):
Hypothetical
reverse
stock split ratio |
|
Approximate
number of shares of
common stock outstanding
following the
Reverse Stock Split (millions
of shares) |
|
Reserved for issuance |
|
Available for issuance
(assuming a reduction to
100 million authorized
shares under Proposal No. 2)(1) |
1 for 12 |
|
4,021,619 |
|
4,947,357 |
|
91,031,023 |
1 for 13 |
|
3,712,264 |
|
4,566,791 |
|
91,720,945 |
1 for 14 |
|
3,447,102 |
|
4,240,592 |
|
92,312,306 |
1 for 15 |
|
3,217,295 |
|
3,957,886 |
|
92,824,819 |
1 for 16 |
|
3,016,214 |
|
3,710,518 |
|
93,273,268 |
1 for 17 |
|
2,838,790 |
|
3,492,252 |
|
93,668,958 |
1 for 18 |
|
2,681,079 |
|
3,298,238 |
|
94,020,682 |
1 for 19 |
|
2,539,970 |
|
3,124,647 |
|
94,335,383 |
1 for 20 |
|
2,412,972 |
|
2,968,414 |
|
94,618,614 |
1 for 21 |
|
2,298,068 |
|
2,827,061 |
|
94,874,870 |
1 for 22 |
|
2,193,610 |
|
2,698,559 |
|
95,107,831 |
1 for 23 |
|
2,098,236 |
|
2,581,230 |
|
95,320,534 |
1 for 24 |
|
2,010,810 |
|
2,473,679 |
|
95,515,512 |
(1)
Each number
in this column will be exactly 100 million shares higher if Proposal No. 2 is not approved.
The actual number of shares outstanding
after giving effect to the reverse stock split, if implemented, will depend on the reverse stock split ratio that is ultimately
determined by the Board.
If approved and effected, the reverse
stock split will be realized simultaneously and in the same ratio for all of our Common Stock. The reverse stock split will affect
all holders of our Common Stock uniformly and will not affect any stockholder’s percentage ownership interest in the Company,
except, that, as described below in “Fractional Shares,” holders of common stock otherwise entitled to
a fractional share as a result of the reverse stock split will receive a cash payment in lieu of such fractional share. These cash
payments will reduce the number of post-reverse stock split holders of our Common Stock to the extent there are currently stockholders
who would otherwise receive less than one share of Common Stock after the reverse stock split. In addition, the reverse stock split
will not affect any stockholder’s proportionate voting power (subject to the treatment of fractional shares).
Effect on Issued and Outstanding Shares of Preferred Stock
The number our issued and outstanding shares of preferred stock will not change as a result of the reverse
stock split. The reverse stock split will, however, result in a proportionate reduction in the number of shares of Common Stock
into which our convertible preferred stock is convertible. Since the Series D Preferred Stock, Series D-1 Preferred Stock and Series
H Preferred Stock all are entitled to a number of votes equal to the number of Common Shares into which such shares of preferred
stock are convertible, this will also proportionately reduce the number of votes to which these shares are entitled, although the
overall relative voting power of such shares will remain the same.
Effect
on Outstanding Warrants
Pursuant to the terms of our outstanding warrants, the reverse stock split will result in a proportional increase in the exercise price per share and a proportional decrease in the number of shares of Common Stock issuable upon the exercise of such warrants, all so that the aggregate exercise price of the warrants shall remain the same. If such adjustment would entitle the holder thereof to be issued a fractional share on the exercise of the warrant, then at the time of exercise we may, at our election, either pay a cash adjustment in respect of such fractional share or round up to the next whole share
Effect on Par Value
The proposed amendments to our Certificate
of Incorporation will not affect the par value of our Common Stock, which will remain at $0.0001, or the par value of any of our
outstanding series of preferred stock.
Effect on the Rights
Agreement
Pursuant to our Rights Agreement, if
we combine our shares of Common Stock in a reverse stock split, (a) the number of preferred stock purchase rights outstanding will
be adjusted so that the number of rights will continue to equal the number of shares of Common Stock we have outstanding, (b) the
exercise price of the rights will be adjusted by multiplying that amount by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such stock split and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the reverse stock split, (c) the purchase price for each one-hundredth of
a share of preferred stock will remain unchanged and (d) the fraction of a share of preferred stock purchasable with each right
will be equal to the product derived by multiplying the fraction of a share of preferred stock purchasable with each right immediately
prior to such stock split times the fraction used to determine the updated exercise price.
Accounting Matters
As a result of the reverse stock split,
upon the Effective Time, the stated capital on our balance sheet attributable to our Common Stock, which consists of the par value
per share of our Common Stock multiplied by the aggregate number of shares of our Common Stock issued and outstanding, will be
reduced in proportion to the size of the reverse stock split. Correspondingly, our additional paid-in capital account, which consists
of the difference between our stated capital and the aggregate amount paid to us upon issuance of all currently outstanding shares
of our Common Stock, shall be credited with the amount by which the stated capital is reduced. Our stockholders’ equity,
in the aggregate, will remain unchanged.
No Going Private Transaction
Notwithstanding the decrease in the
number of outstanding shares following the proposed reverse stock split, our Board does not intend for this transaction to be the
first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Book-Entry Shares
If the reverse stock split is effected,
stockholders who hold uncertificated shares (i.e., shares held in book-entry form and not represented by a physical stock certificate),
either as direct or beneficial owners, will have their holdings electronically adjusted by our transfer agent (and, for beneficial
owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect
to the reverse stock split.
Stockholders who hold uncertificated
shares as direct owners will be sent a transmittal letter by our transfer agent and will need to return a properly completed and
duly executed transmittal letter in order to receive any cash payment in lieu of fractional shares or any other distributions,
if any, that may be declared and payable to holders of record following the reverse stock split.
Exchange of Stock Certificates
If the reverse stock split is effected,
stockholders holding certificated shares (i.e., shares represented by one or more physical stock certificates) will be required
to exchange their Old Certificates for new certificates (“New Certificates”) representing the appropriate number of
shares of our Common Stock resulting from the reverse stock split. Stockholders of record upon the Effective Time will be furnished
the necessary materials and instructions for the surrender and exchange of their Old Certificate(s) at the appropriate time by
our transfer agent. Stockholders will not have to pay any transfer fee or other fee in connection with such exchange. As soon as
practicable after the Effective Time, our transfer agent will send a transmittal letter to each stockholder advising such holder
of the procedure for surrendering Old Certificates in exchange for New Certificates. Pursuant to applicable rules of the NASDAQ
Stock Market, your Old Certificates representing pre-split shares cannot be used for either transfers or deliveries made on the
NASDAQ Stock Market; thus, you must exchange your Old Certificates for New Certificates in order to effect transfers or deliveries
of your shares on the NASDAQ Stock Market.
YOU SHOULD NOT SEND YOUR OLD
CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER YOU RECEIVE THE LETTER OF TRANSMITTAL FROM OUR TRANSFER AGENT.
As soon as practicable after
the surrender to the transfer agent of any Old Certificate(s), together with a properly completed and duly executed transmittal
letter and any other documents the transfer agent may specify, the transfer agent will deliver to the person in whose name such
Old Certificate(s) had been issued a New Certificate registered in the name of such person.
Until surrendered as contemplated
herein, a stockholder’s Old Certificate(s) shall be deemed at and after the Effective Time to represent the number of full
shares of our Common Stock resulting from the reverse stock split. Until stockholders have returned their properly completed and
duly executed transmittal letter and surrendered their Old Certificate(s) for exchange, stockholders will not be entitled to receive
any other distributions, if any, that may be declared and payable to holders of record following the reverse stock split.
Any stockholder whose Old Certificate(s)
have been lost, destroyed or stolen will be entitled to a New Certificate only after complying with the requirements that we and
the transfer agent customarily apply in connection with lost, stolen or destroyed certificates.
No service charges, brokerage
commissions or transfer taxes shall be payable by any holder of any Old Certificate, except that if any New Certificate is to be
issued in a name other than that in which the Old Certificate(s) are registered, it will be a condition of such issuance that (I)
the person requesting such issuance must pay to us any applicable transfer taxes or establish to our satisfaction that such taxes
have been paid or are not payable, (2) the transfer complies with all applicable federal and state securities laws, and (3) the
surrendered certificate is properly endorsed and otherwise in proper form for transfer.
Effect on Registered and Beneficial Stockholders
Upon completion of the reverse stock
split, we will treat shares held by stockholders through a bank, broker, custodian or other nominee, in the same manner as registered
stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect
the reverse stock split for their beneficial holders holding our Common Stock in street name. However, these banks, brokers, custodians
or other nominees may have different procedures for processing the reverse stock split and making payment for fractional shares.
If a stockholder holds shares of our Common Stock with a bank, broker, custodian or other nominee and has any questions in this
regard, the stockholder is encouraged to contact his/her bank, broker, custodian or other nominee.
Fractional Shares
We do not currently intend to issue
fractional shares in connection with the reverse stock split. Therefore, we do not expect to issue certificates representing fractional
shares. Stockholders who would otherwise hold fractional shares because the number of shares of Common Stock they hold before the
reverse stock split is not evenly divisible by the split ratio ultimately selected by our Board of Directors will be entitled to
receive cash (without interest or deduction) in lieu of such fractional shares from our transfer agent, upon receipt by our transfer
agent of a properly completed and duly executed transmittal letter and, where shares are held in certificated form, the surrender
of all Old Certificate(s), in an amount per share equal to the product obtained by multiplying (a) the closing price per share
of our common stock on the Effective Date for the reverse split as reported on the NASDAQ Stock Market by (b) the fraction of the
share owned by the stockholder, without interest. The ownership of a fractional share interest will not give the holder any voting,
dividend or other rights, except to receive the above-described cash payment.
No Appraisal Rights
Under the Delaware General Corporation
Law, our stockholders are not entitled to dissenter’s rights or appraisal rights with respect to the reverse stock split
described in this Proposal No. 1, and we will not independently provide our stockholders with any such rights.
Certain Federal
Income Tax Consequences of the Reverse Stock Split
The following discussion is a general
summary of certain U.S. federal income tax consequences of the reverse stock split that may be relevant to (i) holders of our Common
Stock that hold such stock as a capital asset for U.S. federal income tax purposes and (ii) to us. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder,
administrative rulings and judicial decisions as of the date hereof, all of which may change, possibly with retroactive effect,
resulting in U.S. federal income tax consequences that may differ from those discussed below. This discussion does not address
all aspects of U.S. federal income taxation that may be relevant to such holders in light of their particular circumstances or
to holders that may be subject to special tax rules, including, without limitation: (i) holders subject to the alternative minimum
tax; (ii) banks, insurance companies, or other financial institutions; (iii) tax-exempt organizations; (iv) dealers in securities
or commodities; (v) regulated investment companies or real estate investment trusts; (vi) partnerships (or other flow-through entities
for U.S. federal income tax purposes and their partners or members); (vii) traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings; (viii) U.S. Holders (as defined below) whose “functional currency”
is not the U.S. dollar; (ix) persons holding our common stock as a position in a hedging transaction, “straddle,” “conversion
transaction” or other risk reduction transaction; (x) persons who acquire shares of our common stock in connection with employment
or other performance of services; or (xi) U.S. expatriates. In addition, this summary does not address the tax consequences arising
under the laws of any foreign, state or local jurisdiction and U.S. federal tax consequences other than U.S. federal income taxation.
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares
of our Common Stock, the tax treatment of a holder that is a partner in the partnership generally will depend upon the status of
the partner and the activities of the partnership.
We have not sought, and will
not seek, an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”) regarding the U.S. federal income
tax consequences of the reverse stock split and there can be no assurance the IRS will not challenge the statements and conclusions
set forth below or that a court would not sustain any such challenge.
EACH HOLDER OF COMMON STOCK SHOULD
CONSULT SUCH HOLDER’S TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH HOLDER.
For purposes of the discussion
below, a “U.S. Holder” is a beneficial owner of shares of our Common Stock that for U.S. federal income tax purposes
is: (I) an individual citizen or resident of the United States; (2) a corporation (including any entity treated as a corporation
for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state or political subdivision
thereof; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust,
the administration of which is subject to the primary supervision of a U.S. court and as to which one or more U.S. persons have
the authority to control all substantial decisions of the trust, or that has a valid election in effect to be treated as a U.S.
person. A “Non-U.S. Holder” is a beneficial owner (other than a partnership) of shares of our common stock who is not
a U.S. Holder.
U.S. Holders
The reverse stock split should constitute
a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder generally should not recognize
gain or loss upon the reverse stock split, except with respect to cash received in lieu of a fractional share of our Common Stock,
as discussed below. A U.S. Holder’s aggregate tax basis in the shares of our Common Stock received pursuant to the reverse
stock split should equal the aggregate tax basis of the shares of our Common Stock surrendered (excluding any portion of such basis
that is allocated to any fractional share of our Common Stock), and such U.S. Holder’s holding period (i.e., acquired date)
in the shares of our Common Stock received should include the holding period in the shares of our Common Stock surrendered. Treasury
regulations promulgated under the Code provide detailed rules for allocating the tax basis and holding period of the shares of
our Common Stock surrendered to the shares of our Common Stock received pursuant to the reverse stock split. Holders of shares
of our Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation
of the tax basis and holding period of such shares.
A U.S. Holder who receives cash
in lieu of a fractional share of our common stock pursuant to the reverse stock split should recognize capital gain or loss in
an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the shares of our
Common Stock surrendered that is allocated to such fractional share of our Common Stock. Such capital gain or loss should be long
term capital gain or loss if the U.S. Holder’s holding period for our Common Stock surrendered exceeded one year at the Effective
Time. Long-term capital gains of non-corporate U.S. Holders are generally subject to reduced rates of taxation. The deductibility
of capital losses is subject to limitations. Capital gains recognized by individuals, trusts and estates also may be subject to
a 3.8% federal Medicare contribution tax.
Information Reporting and Backup
Withholding.
Information returns generally
will be required to be filed with the IRS with respect to the receipt of cash in lieu of a fractional share of our Common Stock
pursuant to the reverse stock split in the case of certain U.S. Holders. In addition, U.S. Holders may be subject to a backup withholding
tax (at the current applicable rate of 28%) on the payment of such cash if they do not provide their taxpayer identification numbers
(in the case of individuals, their social security number) in the manner required or otherwise fail to comply with applicable backup
withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may
be refunded or allowed as a credit against the U.S. Holder’s federal income tax liability, if any, provided the required
information is timely furnished to the IRS.
Non-U.S. Holders
Non-U.S. Holders who exchange
shares of our Common Stock pursuant to the reverse stock split generally should be subject to tax in the manner described above
under “U.S. Holders,” except that any capital gain realized by a Non-U.S. Holder as a result of receiving cash in lieu
of a fractional share of our Common Stock generally should not be subject to U.S. federal income or withholding tax unless:
- the Non-U.S. Holder is an individual
who holds our Common Stock as a capital asset, is present in the U.S. for 183 days or more during the taxable year of the reverse
stock split and meets certain other conditions;
- the gain is effectively connected
with the Non-U.S. Holder’s conduct of a trade or business in the U.S. (or, if certain income tax treaties apply, is attributable
to a Non-U.S. Holder’s permanent establishment in the U.S.); or
- we are or have been a “United
States real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of the five-year
period ending on the Effective Time, or the period that the Non-U.S. Holder held the shares of our Common Stock. We do not believe
that we have been, currently are, or will become, a United States real property holding corporation.
Individual Non-U.S. Holders who
are subject to U.S. federal income tax because they are present in the United States for 183 days or more during the year of the
reverse stock split will be taxed on gain recognized as a result of receiving cash in lieu of a fractional share of common stock
at a flat rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Other Non-U.S. Holders subject
to U.S. federal income tax with respect to gain recognized as a result of receiving cash in lieu of a fractional share of common
stock generally will be taxed on such gain in the same manner as if they were U.S. Holders and, in the case of foreign corporations,
may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty.
Information Reporting and Backup
Withholding.
In general, backup withholding
and information reporting will not apply to payment of cash in lieu of a fractional share of our Common Stock to a Non-U.S. Holder
pursuant to the reverse stock split if the Non-U.S. Holder certifies under penalties of perjury that it is a Non-U.S. Holder and
neither we nor the transfer agent has actual knowledge to the contrary. Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be refunded or allowed as a credit against the Non-U.S. Holder’s U.S. federal
income tax liability, if any, provided that certain required information is timely furnished to the IRS. In certain circumstances
the amount of cash paid to a Non-U.S. Holder in lieu of a fractional share of our Common Stock, the name and address of the beneficial
owner and the amount, if any, of tax withheld may be reported to the IRS.
VOTE REQUIRED
The proposed amendment to the
Certificate of Incorporation to effect a reverse stock split of our Common Stock shall be approved upon the affirmative vote of
at least a majority of the shares of our Common Stock that are outstanding and entitled to vote on the proposal.
The Board recommends that you vote FOR the approval
of the amendment to our Certificate of Incorporation to effect a reverse stock split of our Common Stock within a range of, 1-for-12
to 1-for-24, as selected by our Board prior to the time of filing such Certificate of Amendment with the Delaware Secretary of
State.
PROPOSAL
2:
SUBJECT TO APPROVAL OF PROPOSAL 1, TO AMEND OUR CERTIFICATE OF INCORPORATION TO, REDUCE THE TOTAL NUMBER OF SHARES OF COMMON STOCK
THAT THE COMPANY IS AUTHORIZED TO ISSUE
Stockholders are being asked
to approve, subject to approval of Proposal 1, an amendment to our Certificate of Incorporation to reduce the total number
of shares of Common Stock that the Company is authorized to issue from 200 million shares to 100 million shares, subject to the
Board’s authority to abandon such amendment.
On January 14, 2016, our Board
adopted resolutions approving and authorizing the amendment and directing that the amendment be submitted to a vote of the stockholders
at the Special Meeting. Please note that Proposal No. 2 is conditioned on the approval of Proposal No. 1. Therefore,
if Proposal No. 1 is not approved by the stockholders, Proposal No. 2 will automatically be deemed to have not been approved
by the stockholders, regardless of the number of shares actually voted “FOR” Proposal No. 2. Proposal No. 1
is not conditioned on the approval of Proposal No. 2.
The form of the proposed Amendment
is described in the Certificate of Amendment, attached to this Proxy Statement as Appendix B. If both Proposal No. 1
and Proposal No. 2 are approved by our stockholders, the reduction in the number of authorized shares would become effective
at the Effective Time, which is the time at which the Certificate of Amendment to our Certificate of Incorporation is filed and
becomes effective with the Secretary of State of the State of Delaware. Our Board will have the authority to file the amendment
to our Certificate of Incorporation with the Secretary of State of the State of Delaware and thereby implement the reverse stock
split at any time prior to our 2016 Annual Meeting of Stockholders, based on its evaluation as to when such action will be the
most advantageous to the Company and our stockholders. In addition, the Board reserves the right, notwithstanding stockholder approval
and without further action by the stockholders, to elect not to proceed with the proportionate reduction in our total number of
authorized shares if, at any time prior to filing the Certificate of Amendment, the Board, in its sole discretion, determines that
it is no longer in the Company’s best interests and the best interests of our stockholders.
Effects
of Reducing our Total Number of Authorized Shares of common stock
Subject to stockholders’ approval
of the reverse stock split, we intend to decrease our authorized shares of Common Stock from 200 million shares of Common Stock
to 100 million shares of Common Stock. Currently, we are authorized to issue up to 200 million shares of Common Stock. The reduction
in the number of authorized shares would be effected by the filing of the Certificate of Amendment, as discussed above.
Currently, we are authorized
to issue up to 50,000,000 shares of preferred stock, $0.0001 par value per share. Our authorized shares of preferred stock will
not be affected by the reverse stock split or this proposal.
No Appraisal
Rights
Under the Delaware General Corporation
Law, our stockholders are not entitled to dissenter’s rights or appraisal rights with respect to this Proposal No. 2,
and we will not independently provide our stockholders with any such rights.
VOTE REQUIRED
The proposed amendment to the
Certificate of Incorporation to reduce proportionately the total number of shares of Common Stock that the Company is authorized
to issue shall be approved upon the affirmative vote of at least a majority of the shares of our common stock that are outstanding
and entitled to vote on the proposal.
The Board of Directors recommends
that you vote FOR the approval of the amendment to our Certificate of Incorporation to reduce the total number of shares
of common stock that the Company is authorized to issue.
PROPOSAL 3:
AMENDMENT OF THE SPHERIX INCORPORATED
2014 EQUITY INCENTIVE PLAN
Our 2014 Equity Incentive Plan (the
“2014 Plan”) was originally adopted by our Board on September 27, 2013 and approved by our stockholders on February
6, 2014. On February 27, 2014, the Board approved an amendment to the 2014 Plan to increase the number of shares available for
issuance thereunder to 4,161,892 from 2,400,000. That amendment was approved by our stockholders on April 16, 2014.
On January 14, 2016, the Board approved
an amendment (the “Amendment”) to increase the number of shares available for issuance thereunder to 8,250,000 from
4,161,892 (disregarding the effect of any reverse stock split that may be approved pursuant to Proposal 1) in support of our growth
and desire to attract and retain qualified individuals for management and other positions. The Board is recommending and submitting
the Amendment to our stockholders for approval.
Shares Available
As of the Record Date, 3,485,000
awards were outstanding under the 2014 Plan, 2,006,714 options were outstanding under our previously adopted 2013 Equity Incentive
Plan, and 6,987 shares of Common Stock were outstanding under our previously adopted 2012 Equity Incentive Plan. 676,892, 793,286
and 2,926 shares remain available for issuance under the 2014 Plan, the 2013 Equity Incentive Plan, and the 2012 Equity Incentive
Plan, respectively.
Set forth below is a summary
of the 2014 Plan. The full text of the proposed amendment to the 2014 Plan is set forth in Appendix C to this Proxy
Statement.
Reasons for this
Proposed Amendment
We are seeking stockholder approval
of the amendment to increase the number of shares issuable pursuant to the 2014 Plan to 8,250,000 from 4,161,892, disregarding
the effect of any reverse stock split that may be approved under Proposal 1 above. If we do effect a reverse stock split, this
total number of shares authorized for issuance under the 2014 Plan would be proportionately adjusted at the same ratio as is selected
by our Board for the reverse stock split. In determining the amount of the increase contemplated by the proposed amendment to the
2014 Plan, the Board has taken into consideration the significant increases in the number of shares of our Common Stock available
to become issued and outstanding since the original adoption of the 2014 Plan and the desire to continue to retain the flexibility
to issue awards that represent a reasonable percentage of our Common Stock issuable to plan participants when desired by the Board.
As of January 15, 2016, there were approximately 48,259,430 shares of our Common Stock outstanding. Assuming the approval of this increase, the total number of shares of our Common Stock available for issuance under the 2014
Plan will be 8,250,000, which represents approximately sixteen percent (15.82%) of our Common Stock as calculated on a fully-diluted
basis as of January 15, 2016.
The purpose of this increase is to continue
to be able to attract, retain and motivate executive officers and other employees and certain consultants. Upon stockholder approval,
additional 4,088,108 shares of Common Stock will be reserved for issuance under the 2014 Plan, which will enable us to continue
to grant equity awards to our officers, employees and consultants at levels determined by the Board to be necessary to attract,
retain and motivate the individuals who will be critical to our Company’s success in achieving its business objectives and
thereby creating greater value for all our stockholders.
Furthermore, we believe that equity
compensation aligns the interests of our management and other employees with the interests of our other stockholders. Equity awards
are a key component of our incentive compensation program. We believe that option grants have been critical in attracting and retaining
talented employees and officers, aligning their interests with those of stockholders, and focusing key employees on the long-term
growth of our Company. We anticipate that option grants and other forms of equity awards such as restricted stock awards may become
an increasing component in similarly motivating our consultants.
Approval of the Amendment will permit us to continue
to use stock-based compensation to align stockholder and employee interests and to motivate employees and others providing services
to our Company or any subsidiary. The Board recommends approval for the proposed Amendment to the 2014 Plan.
The terms of the 2014 Plan are summarized
below, and the full text of the proposed Amendment to the 2014 Plan is set forth as Appendix C to this Proxy Solicitation.
It is intended that the 2014 Plan qualify as an incentive stock option plan meeting the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”).
Summary of the
2014 Plan
Employees and directors of, and consultants
to the Company and any subsidiary are eligible to receive awards under the 2014 Plan at the discretion of the Board or its designated
committee. The Board, or a committee designated by the Board, has authority to, among other things,
- determine eligibility and, from among
those persons determined to be eligible, the particular person who will receive awards under the 2014 Plan;
- grant awards to eligible persons, determine
the price at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons,
determine the other specific terms and conditions of such awards consistent with the express limits of the 2014 Plan, establish
the installments (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance
and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance
targets, and establish the events of termination or reversion of such awards;
- approve the forms of award agreements
(which need not be identical either as to type of award or among participants);
- construe and interpret the 2014 Plan
and any agreements defining the rights and obligations of the Company, its subsidiaries, and participants under the 2014 Plan,
further define the terms used in the 2014 Plan, and prescribe, amend and rescind rules and regulations relating to the administration
of the 2014 Plan or the awards granted under the 2014 Plan;
- cancel, modify, or waive the Corporation’s
rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent;
- accelerate or extend the vesting or
exercisability or extend the term of any or all such outstanding awards (in the case of options or stock appreciation rights, within
the maximum ten-year term of such awards) in such circumstances as the Board or its designated committee may deem appropriate (including,
without limitation, in connection with a termination of employment or services or other events of a personal nature) subject to
any required consent;
- adjust the number of shares of Common
Stock subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and
conditions, in such circumstances as the Board or its designated committee may deem appropriate,;
- determine the date of grant of an award,
which may be a designated date after but not before the date of the action of the Board or its designated committee;
- determine whether, and the extent to
which, adjustments are required and authorize the termination, conversion, substitution, acceleration or succession of awards upon
the occurrence of certain events;
- acquire or settle rights under awards
in cash, stock of equivalent value, or other consideration; and
- determine the fair market value of
the Common Stock or awards under the 2014 Plan from time to time and/or the manner in which such value will be determined.
The 2014 Plan permits the grant of stock
options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, cash incentive awards, or other
awards. Employees and directors of, and consultants to the Company and any subsidiary are eligible to receive nonstatutory stock
options and other stock-based awards under the 2014 Plan. Only employees of the Company, and any subsidiary, are eligible to receive
incentive stock options under the 2014 Plan.
Incentive stock options and SARs may
not be priced at less than 100% of the fair market value of our Common Stock on the date of grant (110% of fair market value in
the case of individuals holding 10% or more of our Common Stock). Except as otherwise determined by the Board, in the case of nonstatutory
options, the exercise price may not be less than 100% of the fair market value on the date of grant in accordance with applicable
law. The fair market value of our Common Stock on January 5, 2016, was $0.14, based on the closing price of our Common Stock as
reported by NASDAQ on that date. The 2014 Plan provides that stock options and similar awards may be issued with exercise periods
of up to 10 years (except that no incentive stock option granted to 10% owners of the Company’s Common Stock shall be exercisable
after the expiration of five years after the effective date of grant of such option).
The purchase price for any award granted
under the 2014 Plan or the Common Stock to be delivered pursuant to any such award, as applicable, may be paid by means of any
lawful consideration as determined by the Board or its designated committee, including, without limitation, one or a combination
of: (1) services rendered by the recipient of such award; (2) cash, check payable to the order of the Company, or electronic funds
transfer; (3) notice and third party payment in such manner as may be authorized; (4) the delivery of previously owned and fully
vested shares of Common Stock; (5) the delivery of previously owned and fully vested shares of Common Stock; (6) by a reduction
in the number of shares otherwise deliverable pursuant to the award; or (7) subject to such procedures as the Board or its designated
committee may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of
(or who otherwise facilitates) the purchase or exercise of awards.
In the event of termination of employment
or consulting relationship for any reason other than disability or death, the award recipient may exercise his or her vested options
or SARs within 30 days of the date of such termination. In the event of termination as a result of disability, the award recipient
may exercise his or her vested options within six months following the date of such termination but in any event no later than
the date of expiration of the option’s term. In the event of death, the award recipient’s estate may exercise his or
her vested options within 6 months following the date of death.
Unless otherwise specified in an award
agreement, upon termination of a participant’s employment or other service to the Company, option and SAR awards shall expire
(1) three months after the last day that the participant is employed by or provides services to the Company or any subsidiary;
(2) in the case of a participant whose termination of employment or services is due to death or disability, 12 months after the
last day that the participant is employed by or provides services to the Company or its subsidiary; and (3) immediately upon a
participant’s termination for “cause”.
The Board has discretion to grant other
stock-based awards, provided, however, that no such awards may be made unless the terms of the 2014 Plan and the awards are in
compliance with Section 409A of the Code.
Transfers of awards may not be made
other than by will or by the laws of descent and distribution. During the lifetime of a participant, an award may be exercised
only by the participant to whom the award is granted.
New Plan
Benefits
SEC rules require us to
disclose any amounts that we currently are able to determine will be allocated to our named executive officers, directors and
other employees following approval of the proposed amendment to the 2014 Plan. As of the Record Date, 3,485,000 awards were
granted under the 2014 Plan pursuant to the amendment to the 2014 Plan to our named executive officers, directors or other
employees and an additional $120,000 in shares have been authorized by our compensation committee to be issued pursuant to
certain employment agreements. The Company intends to issue 800,000 shares of Common Stock to two employees of the Company
pursuant to the terms of their respective employment agreements. These shares are being issued pursuant to the 2014
Plan and the 2013 Plan as already previously approved by the shareholders of the Company, and the amendment to the 2014 Plan
is not necessary for the issuance of these shares.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth
information concerning our equity compensation plans as of December 31, 2015. The below information is furnished with respect
to the 2014 Plan as proposed to be amended.
Plan Category | |
Number of securities authorized to be issued upon exercise of outstanding options, warrants and rights (1) | |
Weighted average exercise price of outstanding options, warrants and rights | |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (2) |
Equity compensation plans approved by security holders | |
| 5,498,701 | | |
$ | 4.69 | | |
| 1,473,104 | |
Equity compensation plans not approved by security holders | |
| — | | |
$ | — | | |
| — | |
Total | |
| 5,498,701 | | |
$ | — | | |
| 1,473,104 | |
1. Consists of options to acquire 6,987 shares
of our Common Stock under the 2012 Equity Incentive Plan, 2,006,714 shares of our Common Stock under the 2013 Equity Incentive
Plan and 3,485,000 shares of our Common Stock under the 2014 Plan.
2. Consists of shares of Common Stock
available for future issuance under our equity incentive plan.
EXECUTIVE COMPENSATION
The following Summary of Compensation table sets forth
the compensation of our named Executive Officers for the years ended December 31, 2015 and December 31, 2014.
Summary of Compensation
Name and Principal Position | |
Year | |
Salary ($) | |
Bonus ($) | |
Stock Awards ($) | |
Option Awards ($) | |
Non-Equity Incentive Plan Compensation ($)(1) | |
Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) | |
All Other Compensation ($) | |
Total ($) |
Anthony Hayes, President, Chief | |
| 2015 | | |
| 350,000 | | |
| 350,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 700,000 | |
Executive Officer and Director (2) | |
| 2014 | | |
| 350,000 | | |
| 250,000 | | |
| — | | |
| 805,651 | | |
| — | | |
| — | | |
| 6,400 | | |
| 1,412,051 | |
Frank Reiner, Interim Chief | |
| 2015 | | |
| 254,500 | | |
| 80,000 | | |
| 60,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 394,500 | |
Financial Officer (3) | |
| 2014 | | |
| 182,917 | | |
| — | | |
| 46,700 | | |
| 384,838 | | |
| — | | |
| — | | |
| — | | |
| 614,455 | |
Harvey Kesner, Interim CEO and | |
| 2015 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Director (4) | |
| 2014 | | |
| — | | |
| — | | |
| — | | |
| 2,244,944 | | |
| — | | |
| — | | |
| 14,250 | | |
| 2,259,194 | |
Richard Cohen, | |
| 2015 | | |
| 120,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 120,000 | |
Chief Financial Officer (5) | |
| 2014 | | |
| 240,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 240,000 | |
|
(1) |
Awards pursuant to the Spherix Incorporated 2013 Incentive Compensation Plan and 2014 Plan. |
|
|
|
|
(2) |
On January 28, 2014, the Compensation Committee adopted a resolution intended to grant Mr. Hayes 300,000 stock options with a term of five years and an exercise price of $5.83 that would be subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. The parties failed to reach agreement prior to the date of the 2014 Annual Report on From 10-K and accordingly the stock options subject to specific performance targets were determined not to be issued, but may be issued at a future date at the discretion of the Compensation Committee. In accordance with the ASC Topic 718 the failure to finalize performance targets result in the stock options not being considered to have been granted and therefore not outstanding. On April 3, 2014, Mr. Hayes received 500,000 stock options with a term of five years and valued on the date of grant, with 50% vesting immediately and the remaining 50% vesting upon our Company’s receipt of gross proceeds of at least $30 million by April 3, 2015 from an offering of its securities. Since the Performance Condition was not satisfied by April 3, 2015, 250,000 options were forfeited. As a result, $0.4 million of option expense related to this grant were reversed in 2015. On June 30, 2014, Mr. Hayes received a bonus in the aggregate amount of $250,000. On July 3, 2014, Mr. Hayes received 100,000 stock options with a term of five years and an exercise price of $1.79, vesting immediately. Mr. Hayes also received $6,400 in cash for his service as a director of our Company during 2014. All stock options to Mr. Hayes were granted in accordance with ASC Topic 718. On December 16, 2015, the Compensation Committee adopted a resolution to pay Mr. Hayes a bonus of $350,000 in cash since he has achieved the criteria for his 2015 target bonus. |
|
|
|
|
(3) |
On March 14, 2014, Mr.
Reiner received 100,000 non-qualified options with a term of 10 years and an exercise price of $4.67. The
options vest in 25% increments in quarterly installments beginning July 1, 2014. Also on March 14, 2014, the Company
issued 10,000 restricted shares to Mr. Reiner, with 25% increments vesting in quarterly installments beginning March 14,
2014. On June 19, 2014, Mr.Reiner received additional 50,000 non-qualified options with a term of 10 years and an
exercise price of $1.94. The options vested in two equal installments on each of June 19, 2014 and December 19, 2014.
All stock options to Mr. Reiner were granted in accordance with ASC Topic 718. On December 22,
2015, the Compensation Committee adopted a resolution to pay Mr. Reiner a
2015 bonus of $40,000 in cash and $60,000 in shares of common stock in respect of his performance for the
2015 fiscal year which, as of the close of trading on December 21, 2015, would have constituted a total of 400,000 shares.
The Compensation Committee also adopted to pay Mr. Reiner a deferred 2014 bonus of $20,000 in cash and $20,000
in cash in lieu of common stock for achieving the target in respective employment
agreement. |
|
|
|
|
(4) |
Mr. Kesner served as our interim Chief Executive Officer from February 27, 2013 to September 10, 2013. Mr. Kesner was paid $14,250 as compensation for his Board of Director duties during 2014. Mr. Kesner’s compensation does not include legal fees billed by a law firm with which Mr. Kesner is associated, in the amount of $19,936 and $449,935 of December 31, 2015 and 2014, respectively. On January 28, 2014, Mr. Kesner received 675,000 stock options with a term of five years and an exercise price of $5.83, vesting in two equal annual installments with 50% vesting immediately on the date of issuance and the remaining 50% on the one-year anniversary of the date of issuance. On April 3, 2014, Mr. Kesner received 200,000 stock options with a term of five years, valued on the date of grant and vesting immediately. Mr. Kesner resigned his positions as Director on May 28, 2014. Pursuant to his resignation, the Board approved the accelerated vesting of 837,500 previously granted stock options to vest on the date of Mr. Kesner’s resignation. All stock options to Mr. Kesner were granted in accordance with ASC Topic 718. |
|
|
|
|
(5) |
Mr. Cohen was appointed our Chief Financial Officer on January 6, 2014. In consideration for Mr. Cohen’s services, we agreed to pay Chord Advisors LLC (“Chord”), of which Mr. Cohen was chairman, a monthly fee of $20,000 ($5,000 of which was payable in shares of our common stock). In April 2014, we modified this agreement to pay Chord a monthly fee of $20,000 in cash, and no fees were paid to Chord in the form of our common stock. The previous $15,000 payable in shares was forgiven by Chord. Mr. Cohen resigned as a member of Chord and, simultaneously, as a member of our Board on June 30, 2015, and our monthly fee payable to Chord was further reduced to $10,000 per month. |
Outstanding Equity Awards at
December 31, 2015
| |
Option Awards |
| |
| |
| |
| |
|
| |
Number of | |
Number of | |
| |
|
| |
Securities | |
Securities | |
| |
|
| |
Underlying | |
Underlying | |
| |
|
| |
Unexercised | |
Unexercised | |
Option | |
Option |
| |
Options (#) | |
Options (#) | |
Exercise | |
Expiration |
Name | |
Exercisable | |
Unexercisable | |
Price ($) | |
Date |
Anthony Hayes | |
| 750,000 | | |
| — | | |
$ | 7.08 | | |
| 04/01/2023 | |
| |
| 250,000 | | |
| — | | |
$ | 2.86 | | |
| 04/03/2019 | |
| |
| 100,000 | | |
| — | | |
$ | 1.79 | | |
| 07/15/2019 | |
Frank Reiner | |
| 100,000 | | |
| — | | |
$ | 4.67 | | |
| 03/15/2024 | |
| |
| 50,000 | | |
| — | | |
$ | 1.94 | | |
| 06/19/2024 | |
Potential Payment upon Termination
or Change in Control
Under our September 10,
2013 Employment Agreement with Mr. Hayes, we have agreed to, in the event of termination by us without “cause” or
pursuant to the consummation of a change in control, we have agreed to grant Mr. Hayes, in addition to reimbursement of any
documented, unreimbursed expenses incurred prior to such date, (i) any unpaid compensation and vacation pay accrued during
two years commencing on September 10, 2013 or any then applicable extension of the term of Mr. Hayes’ employment, and
any other benefits accrued to him under any of our benefit plans outstanding at such time, (ii) twelve (12) months’
base salary at the then current rate to be paid in a single lump sum within sixty (60) days of Mr. Hayes’ termination,
(iii) continuation for a period of twelve (12) months of any benefits as extended to our executive officers from time to time
and (iv) payment on a pro rata basis of any annual bonus or other payments earned in connection with any bonus plans to which
Mr. Hayes was a participant as of the date of termination. In addition, any options or restricted stock shall be immediately
vested upon termination of Mr. Hayes’s employment without “cause” or pursuant to a change in control. Under
our March 14, 2014 employment agreement with Mr. Frank Reiner, in the event of a termination of his employment without
“cause” or pursuant to the consummation of a change in control, we have agreed to grant Mr. Reiner in addition to reimbursement of any documented, unreimbursed expenses incurred prior to such
date, (i) any unpaid compensation and vacation pay accrued during two years commencing on March 14, 2014 or any then applicable
extension of the term of Mr. Reiner’s employment, and any other benefits accrued to him under any of our benefit plans outstanding
at such time, (ii) twelve (12) months’ base salary at the then current rate to be paid in a single lump sum within sixty
(60) days of Mr. Reiner’s termination, (iii) continuation for a period of twelve (12) months of any benefits as extended
to our executive officers from time to time and (iv) payment on a pro rata basis of any annual bonus or other payments earned in
connection with any bonus plans to which Mr. Reiner was a participant as of the date of termination. In addition, any options or
restricted stock shall be immediately vested upon termination of Mr. Reiner’s employment without “cause” or pursuant
to a change in control.
Director Compensation
The following table summarizes the compensation of
non-employee directors during the year ended December 31, 2015.
Name | |
Fees earned or paid in cash ($) | |
Stock Awards ($) | |
Option Awards ($) | |
Non-Equity Incentive Plan Compensation ($) | |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($) | |
All Other Compensation ($) | |
Total ($) |
Jeffrey Ballabon (1) | |
$ | 54,600 | | |
| — | | |
| 21,713 | | |
| — | | |
| — | | |
| — | | |
| 76,313 | |
Douglas T. Brown (2) | |
$ | 56,400 | | |
| — | | |
| 11,665 | | |
| — | | |
| — | | |
| — | | |
| 68,065 | |
Robert J. Vander Zanden (3) | |
$ | 61,600 | | |
| — | | |
| 11,665 | | |
| — | | |
| — | | |
| — | | |
| 73,265 | |
Alexander Poltorak (4) | |
$ | 25,300 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 25,300 | |
Tim Ledwick (5) | |
$ | 26,500 | | |
| | | |
| 18,025 | | |
| | | |
| | | |
| | | |
| 44,525 | |
Howard E. Goldberg (6) | |
$ | 17,875 | | |
| | | |
| 11,806 | | |
| | | |
| | | |
| 40,800 | | |
| 70,481 | |
| (1) | Mr. Ballabon was paid $54,600 in compensation for his services as a director. On August 5, 2015,
Mr. Ballabon received 75,000 stock options with a term of five years and an exercise price of $0.22, vesting immediately. In addition,
on August 5, 2015, Mr. Ballabon received 75,000 stock options with a term of five years and an exercise price of $1.73, vesting
immediately, in respect of his previously unpaid options due to him for his appointment to the Board in 2014. |
| (2) | Mr. Brown was paid $56,400 in compensation for his duties as a director. On August 5, 2015, Mr.
Brown received 75,000 stock options with a term of five years and an exercise price of $0.22, vesting immediately. |
| (3) | Mr. Vander Zanden was paid $61,600 for his duties as a director. On August 5, 2015, Mr. Vander
Zanden received 75,000 stock options with a term of five years and an exercise price of $0.22, vesting immediately. |
| (4) | Mr. Poltorak was paid $25,300 in compensation for his duties as a director. |
| (5) | Mr. Ledwick was paid $26,500 in compensation for his services as a director. On July 9, 2015, Mr.
Goldberg received 75,000 stock options with a term of five years and an exercise price of $0.38, vesting immediately. |
| (6) | Mr. Goldberg was paid $17,875 in compensation for his services as a director. On August 14,
2015, Mr. Goldberg received 75,000 stock options with a term of five years and an exercise price of $0.24. 50% of the
options vested immediately, and 50% of the options will vest on
the first anniversary of vesting commencement date. In addition, Mr. Goldberg was paid $40,800 in consulting fees for
services provided by Mr. Goldberg pursuant to the consulting agreement between us and Mr. Goldberg, dated as of August 10,
2015 and further described below. |
All the above stock options were granted in accordance
with ASC Topic 718.
Non-employee directors received the following annual
compensation for service as a member of the Board for the fiscal year ended December 31, 2015:
Annual Retainer |
$25,000 |
To be paid in cash at May Board Meeting annually. |
Stock Options |
75,000 |
Options to acquire shares of our Common Stock, pursuant to and subject to the available number of shares under the 2014 Plan, to be granted on the date of our Annual Meeting. The options will have an exercise price equal to the closing price on the trading day immediately preceding the date of issuance and be exercisable for a period of five (5) years. The options will vest in two equal annual installments with 50% vesting immediately on the date of issue and the remaining 50% on the one year anniversary of the date of the issue, so long as the director has not been removed for cause. |
Board Meeting Fees |
$2,500 |
To be paid for all in-person Board Meetings. Members must be present to be paid. |
Committee Meeting Fees |
$800 |
To be paid for all in-person Committee Meetings. Members must be present to be paid. |
Teleconference Fees |
$800
$300 |
To be paid for all teleconferences called by either the Chairman of the Board, the President, or by the Chairman of the relevant Committee. Members must be on-line to be paid. The fee is $800 for teleconferences during which formal action was taken and $300 for teleconferences during which no formal action was taken. |
Additional Retainer |
$5,000 |
To be paid to the Chairman of the Board upon election annually. |
Additional Retainer |
$3,000 |
To be paid to the Chairman of the Audit Committee annually. |
On August 10, 2015, the Company entered
into a consulting agreement (the “Consulting Agreement”) with Mr. Goldberg (d/b/a Forward Vision Associates, of which
Mr. Goldberg is the sole proprietor and owner), on an independent contractor basis, pursuant to which Mr. Goldberg will, among
other services, provide advisory services to the Company in areas including licensing, litigation and business strategies. The
Company will pay Mr. Goldberg an agreed upon quarterly retainer amount of $20,400 (calculated on an hourly basis) and, if applicable,
upon exhaustion of each quarterly retainer, at an hourly rate to be paid in equity (for the first 50 hours above the quarterly
retainer), and subsequently (if applicable) at an hourly rate thereafter in cash. The Company will reimburse Mr. Goldberg for actual
out-of-pocket expenses. The Consulting Agreement has an initial term of one year, unless Mr. Goldberg has completed the desired
services by an earlier date or unless the agreement is earlier terminated pursuant to its terms. The Consulting Agreement may be
extended by written agreement of both the Company and Mr. Goldberg. The Consulting Agreement was approved by all of the independent
directors of the Company.
Compensation Committee Interlocks
and Insider Participation
The members of the Compensation
Committee during the fiscal year ended December 31, 2015 were Mr. Jeffrey Ballabon, Mr. Douglas Brown, Mr. Tim Ledwick
and Dr. Robert Vander Zanden. None of the members of the Compensation Committee during the fiscal year ended December 31,
2015 served as an officer or employee of our Company, was formerly an officer of our Company, or had any relationship requiring
disclosure required by Item 404 of Regulation S-K.
Beneficial Ownership of Common
Stock by Certain Beneficial Owners and Management
The following table sets forth
certain information concerning the number of shares of our Common Stock owned beneficially as of January 15, 2016 by (i) each
person (including any group) known to us to own more than 5% of our Common Stock and (ii) our officers and directors as a
group. As of January 15, 2016 there were 48,259,430 shares of Common Stock outstanding. Unless otherwise indicated, it is our understanding
and belief that the stockholders listed possess sole voting and investment power with respect to the shares shown.
Title of Class |
Name of Beneficial Owner |
Amount and Nature of Ownership (1) |
Percent of Class Beneficially Owned (2) |
Executive Officers and Directors |
|
|
|
Common |
Robert J. Vander Zanden |
426,258 (3) |
* |
Common |
Anthony Hayes |
1,123,081 (4) |
2.28% |
Common |
Jeffrey Ballabon |
150,000 (5) |
* |
Common |
Tim S. Ledwick |
75,000 (6) |
* |
Common |
Howard E. Goldberg |
37,500 (7) |
* |
Common |
Frank Reiner |
161,000 (8) |
* |
Common |
All Directors and Officers as a Group (6 persons) |
1,972,839 |
3.93% |
* Less
than 1% of the outstanding shares of the Company common stock.
| (1) | Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting
power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power
to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if,
for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially
owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding
is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition
rights. |
| (2) | Based on 48,259,430 shares of our Common Stock outstanding as of January 15, 2016 and takes into
account the beneficial ownership limitations governing the Series D Preferred Stock, Series D-1 Preferred Stock and Series H Preferred
Stock. Beneficial ownership limitations on our Series H Preferred Stock prevents the conversion or
voting of the stock if the number of shares of Common Stock to be issued pursuant to such conversion or to be voted would exceed,
when aggregated with all other shares of Common Stock or other voting stock owned by the same holder at the time, the number of
shares of Common Stock which would result in such holder beneficially owning more than 4.99% of all of the Common Stock outstanding
at such time, and beneficial ownership limitations on our Series D-1 Preferred Stock prevents the conversion or voting of the stock
if the number of shares of Common Stock to be issued pursuant to such conversion or to be voted would exceed, when aggregated with
all other shares of Common Stock owned by the same holder at the time, the number of shares of Common Stock which would result
in such holder beneficially owning more than 9.99% of all of the Common Stock outstanding at such time. |
| (3) | Includes 143 shares of Common Stock and 426,115 options for purchase of Common Stock exercisable
within 60 days of December 31, 2015. |
| (4) | Includes 23,081 shares of Common Stock and 1,100,000 options for purchase of Common Stock exercisable
within 60 days of December 31, 2015. |
(5)
Consists of 150,000 options for
purchase of Common Stock exercisable within 60 days of December 31, 2015.
(6)
Consists of 75,000 options for purchase
of Common Stock exercisable within 60 days of December 31, 2015.
(7)
Consists
of 37,500 options for purchase of Common Stock exercisable within 60 days of December 31, 2015.
| (8) | Includes 11,000 shares of Common Stock and 150,000 options for purchase of Common Stock exercisable
within 60 days of December 31, 2015. |
Effective January 24, 2013,
our Company and Equity Stock Transfer, LLC, as Rights Agent, entered into a Rights Agreement which provides each stockholder of
record a dividend distribution of one “right” for each outstanding share of Common Stock. Rights become exercisable
at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire
10% or more of our Common Stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning
10% or more of our outstanding Common Stock. All rights held by an acquirer or offeror expire on the announced acquisition
date, and all rights expire at the close of business on December 31, 2017, subject to further extension. Each right entitles
a stockholder to acquire, at a price of $7.46 per one one-hundredth of a share of our Series A Preferred Stock, subject to adjustments,
which carries voting and dividend rights similar to one share of our Common Stock. Alternatively, a right holder may elect to purchase
for the stated price an equivalent number of shares of our Common Stock at a price per share equal to one-half of the average market
price for a specified period. In lieu of the stated purchase price, a right holder may elect to acquire one-half of
the Common Stock available under the second option. The purchase price of the preferred stock fractional amount is subject
to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board of Directors and within
a specified time period, we may redeem all of the rights at a price of $0.001 per right. The Board may also amend any
provisions of the Agreement prior to exercise.
VOTE REQUIRED
The affirmative vote of a majority
of the votes cast at the Special Meeting will be required for the approval of this Proposal 3.
Our Board of Directors recommends
you voting FOR the amendment of our 2014 Plan to increase the number of shares of Common Stock authorized issuable thereunder.
PROPOSAL
4:
ADJOURNMENT
At the Special Meeting, we may
ask you to vote on a proposal to adjourn the Special Meeting if necessary or appropriate in the sole discretion of our Board, including
to solicit additional proxies in the event that there are not sufficient votes at the time of the Special Meeting or any adjournment
or postponement of the Special Meeting to approve any of the other proposals.
If at the Special Meeting the
number of shares of our Voting Capital present or represented by proxy and voting in favor of a proposal is insufficient to approve
such proposal, then our Board may hold a vote on each proposal that has garnered sufficient votes, if any, and then move to adjourn
the Special Meeting as to the remaining proposals in order to solicit additional proxies in favor of those remaining proposals.
Alternatively, even if there
are sufficient shares of our Voting Capital present or represented by proxy voting in favor of all of the proposals, our Board
may hold a vote on the adjournment proposal if, in its sole discretion, it determines that it is necessary or appropriate for any
reason to adjourn the Special Meeting to a later date and time. In that event, we will ask you to vote only upon the adjournment
proposal and not any other proposal.
Any adjournment may be made without
notice (if the adjournment is not for more than thirty days and a new record date is not fixed for the adjourned meeting), other
than by an announcement made at the Special Meeting of the time, date and place of the adjourned meeting.
Any adjournment of the Special
Meeting will allow you to revoke any proxies already sent in at any time prior to their use at the Special Meeting as adjourned.
If we adjourn the Special Meeting
to a later date, we will transact the same business and, unless we must fix a new record date, only the stockholders who were eligible
to vote at the original meeting will be permitted to vote at the adjourned meeting.
VOTE REQUIRED
The affirmative vote of the
votes cast at the Special Meeting will be required for the approval of this Proposal 4.
The Board recommends voting FOR
authorization to adjourn the Special Meeting if necessary or appropriate.
DOCUMENTS
INCORPORATED BY REFERENCE
The SEC allows us to “incorporate
by reference” information into this Proxy Statement. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered
to be a part of this Proxy Statement, except for any information that is superseded by information that is included directly in
this Proxy Statement or in any other subsequently filed document that also is incorporated by reference herein.
This Proxy Statement incorporates
by reference our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015
and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed with the SEC on November 5,
2015.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert J. Vander
Zanden
Robert J. Vander Zanden
Chairman of the Board
Appendix A
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF SPHERIX INCORPORATED
Spherix Incorporated, a corporation organized
and existing under the Delaware General Corporation Law (the “Corporation”), does hereby certify that:
FIRST: The name of the corporation is
Spherix Incorporated.
SECOND: This Certificate of Amendment
was duly adopted in accordance with the Secretary of State of the State of Delaware by the Board of Directors and Stockholders
of the Corporation. Following action by the Board of Directors, a meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting
the necessary number of shares as required by statute were voted in favor of the amendment. This Certificate of Amendment
was duly adopted at said meeting of the Stockholders in accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delaware.
THIRD: That upon the effectiveness of this Certificate
of Amendment (the “Effective Date”), Clause A. and Paragraphs numbered 1. and 2. of Article FOURTH of the Corporation’s
Amended and Restated Certificate of Incorporation, is hereby amended and restated in its entirety such that, as amended, said clause
shall read in its entirety as follows:
“A. The total number of shares of stock of all classes
that the Corporation shall have authority to issue is Two Hundred Fifty Million (250,000,000) shares, consisting of Two Hundred
Million (200,000,000) shares of common stock, par value $0.0001 per share, and Fifty Million (50,000,000) shares of preferred stock,
par value $0.0001 per share.
Effective as of 5:00 p.m., Eastern time, on the date this
Certificate of Amendment of the Corporation’s Amended and Restated Certificate of Incorporation is filed with the Secretary
of State of the State of Delaware, each share of common stock, par value $0.0001 per share (the “Old Common Stock”),
issued and outstanding immediately before the Effective Date, shall be and hereby is, reclassified as and changed into one-
(1/ ) of a share of common stock, par value $0.0001 per share (the “New Common Stock”).
Each outstanding stock certificate which immediately before the Effective Date represented one or more shares of Old Common Stock
shall thereafter, automatically and without the necessity of surrendering the same for exchange, represent the number of whole
shares of New Common Stock determined by multiplying the number of shares of Old Common Stock represented by such certificate immediately
prior to the Effective Date by one- (1/ ),
and shares of Old Common Stock held in uncertificated form shall be treated in the same manner. Stockholders who would otherwise
be entitled to receive fractional share interests of Common Stock shall instead receive a cash payment equal to the fraction multiplied
by the closing sales price of our Common Stock on the Effective Date.”
IN WITNESS WHEREOF, Spherix Incorporated has
caused this certificate to be signed by its Chief Executive Officer as of the
day of ,
2016.
Appendix B
AUTHORIZED SHARE DECREASE AMENDMENT
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF SPHERIX INCORPORATED
(a Delaware corporation )
Spherix Incorporated (the “Corporation”), a corporation
organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:
1. Effective as of 5:01 p.m., Eastern time on the date this
Certificate of Amendment, the amended and restated certificate of incorporation of the Corporation is hereby further amended by
deleting the following Clause A. of Article FOURTH thereof in its entirety and inserting the following in lieu thereof:
Article “FOURTH: A. The total number of shares of stock
of all classes that the Corporation shall have authority to issue is One Hundred Fifty Million (150,000,000) shares, consisting
of One Hundred Million (100,000,000) shares of common stock, par value $0.0001 per share, and Fifty Million (50,000,000) shares
of preferred stock, par value $0.0001 per share.”
2. The foregoing amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Amendment of the Amended and Restated Certificate of Incorporation to be executed and acknowledged by its duly appointed officer
as of this ___ day of ____, 2016.
Name: Anthony Hayes
Title: Chief Executive Officer
Appendix C
SPHERIX INCORPORATED
AMENDMENT TO 2014 EQUITY INCENTIVE PLAN
4.2 Share Limit. The
maximum number of shares of Common Stock that may be delivered pursuant to awards granted to Eligible Persons under this Plan may
not exceed 8,250,000 shares of Common Stock (the “Share Limit”).
5.2.7 Compensation Limitations.
The maximum aggregate number of shares of Common Stock that may be issued to any Eligible Person during the term of this Plan
pursuant to Qualifying Options and Qualifying SARs may not exceed 8,250,000 shares of Common Stock. The maximum aggregate number
of shares of Common Stock that may be issued to any Eligible Person pursuant to Performance-Based Awards granted during the 162(m)
Term (other than cash awards granted pursuant to Section 5.1.6 and Qualifying Options or Qualifying SARs) may not exceed 3,121,419
shares of Common Stock. The maximum amount that may be paid to any Eligible Person pursuant to Performance-Based Awards granted
pursuant to Sections 5.1.6 (cash awards) during the 162(m) Term may not exceed $1,000,000.
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