Notes
to Consolidated Financial Statements
(Unaudited)
Note
1. Organization and Description of Business
Organization
and Description of Business
Spherix
Incorporated (the “Company”) is technology development company committed to the fostering of innovative ideas. The
Company was incorporated in 1967 in the State of Delaware as a scientific research company, and for much of its history pursued
drug development including through Phase III clinical studies which were discontinued.
The
Company was formerly focused on commercializing and monetizing patents by acquiring IP from patent holders in order to maximize
the value of the patent holdings by conducting and managing a licensing campaign, or through the settlement and litigation of
patents.
Since
March 1, 2013, the Company has received limited funds from its IP monetization. In addition to its patent monetization efforts,
since the fourth quarter of 2017, the Company has been transitioning to focus its efforts as a technology development company.
These efforts have focused on biotechnology research and blockchain technology research. The Company’s biotechnology research
development includes investments in Hoth Therapeutics Inc. and the proposed merger with CBM BioPharma, Inc. (“CBM”).
Reverse
Stock Split
On
May 10, 2019, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of one-for-4.25
(the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the Company’s board of directors
under authority granted by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders held on
April 15, 2019, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on May 9,
2019 (the “Certificate of Amendment”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Standard Time,
on May 10, 2019 (the “Effective Date”). Unless the context otherwise requires, all references in this report
to shares of the Company’s common stock, including prices per share of its common stock, reflect the Reverse Stock Split. Fractional
shares were not issued, and the final number of shares were rounded up to the next whole share.
CBM
Asset Acquisition
Pursuant to a Share Purchase Agreement, dated
as of May 15, 2019, the Company purchased 50,000 shares of CBM for $350,000.
In
addition, on May 15, 2019, the Company restructured the terms of its proposed merger with CBM and entered into an Asset Purchase
Agreement (the “APA”) with CBM. In connection with the execution of the APA, the agreement and plan of merger between
with CBM, dated as of October 10, 2018, was terminated and any and all termination fees thereunder have been waived.
As
consideration for the purchase, the Company agreed to pay aggregate consideration of $8.0 million to CBM consisting of an aggregate
number of shares of common stock equal to $7.0 million (based upon a per share price of $3.61) and cash consideration in the amount
of $1.0 million. The cash consideration is held back and becomes payable to CBM upon the consummation by the Company of the first
sale by the Company of common stock, Series L convertible preferred stock or any other equity or equity-linked financing of Spherix
to investors in one or more transactions for which Spherix receives aggregate gross proceeds of greater than $2,000,000 (a “Qualified
Financing”) after the closing date, upon which the Company will retain the first $2,000,000 of gross proceeds received in
connection with such Qualified Financing and CBM will receive 100% of the gross proceeds of such Qualified Financing received
by the Company in excess of $2,000,000 as well as the gross proceeds of any subsequent equity financings by the Company until
the cash consideration amount is satisfied in full.
The
obligations of the Company and CBM to consummate the transaction are subject to: (a) all necessary approvals being obtained by
relevant governmental authorities and third parties. The APA may be terminated (i) by mutual written consent of the Company and
CBM, (ii) by written notice by the Company or CBM if any of the conditions to Closing (as defined in the APA) are not satisfied
or waived by September 30, 2019. The transactions contemplated by the APA remain subject to shareholder approval of the Company
and CBM.
Note
2. Liquidity and Financial Condition
The
Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding
(non-financing related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities
through:
|
●
|
managing
current cash and cash equivalents on hand from the Company’s past debt and equity offerings,
|
|
●
|
seeking
additional funds raised through the sale of additional securities in the future,
|
|
●
|
seeking
additional liquidity through credit facilities or other debt arrangements, and
|
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
The
Company’s ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow
to meet its obligations on a timely basis. The Company’s business will require significant amounts of capital
to sustain operations and make the investments it needs to execute its longer-term business plan to support new technologies
and help advance innovation. The Company’s working capital amounted to approximately $0.6 million at June 30, 2019.
Absent generation of sufficient revenue from the execution of the Company’s long-term business plan, the Company will need
to obtain additional debt or equity financing, especially if the Company experiences downturns in its business that are more severe
or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded
company or operations. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume
that such financing will be available to the Company on favorable terms, or at all.
Because
of recurring operating losses and net operating cash flow deficits there is substantial doubt about the Company’s ability
to continue as a going concern within one year from the date of this filing. The condensed consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, and do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Note
3. Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries.
All material intercompany balances and transactions have been eliminated. Certain immaterial reclassifications have been made
to prior period amounts to conform to the current period presentation.
The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting
principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and
pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”)
and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated
balance sheet as of June 30, 2019, condensed consolidated statements of operations for the three and six months ended June 30,
2019 and 2018, condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2019
and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited,
but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented. The results for the three
and six months ended June 30, 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2019
or for any future interim period. The condensed consolidated balance sheet at December 31, 2018 has been derived from audited
financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial
statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s annual report on Form
10-K, which was filed with the SEC on March 12, 2019.
Use
of Estimates
The
accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP. This requires management
to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, and the reported expenses during the period. The Company’s
significant estimates and assumptions include the valuation of investments and the valuation allowance related to the Company’s
deferred tax assets. Certain of the Company’s estimates, including the carrying amount of its investments, could be affected
by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that
these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those
estimates and assumptions.
Significant
Accounting Policies
Other
than as described below, there have been no material changes in the Company’s significant accounting policies to those previously
disclosed in the Company’s annual report on Form 10-K, which was filed with the SEC on March 12, 2019.
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
Net
Income Loss per Share
Basic
loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common
shares outstanding during the period. Net loss attributable to common stockholders includes the effect of the deemed capital contribution
on extinguishment of preferred stock and the deemed dividend related to the immediate accretion of beneficial conversion feature
of convertible preferred stock. Diluted earnings per share is computed using the weighted average number of common shares and,
if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common
shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s
convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable
upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share
if their effect would be anti-dilutive.
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
Securities that could potentially dilute loss per share in
the future that were not included in the computation of diluted loss per share at June 30, 2019 and 2018 are as follows:
|
|
As of June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Convertible preferred stock
|
|
|
688
|
|
|
|
688
|
|
Warrants to purchase common stock
|
|
|
285,273
|
|
|
|
294,072
|
|
Options to purchase common stock
|
|
|
100,407
|
|
|
|
124,396
|
|
Total
|
|
|
386,368
|
|
|
|
419,156
|
|
Recently
Issued Accounting Standards
In
August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
ASU 2018-13,
Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement,
which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with
the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted
upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed
consolidated financial statements.
Recently
Adopted Accounting Standards
In
February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, which supersedes FASB ASC Topic 840,
Leases (Topic
840)
and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and
lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases
based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will
determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term
of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with
a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted
for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after
December 15, 2018, with early adoption permitted upon issuance. The Company does not have any long-term leases, therefore the
adoption of this standard on January 1, 2019 did not have a material impact on the Company’s condensed consolidated financial
position and results of operations.
In
July 2017, the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480)
and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception
, (ASU 2017-11). Part I of this update addresses the complexity
of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked
instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity
offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants
and convertible instruments) with down round features that require fair value measurement of the entire instrument
or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from
Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content
is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain
nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not
have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December
15, 2018. The Company adopted ASU 2017-11 on January 1, 2019 and the adoption did not have an impact on the Company’s condensed
consolidated financial statements.
In
June 2018, the FASB issued ASU 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting
(“ASU 2018-07”). ASU 2018-07 simplifies several aspects of
the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock
Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is
effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that
fiscal year. The Company adopted ASU 2018-07 on January 1, 2019 and the adoption did not have an impact on the Company’s
condensed consolidated financial statements
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
Note
4. Investments in Marketable Securities
The
realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and six months
ended June 30, 2019 and 2018, which are recorded as a component of other (expenses) income on the consolidated statements of operations,
are as follows ($ in thousands):
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Realized gain (loss)
|
|
$
|
(25
|
)
|
|
$
|
(177
|
)
|
|
$
|
(98
|
)
|
|
$
|
(275
|
)
|
Unrealized gain (loss)
|
|
|
(10
|
)
|
|
|
41
|
|
|
|
138
|
|
|
|
(17
|
)
|
Dividend income
|
|
|
7
|
|
|
|
44
|
|
|
|
24
|
|
|
|
78
|
|
|
|
$
|
(28
|
)
|
|
$
|
(92
|
)
|
|
$
|
64
|
|
|
$
|
(214
|
)
|
Note
5. Investment in Hoth Therapeutics, Inc.
On
February 20, 2019, Hoth closed its initial public offering (“IPO) at an initial offering price to the public of $5.60 per
share. The Company records this investment at fair value and records any change in fair value in the statements of operations (see
Note 6). The following summarizes the Company investment in Hoth:
Security Name
|
|
Shares Owned as of June 30,
2019
|
|
|
Fair value per Share
as of
June 30,
2019
|
|
|
Fair value
as of
June 30,
2019
(in thousands)
|
|
HOTH
|
|
|
1,735,714
|
|
|
$
|
5.81
|
|
|
$
|
10,084
|
|
The
fair value of Hoth common shares as of June 30, 2019 was based on the closing price of $5.81 reported on The Nasdaq Capital Market
as of June 28, 2019.
Note
6. Fair Value of Financial Assets and Liabilities
Financial
instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management
believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial
assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when
measuring fair value.
The
Company uses three levels of inputs that may be used to measure fair value:
Level
1 - quoted prices in active markets for identical assets or liabilities
Level
2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The
following table presents the Company’s assets and liabilities that are measured at fair value at June 30, 2019 and December
31, 2018 ($ in thousands):
|
|
Fair value measured at June 30, 2019
|
|
|
|
Total at
June 30,
|
|
|
Quoted prices in active markets
|
|
|
Significant other observable inputs
|
|
|
Significant unobservable inputs
|
|
|
|
2019
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities - mutual and exchange traded funds
|
|
$
|
817
|
|
|
$
|
817
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investments in Hoth
|
|
$
|
10,084
|
|
|
$
|
10,084
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrant liabilities
|
|
$
|
8
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8
|
|
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
In May 2019, the Company purchased a senior
convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share (b)
a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to
acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d)
a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, and (e) a contingent
option to put 200,000 shares of DatChat common stock. The aggregate purchase price was nominal. As a result of the nominal purchase
price associated with is transaction, the Company reviewed its existing holdings in DatChat and reduced its existing carrying amount
from $1.0 million to $0.
The table above excludes the Company’s
investment in Mellow Scooters for $0.1 million and its other investments for $0.1 million as of June 30, 2019. Such investments
were recorded on adjusted cost method measurement alternative in accordance with ASU 2016-01.
|
|
Fair value measured at December 31, 2018
|
|
|
|
Total at December 31,
|
|
|
Quoted prices in active markets
|
|
|
Significant other observable inputs
|
|
|
Significant unobservable inputs
|
|
|
|
2018
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities - mutual and exchange traded funds
|
|
$
|
2,700
|
|
|
$
|
2,700
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investments in Hoth
|
|
$
|
9,214
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrant liabilities
|
|
$
|
82
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
82
|
|
Due
to the Hoth’s IPO in February 2019, the Company’s investment in Hoth was transferred from Level 3 to Level 1 during
the six months ended June 30, 2019 and there were no transfers between Level 1, 2 or 3 during the six months ended June 30, 2018.
Level
3 Valuation Techniques - Liabilities
Level
3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that
the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within
Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
A
significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result
in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in “change
in fair value of warrant liabilities” in the Company’s consolidated statements of operations.
The
Series A and Series B warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded
at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the
Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The warrants require, at the
option of the holder, a net-cash settlement following certain fundamental transactions at the Company or require the issuance
of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted
for as derivative liabilities.
A
summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the
Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and
as of June 30, 2019 and December 31, 2018 is as follows:
Date of valuation
|
|
June 30,
2019
|
|
December 31,
2018
|
Risk-free interest rate
|
|
1.75% - 1.92%
|
|
2.48%
|
Expected volatility
|
|
67.11% - 100.00%
|
|
72.03% - 103.13%
|
Contractual life (in years)
|
|
1.44-2.00
|
|
1.94-2.06
|
Expected dividend yield
|
|
-
|
|
-
|
The
risk-free interest rate was based on rates established by the Federal Reserve. For the July 2015 Warrants, the expected volatility
in the Black-Scholes model is based on an expected volatility of 100% for both periods which represents the percentage required
to be used when valuing the cash settlement feature as contractually stated in the form of warrant. The general expected volatility
is based on standard deviation of the Company’s underlying stock price’s daily logarithmic returns. The expected life
of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact that
the Company has not historically paid dividends on its common stock and does not expect to pay dividends on its common stock in
the future.
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
The
following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that
are measured at fair value on a recurring basis for the six months ended June 30, 2019 and 2018 ($ in thousands):
|
|
Fair Value of Level 3 financial liabilities
|
|
|
|
June 30,
2019
|
|
|
June 30,
2018
|
|
Beginning balance
|
|
$
|
82
|
|
|
$
|
822
|
|
Fair value adjustment of warrant liabilities
|
|
|
(74
|
)
|
|
|
(465
|
)
|
Ending balance
|
|
$
|
8
|
|
|
$
|
357
|
|
Note
7. Stockholders’ Equity and Convertible Preferred Stock
Common
Stock
Registered
Common Stock and Warrant Financing
On
May 29, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) for the sale by
the Company of 221,000 shares of the Company’s common stock, at a purchase price of $2.60 per share, and pre-funded common
stock purchase warrants to purchase up to 86,692 shares of common stock at a purchase price of $2.5999 per Warrant, which represents
the per share purchase price, less a $0.0001 per share exercise price for each of the warrants (“Penny Warrants”).
The Company sold the shares and warrants for net proceeds of approximately $787 thousand which transaction closed on May 31, 2019.
Common
Stock Warrant Exchange
On
June 6, 2019, the Company entered into an amendment to the Purchase Agreement, pursuant to which the Purchaser surrendered an
aggregate of 115,269 shares to the Company and the Company issued 115,269 Penny Warrants to the Purchaser in order to limit the
Purchaser’s beneficial ownership.
The
exchange of 115,269 Penny Warrants do not meet the definition of a derivative under ASC 815 because their fair value at issuance
is equal to the fair value of the shares underlying the warrant. As such, they have the characteristics of a prepaid forward sale
of equity. Since the shares underlying the Penny Warrants are issuable for little or no consideration, they are considered outstanding
in the context of earnings per share, as discussed in ASC 260-10-45-13.
Warrants
A
summary of warrant activity for the six months ended June 30, 2019 is presented below:
|
|
Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Total Intrinsic Value
|
|
|
Weighted Average Remaining Contractual Life
(in years)
|
|
Outstanding as of December 31, 2018
|
|
|
294,072
|
|
|
$
|
38.15
|
|
|
$
|
-
|
|
|
|
1.92
|
|
Issued
|
|
|
235,294
|
|
|
|
-
|
|
|
|
587,881
|
|
|
|
0.28
|
|
Exercised
|
|
|
(201,961
|
)
|
|
|
-
|
|
|
|
504,882
|
|
|
|
-
|
|
Expired
|
|
|
(8,799
|
)
|
|
|
476.66
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of June 30, 2019
|
|
|
318,606
|
|
|
$
|
22.05
|
|
|
|
82,999
|
|
|
|
1.43
|
|
On May 29, 2019, the Company entered into
the Master Service Agreement (“MSA”) with a consultant, World Wide Holdings, LLC (“Consultant”). In consideration
for services provided by Consultant, the Company paid to Consultant three warrants, with each warrant immediately exercisable
for 33,333 shares of common stock with a $0.01 strike price. The first warrant of 33,333 was issued on June 28, 2019. The Company
recorded $0.1 million in stock-based compensation during the three-month ended June 30, 2019 related to this arrangement.
SPHERIX
INCORPORATED AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
(Unaudited)
Stock
Options
A
summary of option activity under the Company’s stock option plan for the six months ended June 30, 2019 is presented below:
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Total Intrinsic Value
|
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
Outstanding as of December 31, 2018
|
|
|
124,381
|
|
|
$
|
209.22
|
|
|
$
|
-
|
|
|
|
4.8
|
|
Employee options expired
|
|
|
(23,664
|
)
|
|
|
378.67
|
|
|
|
-
|
|
|
|
-
|
|
Non-employee options expired
|
|
|
(310
|
)
|
|
|
571.71
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of June 30, 2019
|
|
|
100,407
|
|
|
$
|
169.21
|
|
|
$
|
-
|
|
|
|
5.5
|
|
Options vested and expected to vest
|
|
|
100,407
|
|
|
$
|
169.21
|
|
|
$
|
-
|
|
|
|
5.5
|
|
Options vested and exercisable
|
|
|
100,407
|
|
|
$
|
169.21
|
|
|
$
|
-
|
|
|
|
5.5
|
|
Stock-based
Compensation
Stock-based
compensation for the three and six months ended June 30, 2019 and 2018 was comprised of the following ($ in thousands):
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Employee restricted stock awards
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
-
|
|
|
$
|
107
|
|
Employee stock option awards
|
|
|
2
|
|
|
|
71
|
|
|
|
8
|
|
|
|
179
|
|
Non-employee warrant awards
|
|
|
107
|
|
|
|
-
|
|
|
|
107
|
|
|
|
-
|
|
Total compensation expense
|
|
$
|
109
|
|
|
$
|
98
|
|
|
$
|
115
|
|
|
$
|
286
|
|
Note
8. Commitments and Contingencies
Legal
Proceedings
In
the past, in the ordinary course of business, the Company actively pursued legal remedies to enforce its intellectual property
rights and to stop unauthorized use of technology. From time to time, the Company may be involved in various claims and counterclaims
and legal actions arising in the ordinary course of business. The Company knows of no pending material claims or legal matters
against it as of the date of this report.
Note
9. Subsequent Events
On
August 9, 2019, the Company entered into an At The Market Offering Agreement (the “Offering Agreement”) with H.C.
Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from
time to time through H.C. Wainwright shares of the Company’s common stock having an aggregate offering price of up to $1.2 million
(the “Shares”). The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds
from each sale of Shares and have agreed to provide H.C.