UNITED STATES
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
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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 |
(2) | Subject to |
(3) | To approve |
(4) | To authorize the |
(5) | To |
Pursuant to our bylaws, our Board has deemed it advisable to seek stockholder approval of the Proposals and has decided to seek the written consent of stockholders through a consent solicitation process rather than holding a special meeting of stockholders, in order to eliminate the costs and management time involved in holding a special meeting. The Proposals are described in more detail in the accompanying Consent Solicitation Statement.
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.
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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.
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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 must vote in favorand the date of the Proposalsmeeting.
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 be approvedyou by stockholders. Wethe 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 entered into separate Votingbeen 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 Support Agreements with various stockholders holdingbeneficial owners may attend the Special Meeting. If your shares are held in excessstreet name, you will need to bring a copy of 50% of the Company’s Voting Capitala brokerage statement or other documentation reflecting your stock ownership as of the Record Date.
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How Do I Vote?
Stockholders of Record
For your convenience, our record date pursuant to whichholders 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 stockholder agreedmeeting, you may deliver your completed proxy card in person. “Street name” stockholders who wish to vote in favor of matters described in Proposals 1at 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 2 atrepresented by a meeting called therefor or by written consent. As a result, it is likely that we will obtain the requisite approval of Proposals 1 and 2.
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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 each Proposal, your consent formhave a quorum. Your shares will be treatedcounted 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 consent “FOR”reverse stock split of our Common Stock, and Proposal 2, an amendment of our Certificate of Incorporation to reduce the Proposal.
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 Boardvoting results of Directors of Spherix Incorporated.
How Many Votes Are Needed for Each Proposal to the following proposals:
Proposal | Broker Discretionary Vote Allowed | |||
Amendment of our Certificate of Incorporation to | A majority of the | Yes | ||
Subject to approval of the |
A majority of the votes cast | No | |||
Adjournment of the Special Meeting | A majority of the votes cast | 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 votedfor 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 andfor 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 directors (the “Board”) unanimously adoptedrevocation 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 Proposals and recommends that stockholders vote FOR the approvaltime of the Proposals.
Who Is Paying for the Expenses Involved in order to eliminatePreparing and Mailing this Proxy Statement?
All of the costs and management timeexpenses involved in holding a special meeting. Written consents are beingpreparing, 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 from allby 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 our stockholdersthe shares held of record pursuant to Section 228by such persons, and we may reimburse such persons for reasonable out of thepocket expenses incurred by them in so doing.
Do I Have Dissenters’ Rights of Appraisal?
Our stockholders do not have appraisal rights under Delaware General Corporation Law and Section 7 in Article I oflaw or under our Amended and Restated Bylaws.
How can I find out the Results of the Record Date, the Company had 3,569,895 shares of Common Stock outstanding, one share of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”) outstanding, 1,227,582 shares of Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Stock”) outstanding, 59,265 shares of Series D-1 Convertible Preferred Stock, par value $0.0001 per share (the “Series D-1 Preferred Stock”) outstanding and 156,250 shares of Series F-1 Preferred Stock, par value $0.0001 per share (the “Series F-1 Preferred Stock” and, collectively with the Common Stock, Series C Preferred Stock, Series D Preferred Stock and Series D-1 Preferred Stock, the “Voting Capital”) outstanding.
Preliminary voting results of this solicitation of written consents will be includedannounced at the Special Meeting. Final voting results will be published in a Current Report on Form 8-K, (the “Form 8-K”) by the Company. This Consent Solicitation Statement and the Form 8-K shall constitute notice of taking of a corporate action without a meeting by less than unanimous written consent as permitted by applicable law and our Amended and Restated Bylaws.
What Interest Do Officers and if given or made, such other information or representations must not be relied upon as having been authorized. In additionDirectors Have in Matters to solicitations by mail, consents may be solicited by directors, officers and other employees of Spherix who will receive no additional compensation therefor.
Our Board members and executive officers of the Company are eligible to receive grants under the terms of the 2014 Plan, as amended by the Amendment.Plan. Accordingly, our members of the Boardboard of directors and the executive officers of the Company have a substantial interest in Proposal 3. Members of theOther than Proposal 3, our Board members and executive officers of the Company 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.
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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 Company.
The form of the proposed Amendment is attached to this Proxy Statement asAppendix 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 Current Report on Form 8-K filedBoard determines in its discretion not to proceed with the Securities and Exchange Commission (the “SEC”) on January 2, 2014, on December 31, 2013, we, through our wholly owned subsidiary, Spherix Portfolio Acquisition II, Inc., entered into our second agreement to acquire patents from Rockstar. We acquired a suite of 101 patents and patent applications (the “Rockstar Patents”) pursuant to the Purchase Agreement in several technology families, including data, optical and voice technology. Rockstar is the holder of approximately 4,000 patents formerly owned by Nortel Networks. In July 2013, we acquired seven patents from Rockstar in mobile communications. The Rockstar Patents provide us rights to develop and commercialize products as well as enforcement rights for past, present and future infringement.
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 approvalactual number of this Proposal 1 includesshares outstanding after giving effect to the approvalreverse 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 issuance of such Registration Right Shares, if any.
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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:
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 Patent Acquisition, which represented less than 20%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 Company’s issuedcure 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.
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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 such dateJanuary 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 accordancethe 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 NASDAQ Listing Rule 5635. We arefurther 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. 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 underto issue more shares of Common Stock, or accept lower consideration for those shares of Common Stock, than we anticipate.
Furthermore, the Purchase Agreement to obtain stockholder approvalliquidity 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 issuancereverse 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 Preferred Shares on or before March 31, 2014 unless extended.
Effect of the issuance, pursuantReverse Stock Split on Registration and Voting Rights
If the reverse stock split is approved and implemented, the principal effect will be to NASDAQ Listing Rule 5635, for whichproportionately 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 soliciting consents hereunder. We have agreedsubject to use our reasonable best efforts to obtain such stockholder approval on or prior to March 31, 2014. In connection with the foregoing, we entered into separate Votingperiodic reporting and Support Agreements with various stockholders holding in excess of 50% of our Voting Capital pursuant to which the stockholder agreed to vote in favorother requirements of the matters described in Proposals 1 and 2 at a meeting called therefor or by written consent.
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Proportionate voting rights and other rights of existing stockholders butthe holders of our Common Stock will cause substantial dilution to existing stockholders’ voting power and innot be affected by the future earnings per share of their Common Stock. However, Rockstar may not convert the Preferred Shares to the extent that,reverse stock split, other than as a result of such conversion, Rockstar would beneficially own morethe 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 4.99% (which100 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 9.99% and subsequently to 19.99%, each outstanding stock option would be decreased by fifteen (15) times, such that upon 61 days’ written notice), inan 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 ouroptions 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.
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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 calculated immediatelyas 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) | |
1 for 12 | 4,021,619 | |
1 for 13 | 3,712,264 | |
1 for 14 | 3,447,102 | |
1 for 15 | 3,217,295 | |
1 for 16 | 3,016,214 | |
1 for 17 | 2,838,790 | |
1 for 18 | 2,681,079 | |
1 for 19 | 2,539,970 | |
1 for 20 | 2,412,972 | |
1 for 21 | 2,298,068 | |
1 for 22 | 2,193,610 | |
1 for 23 | 2,098,236 | |
1 for 24 | 2,010,810 |
The actual number of shares outstanding after giving effect to the issuancereverse 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 sharesour Common Stock. The reverse stock split will affect all holders of our Common Stock uponuniformly and will not affect any stockholder’s percentage ownership interest in the conversionCompany, except, that, as described below in “Fractional Shares,” holders of common stock otherwise entitled to a fractional share as a result of the Preferred Shares.
Effect on Issued and certain beneficial ownership limitations); and 119,760 shares of Series I Preferred Stock convertible into an aggregate of 2,395,200 shares of Common Stock (subject to stockholder approval and certain beneficial ownership limitations).
The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. We are prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 4.99% (which may be increased to 9.99% and subsequently to 19.99%, each upon 61 days’ written notice), in the aggregate, ofnumber our issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversionpreferred stock will not change as a result of the Series H Preferred Stock. Holders of the Series H Preferred Stock shall be entitled to vote on all matters submitted to our stockholders and shall be entitled to the number of votes equal toreverse 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 shares ofSeries D Preferred Stock, Series D-1 Preferred Stock and Series H Preferred Stock all are convertible, subject to applicable beneficial ownership limitations. The Series H Preferred Stock provides a liquidation preference of $83.50 per share.
EffectonOutstandingWarrants
Pursuant to the terms of a Security Agreement under whichour outstanding warrants, the Rockstar Patents serve as collateral security. No action can be taken under the Security Agreement unless we have failed to make a second redemption payment of $5,000,000 ($10,000,000 in the aggregate) due December 31, 2014. The Security Agreement contains additional usual and customary “Events of Default” (as such term is defined in the Intellectual Property Security Agreement) under which Rockstar can take action, including a sale to a third party or reduction of secured amounts via transfer of the Rockstar Patents to Rockstar.
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 theRights Agreement
Pursuant to our Rights Agreement, if we combine our shares of Series H PreferredCommon Stock are convertible, subject to applicable beneficial ownership limitations. Holders of the Series I Preferred Stock shall be entitled to vote on all matters submitted to our stockholders and shall be entitled toin a reverse stock split, (a) the number of votespreferred stock purchase rights outstanding will be adjusted so that the number of rights will continue to equal to the number of shares of Common Stock intowe 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 Series I PreferredCommon Stock are convertible, subject to applicable beneficial ownership limitations. However, the Preferred Shares are notoutstanding immediately convertible and do not possess any voting rights until we have obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. We have agreed to use our reasonable best efforts to obtain such stockholder approval on or prior to March 31, 2014.
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Accounting Matters
As a result of the issuancereverse stock split, upon the Effective Time, the stated capital on our balance sheet attributable to our Common Stock, which consists of the Preferred Shares in connection withpar value per share of our Common Stock multiplied by the Patent Acquisition, Rockstar would beneficially own 7,362,611aggregate number of shares of our Common Stock or approximately 28%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 outstanding Common Stock, onshall 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 fully diluted basis, assuming“going private transaction” within the conversionmeaning of Rule 13e-3 of the PreferredExchange 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.
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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.
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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:
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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.
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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 asAppendix 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, (without regard to any beneficial ownership or conversion limitations contained therein). Therefore, the issuance$0.0001 par value per share. Our authorized shares of the Preferred Shares, on an “as converted” basis, if authorizedpreferred stock will not be affected by the reverse stock split or this proposal.
Under the Delaware General Corporation Law, our stockholders may result in a change in control as described by NASDAQ Listing Rule 5635(b).
VOTE REQUIRED
The proposed amendment to the requisite approvalCertificate of this Proposal.
The Board of Directors recommends that you voteFOR the approval of the Record Dateamendment to our Certificate of Incorporation to reduce the total number of shares of common stock that the Company is requiredauthorized to approve this Proposal.
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AMENDMENT TOOF THE SPHERIX INCORPORATED 2014 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER
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 (the “Amendment”) to the 2014 Plan to increase the number of shares available for issuance thereunder to 4,161,892 from 2,400,0002,400,000. 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 the Company'sour 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
As of the Record Date, no3,485,000 awards were grantedoutstanding 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.
Set forth below is a summary of the 2014 Plan. The full text of the proposed amendment to the 2014 Plan is set forth inAppendix C to this Proxy Statement.
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, from 2,400,000.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 March 20, 2014 ,January 15, 2016, there were approximately 23,876,64448,259,430 shares of our Common Stock outstanding on a fully-diluted basis (assuming conversion of all the issued and outstanding shares of convertible preferred stock without regard to any beneficial or conversion limitations). The Board believes that this fully-diluted number, rather than the number of outstanding shares of Common Stock of the Company, to be the relevant factor in determining the appropriate number of shares available under the 2014 Plan.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 4,161,892,8,250,000, which represents approximately 17.43sixteen percent (17.43%(15.82%) of our Common Stock as calculated on a fully-diluted basis as of March 20, 2014 .
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 1,761,8924,088,108 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 theour 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 theour 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.
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Approval of the Amendment will permit the Companyus to continue to use stock-based compensation to align stockholder and employee interests and to motivate employees and others providing services to theour 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 asAppendix BC to this ConsentProxy 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”).
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,
The 2014 Plan permits the grant of stock options, stock appreciation rights (“SAR”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.
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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 March 20, 2014 ,January 5, 2016, was $4.29 ,$0.14, based on the last saleclosing 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.
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, no3,485,000 awards were granted under the 2014 Plan pursuant to the amendment to the 2014 Plan to our named executive officers, directors or other employees.
- 19 - |
The following table sets forth information concerning our equity compensation plans as of December 31, 2013.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | 2,012,163 | (1) | $ | 7.13 | 797,250 | (2) |
2012 | 2011 | |||||||
Restated | ||||||||
Revenue | $ | 19,922 | $ | - | ||||
Operating expense | ||||||||
Research and development expense | (727,091 | ) | (1,645,939 | ) | ||||
Selling, general and administrative expense | (2,764,836 | ) | (2,548,007 | ) | ||||
Total operating expense | (3,491,927 | ) | (4,193,946 | ) | ||||
Loss from operations | (3,472,005 | ) | (4,193,946 | ) | ||||
Other Income from Change in Fair Value of Warrants | 1,202,489 | 3,716,812 | ||||||
Loss on issuance of warrants | (621,983 | ) | (4,983 | ) | ||||
Interest income | 3,466 | 3,455 | ||||||
Other income | - | 51,261 | ||||||
Gain on settlement of obligations | - | 845,000 | ||||||
(Loss) income from continuing operations before taxes | (2,888,033 | ) | 417,599 | |||||
Income tax expense | - | (14,485 | ) | |||||
(Loss) income from continuing operations | (2,888,033 | ) | 403,114 | |||||
Discontinued operations | ||||||||
Loss from discontinued operations | (968,991 | ) | (383,529 | ) | ||||
Income tax expense | - | - | ||||||
Loss from discontinued operations | (968,991 | ) | (383,529 | ) | ||||
Net (loss) income | $ | (3,857,024 | ) | $ | 19,585 | |||
Net (loss) income per share, basic | ||||||||
Continuing operations | $ | (10.56 | ) | $ | 3.07 | |||
Discontinued operations | $ | (3.54 | ) | $ | (2.92 | ) | ||
Net (loss) income per share | $ | (14.10 | ) | $ | 0.15 | |||
Net loss per share, diluted | ||||||||
Continuing operations | $ | (10.56 | ) | $ | (2.37 | ) | ||
Discontinued operations | $ | (3.54 | ) | $ | (2.77 | ) | ||
Net loss per share | $ | (14.10 | ) | $ | (5.14 | ) | ||
Weighted average shares outstanding, basic | 273,567 | 131,285 | ||||||
Weighted average shares outstanding, diluted | 273,567 | 138,346 |
ASSETS | 2012 | 2011 | ||||||
Current assets | Restated | |||||||
Cash and cash equivalents | $ | 4,498,237 | $ | 4,911,350 | ||||
Trade accounts receivable, net of allowance of $0 and $8,174 | - | - | ||||||
Other receivables | 3,425 | 293 | ||||||
Prepaid research expenses | - | 209,780 | ||||||
Prepaid expenses and other assets | 100,474 | 116,565 | ||||||
Assets of segment held for sale | 104,265 | 289,927 | ||||||
Total current assets | 4,706,401 | 5,527,915 | ||||||
Property and equipment, net of accumulated depreciation | 24,009 | 85,374 | ||||||
of $308,386 and $244,711 | ||||||||
Patents, net of accumulated amortization of $0 and $2,146 | - | - | ||||||
Deposit | 25,625 | 35,625 | ||||||
Assets of segment held for sale, non-current | - | 6,108 | ||||||
Total assets | $ | 4,756,035 | $ | 5,655,022 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 425,774 | $ | 269,996 | ||||
Accrued salaries and benefits | 280,263 | 242,550 | ||||||
Liabilities of segment held for sale | 25,040 | 380,136 | ||||||
Total current liabilities | 731,077 | 892,682 | ||||||
Deferred rent | 45,081 | 47,675 | ||||||
Warrant liability | 3,125,393 | 916,621 | ||||||
Total liabilities | 3,901,551 | 1,856,978 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; | ||||||||
5,250 series B issued and 1 outstanding at December 31, 2012, | ||||||||
and December 31, 2011 | - | - | ||||||
Common stock, $0.0001 par value, 50,000,000 shares authorized; | ||||||||
814,114 and 155,150 issued, 813,713 and 154,749 | ||||||||
outstanding at December 31, 2012 and 2011, respectively | 82 | 16 | ||||||
Paid-in capital in excess of par value | 36,630,406 | 35,717,008 | ||||||
Treasury stock, 401 shares | (464,786 | ) | (464,786 | ) | ||||
Accumulated deficit | (35,311,218 | ) | (31,454,194 | ) | ||||
Total stockholders' equity | 854,484 | 3,798,044 | ||||||
Total liabilities and stockholders' equity | $ | 4,756,035 | $ | 5,655,022 |
Preferred Stock | Common Stock | Paid-in | Treasury Stock | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital in Excess of Par | Shares | Amount | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||||||||
Balance, January 1, 2011 (Restated) | 1 | $ | - | 107,181 | $ | 11 | 34,536,947 | 401 | (464,786 | ) | 31,473,779 | $ | 2,598,393 | |||||||||||||||||||||||
Sale of common stock, net of | ||||||||||||||||||||||||||||||||||||
offering costs of $103,196 (Restated) | - | - | 47,969 | 5 | 1,144,527 | - | - | - | 1,144,532 | |||||||||||||||||||||||||||
Stock-based compensation (Restated) | - | - | - | - | 35,534 | - | - | - | 35,534 | |||||||||||||||||||||||||||
Net income (Restated) | - | - | - | - | - | - | - | 19,585 | 19,585 | |||||||||||||||||||||||||||
Balance, December 31, 2011 (Restated) | 1 | - | 155,150 | 16 | 35,717,008 | 401 | (464,786 | ) | (31,454,194 | ) | 3,798,044 | |||||||||||||||||||||||||
Sale of common stock, net of | ||||||||||||||||||||||||||||||||||||
offering costs of $77,012 | - | - | 536,898 | 54 | 858,647 | - | - | - | 858,701 | |||||||||||||||||||||||||||
Stock-based compensation | - | - | 122,250 | 12 | 56,436 | - | - | - | 56,448 | |||||||||||||||||||||||||||
Fractional shares payment | - | - | (184 | ) | - | (1,685 | ) | - | - | - | (1,685 | ) | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (3,857,024 | ) | (3,857,024 | ) | |||||||||||||||||||||||||
Balance, December 31, 2012 | 1 | $ | - | 814,114 | $ | 82 | 36,630,406 | 401 | (464,786 | ) | (35,311,218 | ) | $ | 854,484 |
2012 | 2011 | |||||||
Cash flows from operating activities | Restated | |||||||
Net (loss) income | (3,857,024 | ) | $ | 19,585 | ||||
Adjustments to reconcile net (loss) income to net cash | ||||||||
used in operating activities: | ||||||||
Other Income from Change in Fair Value of Warrants | (1,202,489 | ) | (3,716,812 | ) | ||||
Issuance costs of warrants accounted for at fair value | 245,513 | 230,604 | ||||||
Loss on issuance of warrants | 621,983 | 4,983 | ||||||
Gain on settlement of obligation | - | (845,000 | ) | |||||
Depreciation and amortization | 63,675 | 66,308 | ||||||
Stock-based compensation | 56,448 | 35,534 | ||||||
Provision for doubtful accounts | (8,174 | ) | 8,174 | |||||
Changes in assets and liabilities: | ||||||||
Receivables | 5,042 | 262,333 | ||||||
Prepaid expenses and other assets | 235,871 | 289,830 | ||||||
Accounts payable and accrued expenses | 193,491 | (366,885 | ) | |||||
Deferred rent | (2,594 | ) | (33,270 | ) | ||||
Deferred compensation | - | (305,000 | ) | |||||
Net cash used in activities of continuing operations | (3,648,258 | ) | (4,349,616 | ) | ||||
Net cash used in activities of discontinued operations | (167,429 | ) | (10,044 | ) | ||||
Net cash used in operating activities | (3,815,687 | ) | (4,359,660 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of fixed assets | (2,309 | ) | (2,374 | ) | ||||
Net cash used in activities of continuing operations | (2,309 | ) | (2,374 | ) | ||||
Net cash provided by (used in) activities of discontinued operations | 4,102 | (2,478 | ) | |||||
Net cash provided by (used in) investing activities | 1,793 | (4,852 | ) | |||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of common stock and warrants | 3,724,991 | 4,034,352 | ||||||
Issuance cost of common stock and warrants | (322,525 | ) | (333,800 | ) | ||||
Reverse stock split fractional share payment | (1,685 | ) | - | |||||
Net cash provided by activities of continuing operations | 3,400,781 | 3,700,552 | ||||||
Net cash provided by financing activities | 3,400,781 | 3,700,552 | ||||||
Net decrease in cash and cash equivalents | (413,113 | ) | (663,960 | ) | ||||
Cash and cash equivalents, beginning of year | 4,911,350 | 5,575,310 | ||||||
Cash and cash equivalents, end of year | $ | 4,498,237 | $ | 4,911,350 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for taxes | $ | - | $ | 160,829 |
THIRD: That upon the effectiveness of this Certificate of Amendment (the “Effective Date”), Clause A. and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) givesParagraphs numbered 1. and 2. of Article FOURTH of the Company a choiceCorporation’s Amended and Restated Certificate of net-cash settlement or settlementIncorporation, is hereby amended and restated in its ownentirety such that, as amended, said clause shall read in its entirety as follows:
“A. The total number of shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choicestock of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
2012 | 2011 | |||||||
Revenue | $ | 728,312 | $ | 820,925 | ||||
Direct cost and operating expense | (417,428 | ) | (388,065 | ) | ||||
Selling, general and administrative expense | (1,279,875 | ) | (816,389 | ) | ||||
Loss from discontinued operations before taxes | $ | (968,991 | ) | $ | (383,529 | ) |
Fair Value Measurements of Warrants Using Significant Unobservable Inputs (Level 3) | ||||
Balance at December 31, 2011 (Restated) | $ | 3,125,000 | ||
Change in fair value of Warrant Liability | (2,208,000 | ) | ||
Balance at December 31, 2012 | $ | 917,000 |
Diluted earnings per share Calculation | December 31, 2012 | December 31, 2011 | ||||||
(Restated) | ||||||||
Net (loss) income | $ | (3,857,024 | ) | $ | 19,585 | |||
Less other income from change in fair value of warrants assumed exercised | -- | (730,862 | ) | |||||
Adjusted net loss | $ | (3,857,024 | ) | $ | (711,277 | ) | ||
Diluted shares outstanding | ||||||||
Weighted average shares outstanding, | 273,567 | 131,285 | ||||||
Shares assumed exercised | -- | 7,061 | ||||||
Diluted shares outstanding | 273,567 | 138,346 | ||||||
Net loss per share, diluted | $ | (14.10 | ) | $ | (5.14 | ) |
Three Months Ended March 31, 2012 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (674,856 | ) | $ | (17,636 | ) | $ | (692,492 | ) | |||
Loss from operations | $ | (1,046,259 | ) | $ | (17,636 | ) | $ | (1,063,895 | ) | |||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 339,308 | $ | 339,308 | ||||||
Loss from continuing operations | $ | (1,045,237 | ) | $ | 321,672 | $ | (723,565 | ) | ||||
Net loss | $ | (1,155,955 | ) | $ | 321,672 | $ | (834,283 | ) | ||||
Net loss per share, basic and diluted | $ | (6.21 | ) | $ | 1.73 | $ | (4.48 | ) | ||||
Three Months Ended June 30, 2012 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (530,691 | ) | $ | - | $ | (530,691 | ) | ||||
Loss from operations | $ | (668,940 | ) | $ | - | $ | (668,940 | ) | ||||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 342,884 | $ | 342,884 | ||||||
Loss from continuing operations | $ | (668,018 | ) | $ | 342,884 | $ | (325,134 | ) | ||||
Net loss | $ | (747,575 | ) | $ | 342,884 | $ | (404,691 | ) | ||||
Net loss per share, basic and diluted | $ | (3.59 | ) | $ | 1.64 | $ | (1.95 | ) | ||||
Three Months Ended September 30, 2012 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (542,538 | ) | $ | - | $ | (542,538 | ) | ||||
Loss from operations | $ | (633,645 | ) | $ | - | $ | (633,645 | ) | ||||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 58,413 | $ | 58,413 | ||||||
Loss from continuing operations | $ | (632,815 | ) | $ | 58,413 | $ | (574,402 | ) | ||||
Net loss | $ | (765,963 | ) | $ | 58,413 | $ | (707,550 | ) | ||||
Net loss per share, basic and diluted | $ | (3.69 | ) | $ | 0.29 | $ | (3.40 | ) |
Three Months Ended March 31, 2011 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (737,680 | ) | $ | (126,304 | ) | $ | (863,984 | ) | |||
Loss from operations | $ | (1,093,183 | ) | $ | (126,304 | ) | $ | (1,219,487 | ) | |||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 1,542,051 | $ | 1,542,051 | ||||||
(Loss) income from continuing operations | $ | (216,819 | ) | $ | 1,415,747 | $ | 1,198,928 | |||||
Net (loss) income | $ | (235,336 | ) | $ | 1,415,747 | $ | 1,180,411 | |||||
Net (loss) income per share, basic and diluted | $ | (1.92 | ) | $ | 11.56 | $ | 9.64 | |||||
Three Months Ended June 30, 2011 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (525,572 | ) | $ | - | $ | (525,572 | ) | ||||
Loss from operations | $ | (930,071 | ) | $ | - | $ | (930,071 | ) | ||||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 898,446 | $ | 898,446 | ||||||
Loss from continuing operations | $ | (920,828 | ) | $ | 898,446 | $ | (22,382 | ) | ||||
Net loss | $ | (1,013,739 | ) | $ | 898,446 | $ | (115,293 | ) | ||||
Net loss per share, basic and diluted | $ | (7.91 | ) | $ | 7.01 | $ | (0.90 | ) | ||||
Three Months Ended September 30, 2011 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (417,260 | ) | $ | - | $ | (417,260 | ) | ||||
Loss from operations | $ | (788,587 | ) | $ | - | $ | (788,587 | ) | ||||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 134,827 | $ | 134,827 | ||||||
Loss from continuing operations | $ | (787,992 | ) | $ | 134,827 | $ | (653,165 | ) | ||||
Net loss | $ | (913,318 | ) | $ | 134,827 | $ | (778,491 | ) | ||||
Net loss per share, basic and diluted | $ | (7.13 | ) | $ | 1.05 | $ | (6.08 | ) |
Year Ended December 31, 2011 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data: | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (2,317,403 | ) | $ | (230,604 | ) | $ | (2,548,007 | ) | |||
Loss from operations | $ | (3,963,342 | ) | $ | (230,604 | ) | $ | (4,193,946 | ) | |||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 3,716,812 | $ | 3,716,812 | ||||||
Loss on issuance of warrants | $ | - | $ | (4,983 | ) | $ | (4,983 | ) | ||||
Income (loss) from continuing operations | $ | (3,078,111 | ) | $ | 3,481,225 | $ | 403,114 | |||||
Net (loss) income | $ | (3,461,640 | ) | $ | 3,481,225 | $ | 19,585 | |||||
Net (loss) income per share, basic | $ | (26.37 | ) | $ | 26.52 | $ | 0.15 | |||||
Net (loss) income per share, diluted | $ | (26.37 | ) | $ | 21.23 | $ | (5.14 | ) | ||||
Year Ended December 31, 2010 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data: | Reported* | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (3,175,350 | ) | $ | (165,365 | ) | $ | (3,340,715 | ) | |||
Loss from operations | $ | (8,006,738 | ) | $ | (165,365 | ) | $ | (8,172,103 | ) | |||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 1,556,161 | $ | 1,556,161 | ||||||
Loss from continuing operations | $ | (7,731,521 | ) | $ | 1,390,796 | $ | (6,340,725 | ) | ||||
Net loss | $ | (7,736,242 | ) | $ | 1,390,796 | $ | (6,345,446 | ) | ||||
Net loss per share, basic and diluted | $ | (85.67 | ) | $ | 15.40 | $ | (70.27 | ) | ||||
Year Ended December 31, 2009 | ||||||||||||
As Previously | As | |||||||||||
Statement of Operations Data: | Reported | Adjustment | Restated | |||||||||
Selling, general and administrative expense | $ | (3,055,473 | ) | $ | (136,752 | ) | $ | (3,192,225 | ) | |||
Loss from operations | $ | (9,877,082 | ) | $ | (136,752 | ) | $ | (10,013,834 | ) | |||
Other Income from Change in Fair Value of Warrants | $ | - | $ | 957,422 | $ | 957,422 | ||||||
Loss from continuing operations | $ | (9,839,436 | ) | $ | 820,670 | $ | (9,018,766 | ) | ||||
Net loss | $ | (9,148,631 | ) | $ | 820,670 | $ | (8,327,961 | ) | ||||
Net loss per share, basic and diluted | $ | (124.36 | ) | $ | 11.16 | $ | (113.20 | ) |
As of March 31, 2012 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 639,097 | $ | 791,601 | $ | 1,430,698 | ||||||
Paid-in capital in excess of par value | $ | 43,394,988 | $ | (6,805,964 | ) | $ | 36,589,024 | |||||
Accumulated deficit | $ | 38,302,840 | $ | (6,014,363 | ) | $ | 32,288,477 | |||||
Total stockholders' equity | $ | 4,627,383 | $ | (791,601 | ) | $ | 3,835,782 | |||||
As of June 30, 2012 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 679,960 | $ | 448,717 | $ | 1,128,677 | ||||||
Paid-in capital in excess of par value | $ | 43,401,195 | $ | (6,805,964 | ) | $ | 36,595,231 | |||||
Accumulated deficit | $ | 39,050,415 | $ | (6,357,247 | ) | $ | 32,693,168 | |||||
Total stockholders' equity | $ | 3,886,015 | $ | (448,717 | ) | $ | 3,437,298 | |||||
As of September 30, 2012 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 793,960 | $ | 389,913 | $ | 1,183,873 | ||||||
Paid-in capital in excess of par value | $ | 43,420,333 | $ | (6,805,964 | ) | $ | 36,614,369 | |||||
Accumulated deficit | $ | 39,816,415 | $ | (6,415,697 | ) | $ | 33,400,718 | |||||
Total stockholders' equity | $ | 3,139,190 | $ | (390,304 | ) | $ | 2,748,886 |
As of March 31, 2011 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 818,816 | $ | 1,826,897 | $ | 2,645,713 | ||||||
Paid-in capital in excess of par value | $ | 41,135,829 | $ | (5,454,110 | ) | $ | 35,681,719 | |||||
Accumulated deficit | $ | 33,920,581 | $ | (3,627,213 | ) | $ | 30,293,368 | |||||
Total stockholders' equity | $ | 6,750,475 | $ | (1,826,897 | ) | $ | 4,923,578 | |||||
As of June 30, 2011 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 741,041 | $ | 928,451 | $ | 1,669,492 | ||||||
Paid-in capital in excess of par value | $ | 41,135,586 | $ | (5,454,110 | ) | $ | 35,681,476 | |||||
Accumulated deficit | $ | 34,934,320 | $ | (4,525,659 | ) | $ | 30,408,661 | |||||
Total stockholders' equity | $ | 5,736,493 | $ | (928,451 | ) | $ | 4,808,042 | |||||
As of September 30, 2011 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 807,153 | $ | 793,624 | $ | 1,600,777 | ||||||
Paid-in capital in excess of par value | $ | 41,135,586 | $ | (5,454,110 | ) | $ | 35,681,476 | |||||
Accumulated deficit | $ | 35,847,638 | $ | (4,660,486 | ) | $ | 31,187,152 | |||||
Total stockholders' equity | $ | 4,823,175 | $ | (793,624 | ) | $ | 4,029,551 | |||||
As of December 31, 2011 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data: | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 940,357 | $ | 916,621 | $ | 1,856,978 | ||||||
Paid-in capital in excess of par value | $ | 42,326,320 | $ | (6,609,312 | ) | $ | 35,717,008 | |||||
Accumulated deficit | $ | 37,146,885 | $ | (5,692,691 | ) | $ | 31,454,194 | |||||
Total stockholders' equity | $ | 4,714,665 | $ | (916,621 | ) | $ | 3,798,044 |
As of December 31, 2010 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 2,576,853 | $ | 1,841,826 | $ | 4,418,679 | ||||||
Paid-in capital in excess of par value | $ | 38,590,239 | $ | (4,053,292 | ) | $ | 34,536,947 | |||||
Accumulated deficit | $ | 33,685,245 | $ | (2,211,466 | ) | $ | 31,473,779 | |||||
Total stockholders' equity | $ | 4,440,219 | $ | (1,841,826 | ) | $ | 2,598,393 | |||||
As of December 31, 2009 | ||||||||||||
As Previously | As | |||||||||||
Balance Sheet Data (Unaudited): | Reported* | Adjustment | Restated | |||||||||
Total liabilities | $ | 2,883,432 | $ | 1,128,278 | $ | 4,969,132 | ||||||
Paid-in capital in excess of par value | $ | 33,685,656 | $ | (1,948,948 | ) | $ | 31,736,708 | |||||
Accumulated deficit | $ | 25,949,003 | $ | (820,670 | ) | $ | 25,128,333 | |||||
Total stockholders' equity | $ | 7,271,876 | $ | (1,128,278 | ) | $ | 6,143,598 |
Effective as of December 31, at cost are:
2012 | 2011 | |||||||
Computers | $ | 9,000 | $ | 7,000 | ||||
Office furniture and equipment | 94,000 | 94,000 | ||||||
Leasehold improvements | 229,000 | 229,000 | ||||||
Total cost | 332,000 | 330,000 | ||||||
Accumulated depreciation and amortization | (308,000 | ) | (245,000 | ) | ||||
Property and equipment, net | $ | 24,000 | $ | 85,000 |
2012 | 2011 | |||||||
Accounts payable | $ | 210,000 | $ | 106,000 | ||||
Accrued expenses | 218,000 | 164,000 | ||||||
$ | 428,000 | $ | 270,000 |
2012 | 2011 | |||||||
Accrued Payroll | $ | 21,000 | $ | 29,000 | ||||
Accrued annual bonuses | 173,000 | 176,000 | ||||||
Accrued severance | 40,000 | - | ||||||
Accrued vacation | 42,000 | 38,000 | ||||||
Other | 4,000 | - | ||||||
$ | 280,000 | $ | 243,000 |
Warrant | Exercise | Estimated fair value | Change in estimated fair value | |||||||||||||||||||||
Date | Shares | Price | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
11/16/2009 | 5,522 | $ | 650.00 | $ | - | $ | 41,000 | $ | (40,000 | ) | $ | (524,000 | ) | |||||||||||
11/16/2009 | 414 | $ | 575.00 | - | - | - | (1,000 | ) | ||||||||||||||||
10/7/2010 | 10,500 | $ | 300.00 | 3,000 | 157,000 | (154,000 | ) | (1,069,000 | ) | |||||||||||||||
10/7/2010 | 630 | $ | 312.50 | - | - | - | (50,000 | ) | ||||||||||||||||
1/19/2011 | 10,673 | $ | 160.00 | 7,000 | 184,000 | (177,000 | ) | (1,277,000 | ) | |||||||||||||||
1/19/2011 | 640 | $ | 162.50 | - | 1,000 | (1,000 | ) | (65,000 | ) | |||||||||||||||
10/25/2011 | 26,628 | $ | 44.80 | 106,000 | 528,000 | (422,000 | ) | (709,000 | ) | |||||||||||||||
10/25/2011 | 799 | $ | 59.13 | - | 6,000 | (6,000 | ) | (22,000 | ) | |||||||||||||||
2/2/2012 | 10,648 | $ | 28.00 | 49,000 | - | (144,000 | ) | - | ||||||||||||||||
2/2/2012 | 1,597 | $ | 27.00 | - | - | (21,000 | ) | - | ||||||||||||||||
11/8/2012 | 483,657 | $ | 6.53 | 2,960,000 | - | (237,000 | ) | - | ||||||||||||||||
3,125,000 | $ | 917,000 | $ | (1,202,000 | ) | $ | (3,717,000 | ) |
As of December 31, 2011 | ||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/07/10 | 01/19/11 | 10/25/11 | ||||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | ||||||||||||||||||||
Stock price | $ | 23.40 | $ | 23.40 | $ | 23.40 | $ | 23.40 | ||||||||||||||||
Exercise price | $ | 650.00 | $ | 300.00 | $ | 160.00 | $ | 44.80 | ||||||||||||||||
Expected terms (yrs) | 2.9 | 3.8 | 4.1 | 4.8 | ||||||||||||||||||||
Risk-free interest rate | 0.36 | % | 0.60 | % | 0.60 | % | 0.83 | % | ||||||||||||||||
Estimated volatility | 144.55 | % | 156.71 | % | 156.71 | % | 143.85 | % | ||||||||||||||||
As of December 31, 2012 | ||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/07/10 | 01/19/11 | 10/25/11 | 02/02/12 | 11/08/12 | ||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | 10,648 | 483,657 | ||||||||||||||||||
Stock price | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | ||||||||||||
Exercise price | $ | 650.00 | $ | 300.00 | $ | 160.00 | $ | 44.80 | $ | 28.00 | $ | 6.53 | ||||||||||||
Expected terms (yrs) | 1.9 | 2.8 | 3.1 | 3.8 | 4.1 | 4.9 | ||||||||||||||||||
Risk-free interest rate | 0.25 | % | 0.36 | % | 0.36 | % | 0.54 | % | 0.54 | % | 0.72 | % | ||||||||||||
Estimated volatility | 110.99 | % | 101.94 | % | 101.94 | % | 133.28 | % | 133.28 | % | 146.03 | % | ||||||||||||
As of the date of issuance for warrants issued in 2011 and 2012 | ||||||||||||||||||||||||
Grant Date | 01/19/11 | 10/25/11 | 02/02/12 | 11/08/12 | ||||||||||||||||||||
Shares | 10,673 | 26,628 | 10,648 | 483,657 | ||||||||||||||||||||
Stock price | $ | 155.00 | $ | 51.40 | $ | 20.60 | $ | 7.31 | ||||||||||||||||
Exercise price | $ | 160.00 | $ | 44.80 | $ | 28.00 | $ | 6.53 | ||||||||||||||||
Expected terms (yrs) | 5 | 5 | 5 | 5 | ||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 1.01 | % | 0.71 | % | 0.65 | % | ||||||||||||||||
Estimated volatility | 138.7 | % | 144.6 | % | 144.7 | % | 146.0 | % |
11-16-2012 | 8-14-2012 | 5-15-2012 | 11-15-2011 | |||||||||||||
Risk-free interest rate | 0.62 | % | 0.75 | % | 0.74 | % | 0.93 | % | ||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Expected life (years) | 5 | 5 | 5 | 5 | ||||||||||||
Volatility | 91.3 | % | 111.8 | % | 122.7 | % | 130.0 | % |
2012 | 2011 | |||||||||||||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Shares | Weighted Average Exercise Price | |||||||||||||||||||
Outstanding at beginning of year | 2,426 | $ | 53.60 | 316 | $ | 322.00 | ||||||||||||||||||
Granted | 5,487 | $ | 10.93 | 2,250 | $ | 40.00 | ||||||||||||||||||
Exercised | - | $ | - | - | $ | - | ||||||||||||||||||
Expired or forfeited | (750 | ) | $ | 40.00 | (140 | ) | $ | 440.00 | ||||||||||||||||
Outstanding at end of year | 7,163 | $ | 22.34 | 4.4 | $ | - | 2,426 | $ | 53.60 | |||||||||||||||
Exercisable at end of year | 6,788 | $ | 21.36 | 4.5 | $ | - | 1,176 | |||||||||||||||||
Weighted-average fair value of | ||||||||||||||||||||||||
options granted during the year | $ | 8.44 | $ | 34.20 | ||||||||||||||||||||
Price range of options | ||||||||||||||||||||||||
Outstanding | $ | 9.80-$228.00 | $ | 40.00-$228.00 | ||||||||||||||||||||
Exercised | $ | - | $ | - | ||||||||||||||||||||
Expired or forfeited | $ | 40.00 | $ | 440.00 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Range of Exercise Price | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Number of Options | Weighted Average Exercise Price | |||||||||||||||||
$ | 9.80-$15.20 | 5,488 | $ | 10.93 | 4.7 | 5,488 | $ | 10.93 | ||||||||||||||
$ | 40.00 | 1,500 | $ | 40.00 | 3.9 | 1,125 | $ | 40.00 | ||||||||||||||
$ | 228.00 | 175 | $ | 228.00 | 2.4 | 175 | $ | 228.00 | ||||||||||||||
7,163 | 6,788 |
2012 | 2011 | |||||||
U.S. Federal income tax expense | $ | - | $ | (13,000 | ) | |||
State and local income tax expense | $ | - | $ | (1,000 | ) | |||
Total income tax expense | $ | - | $ | (14,000 | ) | |||
2012 | 2011 | |||||||
Current income tax expense | $ | - | $ | (14,000 | ) | |||
Deferred income tax expense | $ | - | $ | - | ||||
Total income tax expense | $ | - | $ | (14,000 | ) |
2012 | 2011 | |||||||
Deferred tax assets | ||||||||
Deferred rent | $ | 17,000 | $ | 19,000 | ||||
Accrued vacation | 16,000 | 15,000 | ||||||
Tax credit/grants | 82,000 | 82,000 | ||||||
Deferred compensation | 16,000 | - | ||||||
Net operating loss carryforward | 16,852,000 | 15,467,000 | ||||||
Accrued bonus | 68,000 | 68,000 | ||||||
Stock based compensation | 45,000 | 25,000 | ||||||
Accrued expenses | 38,000 | 38,000 | ||||||
Property and equipment | 19,000 | - | ||||||
Warrants | 3,683,000 | 2,813,000 | ||||||
Warrants - issuance costs | 553,000 | 211,000 | ||||||
Other | 1,000 | 5,000 | ||||||
Total deferred tax asset | 20,837,000 | 18,532,000 | ||||||
Deferred tax liabilities | ||||||||
Property and equipment | - | (3,000 | ) | |||||
Change in accounting method - accrued bonus | - | (20,000 | ) | |||||
- | (23,000 | ) | ||||||
Valuation allowance | (20,837,000 | ) | (18,509,000 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
2012 | 2011 | |||||||
U.S. Federal income tax benefit at the statutory rate of 34% | $ | 982,000 | $ | (142,000 | ) | |||
Effect of permanent differences | 4,000 | (9,000 | ) | |||||
Effect of permanent differences - Government Grant | - | 4,000 | ||||||
Effect of permanent differences - Warrants | 114,000 | 1,184,000 | ||||||
State income taxes benefit, net of federal tax benefit | 99,000 | 251,000 | ||||||
Other | (1,000 | ) | (78,000 | ) | ||||
Change in valuation allowance | (1,198,000 | ) | (1,224,000 | ) | ||||
Income tax expense | $ | - | $ | (14,000 | ) |
Year Ending December 31, | Operating Lease | |||
2013 | $ | 156,000 | ||
2014 | 161,000 | |||
2015 | 165,000 | |||
2016 | 170,000 | |||
2017 | 176,000 | |||
2018 | 44,000 | |||
$ | 872,000 |
September 30, 2013 | December 31, 2012 | |||||||
ASSETS | (Unaudited) | |||||||
Current assets | ||||||||
Cash | $ | 2,541,743 | $ | 4,498,237 | ||||
Other receivables | - | 3,425 | ||||||
Prepaid expneses and other assets | 51,074 | 100,474 | ||||||
Assets of segment held for sale | - | 104,265 | ||||||
Total current assets | 2,592,817 | 4,706,401 | ||||||
Other assets | ||||||||
Property and equipment, net of accumulated depreciation of $332,395 and $308,386 | - | 24,009 | ||||||
Patent portfolio, net of accumulated amortization of $133,785 and $0 | 4,967,911 | - | ||||||
Deposit | 29,505 | 25,625 | ||||||
Goodwill | 1,711,883 | - | ||||||
Total assets | $ | 9,302,116 | $ | 4,756,035 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 486,136 | $ | 425,774 | ||||
Accrued salaries and benefits | 48,505 | 280,263 | ||||||
Accrued patent costs | 1,000,000 | - | ||||||
Liabilities of segment held for sale | 2,551 | 25,040 | ||||||
Total current liabilities | 1,537,192 | 731,077 | ||||||
Deferred rent | 45,008 | 45,081 | ||||||
Warrant liabilities | 39,923 | 3,125,393 | ||||||
Total liabilities | 1,622,123 | 3,901,551 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity | ||||||||
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized; | ||||||||
Series A: No shares issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $1,000 per share | - | - | ||||||
Series B: 1 share issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $1,000 per share | - | - | ||||||
Series C: 1 and no shares issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $0.0001 per share | - | - | ||||||
Series D: 1,379,685 and no shares issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $0.0001 per share | 138 | - | ||||||
Series E: No shares issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $0.0001 per share | - | - | ||||||
Series F: No shares issued and outstanding, at September 30, 2013 and December 31, 2012; liquidation preference $0.0001 per share | - | - | ||||||
Common stock, $0.0001 par value, 50,000,000 shares authorized; 2,430,305 and 814,114 shares issued at September 30, 2013 and December 31, 2012, respectively; 2,429,904 and 813,713 shares outstanding at September 30, 2013 and December 31, 2012, respectively | 244 | 82 | ||||||
Additional paid in capital | 57,239,275 | 36,630,406 | ||||||
Treasury stock at cost, 401 shares at September 30, 2013 and December 31, 2012, respectively | (464,786 | ) | (464,786 | ) | ||||
Accumulated deficit | (49,094,878 | ) | (35,311,218 | ) | ||||
Total stockholders' equity | 7,679,993 | 854,484 | ||||||
Total liabilities and stockholders' equity | $ | 9,302,116 | $ | 4,756,035 |
For the Three Months Ended September 30, 2013 (Unaudited) | For the Three Months Ended September 30, 2012 (Unaudited) | For the Nine Months Ended September 30, 2013 (Unaudited) | For the Nine Months Ended September 30, 2012 (Unaudited) | |||||||||||
Revenues | $ | 1,837 | $ | 16,710 | $ | 7,811 | $ | 16,710 | ||||||
Operating costs and expernses | ||||||||||||||
Costs of revenues | ||||||||||||||
Amortization of patents | 133,785 | - | 133,785 | - | ||||||||||
Compensation and compensation related expenses (including stock based compensation) | 6,392,503 | - | 7,129,025 | - | ||||||||||
Research and development expenses | 9,648 | 107,817 | 9,648 | 617,469 | ||||||||||
Professional fees | 2,139,977 | - | 2,867,945 | - | ||||||||||
Rent | 60,433 | - | 132,475 | - | ||||||||||
Depreciation expense | 2,519 | - | 24,009 | - | ||||||||||
Other selling, general and administrative expenses | 579,740 | 542,538 | 884,858 | 1,765,721 | ||||||||||
Total operating expenses | 9,318,605 | 650,355 | 11,181,745 | 2,383,190 | ||||||||||
Operating loss | (9,316,768) | (633,645) | (11,173,934) | (2,366,480) | ||||||||||
Loss from operations | ||||||||||||||
Interest income | 202 | 830 | 739 | 2,774 | ||||||||||
Fair value adjustments for warrant liabilities | 36,583 | 58,413 | (2,610,465) | 740,605 | ||||||||||
Loss from continuing operations before taxes | (9,279,983) | (574,402) | (13,783,660) | (1,623,101) | ||||||||||
Income tax expense | - | - | - | - | ||||||||||
Loss from continuing operations | (9,279,983) | (574,402) | (13,783,660) | (1,623,101) | ||||||||||
Discontinued operations | ||||||||||||||
Loss from discontinued operations before tax | - | (133,148) | - | (323,423) | ||||||||||
Income tax expense | - | - | - | - | ||||||||||
Loss from discontinued operations | - | (133,148) | - | (323,423) | ||||||||||
Net loss | $ | (9,279,983) | $ | (707,550) | $ | (13,783,660) | $ | (1,946,524) | ||||||
Net loss per share, basic and diluted | ||||||||||||||
Continuing operations | $ | (6.93) | $ | (2.76) | $ | (14.43) | $ | (8.09) | ||||||
Discontinued operations | $ | - | $ | (0.64) | $ | - | $ | (1.61) | ||||||
Net loss per share, basic and diluted | $ | (6.93) | $ | (3.40) | $ | (14.43) | $ | (9.70) | ||||||
Weighted average shares outstanding, basic and diluted | 1,339,300 | 207,806 | 955,292 | 200,547 |
For the Nine Months Ended | For the Nine Months Ended | |||||||
September 30, 2013 | September 30, 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (13,783,660 | ) | $ | (1,946,524 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Provision for doubtful accounts | - | (8,174 | ) | |||||
Depreciation | 24,009 | 50,936 | ||||||
Fair value adjustments for warrant liabilities | 2,610,465 | (740,605 | ) | |||||
Stock based compensation | 7,402,485 | 40,350 | ||||||
Amortization of patent portfolio | 133,785 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other assets | 60,023 | 316,041 | ||||||
Accounts receivable | - | 103,746 | ||||||
Other receivables | 3,425 | - | ||||||
Accounts payable, accrued expenses and accrued salaries and benefits | (171,396 | ) | (151,994 | ) | ||||
Deferred payables | (73 | ) | 5,206 | |||||
Net cash used in continuing operations | (3,720,937 | ) | (2,331,018 | ) | ||||
Net cash provided by discontinued operations | 81,776 | 17,636 | ||||||
Net cash used in operating activities | (3,639,161 | ) | (2,313,382 | ) | ||||
Cash flows from investing activities | ||||||||
Cash acquired in acquisition of North South | 2,684,363 | - | ||||||
Purchase of property and equipment | - | (1,599 | ) | |||||
Purchase of patent portfolio | (2,001,696 | ) | - | |||||
Net cash provided by (used in) investing activities | 682,667 | (1,599 | ) | |||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of note payable | 500,000 | - | ||||||
Proceeds received from issuance of preferred stock | 500,000 | 1,055,353 | ||||||
Reverse stock split fractional share payment | - | (1,685 | ) | |||||
Net cash provided by financing activiites | 1,000,000 | 1,053,668 | ||||||
Net decrease in cash | (1,956,494 | ) | (1,261,313 | ) | ||||
Cash at beginning of period | 4,498,237 | 4,911,350 | ||||||
Cash at end of period | $ | 2,541,743 | $ | 3,650,037 | ||||
Supplemental disclosure of cash flow information | ||||||||
Interest paid | $ | - | $ | - | ||||
Income taxes paid | $ | - | $ | - | ||||
Supplemental disclosure of non cash activity | ||||||||
Issuance of Convertible Preferred Stock - Series C in connection with exchange of warrants | $ | 5,695,935 | $ | - | ||||
Conversion of Convertible Preferred Stock - Series C into common stock | $ | 23 | $ | - | ||||
Issuance of common stock in connection with cashless exercise of warrants | $ | 1 | $ | - | ||||
Issuance of common stock in connection with acquisition of patent portfolio | $ | 1,000,000 | $ | - | ||||
Accrued patent costs | $ | 1,000,000 | $ | - | ||||
Acquisition of North South Holdings: | ||||||||
Prepaid expenses | $ | (14,503 | ) | $ | - | |||
Patent portfolio | (1,100,000 | ) | - | |||||
Goodwill | (1,711,883 | ) | - | |||||
Common and preferred stock issued | 5,510,749 | - | ||||||
Cash acquired in acquisition of North South | $ | 2,684,363 | $ | - |
For the Years Ending December 31 | Harris Patent Portfolio | CompuFill Patent Portfolio | Rockstar Patent Portfolio | Other Costs | Total Amortization | |||||||||||||||||
2013 | * | $ | 11,765 | $ | 10,294 | $ | 247,001 | $ | 10,344 | $ | 279,404 | |||||||||||
2014 | 47,059 | 41,176 | 795,348 | 41,376 | 924,959 | |||||||||||||||||
2015 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||
2016 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||
2017 | 47,059 | 41,176 | 433,918 | 41,376 | 563,529 | |||||||||||||||||
Thereafter | 196,077 | 171,571 | 1,056,112 | 172,417 | 1,596,177 | |||||||||||||||||
Total | $ | 396,078 | $ | 346,569 | $ | 3,876,999 | $ | 348,265 | $ | 4,967,911 |
September 30, 2013 | September 30, 2012 | |||||||
Convertible preferred stock | 13,796,852 | 4 | ||||||
Warrants to purchase common stock | 66,062 | 67,637 | ||||||
Non-vested restricted stock awards | 250 | - | ||||||
Options to purchase common stock | 2,012,163 | 2,425 | ||||||
Total | 15,875,327 | 70,066 |
Purchase Consideration: | ||||
Value of common stock and convertible preferred stock issued to sellers | $ | 5,510,749 | ||
Tangible assets acquired: | ||||
Cash | 2,684,363 | |||
Prepaid expenses | 14,503 | |||
Net tangible assets acquired | 2,698,866 | |||
Purchase consideration in excess of fair value of net tangible assets | 2,811,883 | |||
Allocated to: | ||||
Patent portfolios | 1,100,000 | |||
Goodwill | 1,711,883 | |||
$ | - |
For the nine months ended September 30, 2013 | For the nine months ended September 30, 2012 | For the three months ended September 30, 2013 | For the three months ended September 30, 2012 | |||||||||||||
Revenues | $ | 101,811 | $ | 16,710 | $ | 95,837 | $ | 16,710 | ||||||||
Net loss | $ | (14,214,571 | ) | $ | (1,720,160 | ) | $ | (9,421,574 | ) | $ | (606,755 | ) | ||||
Loss per share- basic and diluted | $ | (6.84 | ) | $ | (1.23 | ) | $ | (4.08 | ) | $ | (0.43 | ) |
Preferred Stock | Number of Shares Issued | Par Value | Conversion to Common Stock | |||||||||
Series “A" (1) | 0 | $ | .0001 | N/A | ||||||||
Series “B" (2) | 1 | $ | .0001 | 1:1 | ||||||||
Series “C" (3) | 1 | $ | .0001 | 1:1 | ||||||||
Series “D” (4) | 1,379,685 | $ | .0001 | 10:1 | ||||||||
Series “E” (5) | 0 | $ | .0001 | 1:1 |
IN WITNESS WHEREOF, Spherix Incorporated has caused this certificate to be signed by its Chief Executive Officer as of the holder, subject to certain limitations on conversions that would result in the Investors acquiring more than 4.99% day of , 2016.
By: | ||
Anthony Hayes, CEO |
A-1
Appendix B
AUTHORIZED SHARE DECREASE AMENDMENT
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF SPHERIX INCORPORATED
(or, if such limitation is waiveda Delaware corporation )
Spherix Incorporated (the “Corporation”), a corporation organized and existing under and by the holder upon no less than 61 days prior notice, 9.99%)
1. Effective as of a5:01 p.m., Eastern time on the date this Certificate of DesignationAmendment, the amended and restated certificate of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (“Certificate of Designation”). The liquidation preferenceincorporation of the Series C Convertible Preferred StockCorporation is $0.0001 per share.
Article “FOURTH: A. The total number of shares of Common Stock underlying the Series C Convertible Preferred Stock is the same number as would have been-issued upon a “cashless exercise”stock of the exchanged warrants under the terms of the warrants based on the one-day volume weighted average price of the Company’s Common Stock on February 28, 2013, which was $12.6439 per share, as reported by Bloomberg.
Options | Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
Outstanding at December 31, 2012 | 7,163 | $ | 22.34 | 4.4 | ||||||||||||
Granted | 2,005,500 | $ | 7.08 | 9.5 | ||||||||||||
Exercised | - | $ | - | |||||||||||||
Expired or forfeited | (500 | ) | $ | (25.00 | ) | |||||||||||
Outstanding at September 30, 2013 | 2,012,163 | $ | 7.13 | 9.5 | $ | 1,724,730 | ||||||||||
Options exercisable at September 30, 2013 | 36,663 | $ | 7.43 | 9.5 | $ | 25,800 |
Number of Units | Weighted Average Grant Date Fair Value | ||||
Nonvested at January 1, 2013 | 122,500 | $6.83 | |||
Granted | - | ||||
Vested | (120,250) | ($6.80) | |||
Forfeited | (2,000) | ($6.83) | |||
Nonvested at September 30, 2013 | 250 | $6.83 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Stock Options with: | ||||||||||||||||
Service conditions only | $ | 4,716,070 | $ | - | $ | 4,718,214 | $ | 40,000 | ||||||||
Combined market and service conditions | 306,250 | - | 306,250 | - | ||||||||||||
Combined market and performance conditions | 1,555,535 | - | 1,555,535 | - | ||||||||||||
Restrcited stock | 816,000 | - | 822,486 | - | ||||||||||||
$ | 7,393,855 | $ | - | $ | 7,402,485 | $ | 40,000 |
Fair value measurements at September 30, 2013 using | |||||||||||||||||
September 30, 2013 | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||
Liabilities: | |||||||||||||||||
Fair value of warrant liabilities | $ | 39,923 | – | – | $ | 39,923 |
Fair value measurements at December 31, 2012 using | ||||||||||||||||
December 31, 2012 | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
Liabilities: | ||||||||||||||||
Fair value of warrant liabilities | $ | 3,125,393 | – | – | $ | 3,125,393 |
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Warrants: | ||||||||
Risk-free interest rate | 0.04% - 1.42 | % | 0.16% - 0.72 | % | ||||
Expected volatility | 55.12%-72.94 | % | 91.79% - 146.03 | % | ||||
Expected life (in years) | 0.1-3.3 | 0.8 - 4.9 | ||||||
Expected dividend yield | - | - | ||||||
Number of warrants | 66,062 | 550,664 | ||||||
Fair value | $ | 39,923 | $ | 3,125,393 |
2013 | 2012 | |||||||
Beginning balance | $ | 3,125,393 | $ | 916,621 | ||||
Issuance of new warrants | - | 214,288 | ||||||
Fair value adjustments for | ||||||||
warrant liabilities | 2,610,465 | (740,605 | ) | |||||
Reclassification to | ||||||||
stockholders’ equity | (5,695,935 | ) | - | |||||
Ending balance | $ | 39,923 | $ | 390,304 |
Operating | ||||
Year Ending December 31, | Leases | |||
2013 | $ | 44,819 | ||
2014 | 176,014 | |||
2015 | 165,427 | |||
2016 | 170,390 | |||
2017 | 175,502 | |||
2018 | 44,197 | |||
$ | 776,349 |
2012 | 2011 | |||||||
Revenue | $ | 728,312 | $ | 820,925 | ||||
Direct cost and operating expense | (417,428 | ) | (388,065 | ) | ||||
Selling, general and administrative expense | (1,279,875 | ) | (816,389 | ) | ||||
Loss from discontinued operations before taxes | $ | (968,991 | ) | $ | (383,529 | ) |
Period | High | Low | ||||||
2013 | ||||||||
First Quarter | $ | 14.99 | $ | 5.51 | ||||
Second Quarter | $ | 11.05 | $ | 4.07 | ||||
Third Quarter | $ | 27.86 | $ | 4.54 | ||||
Fourth Quarter | $ | 13.70 | $ | 6.52 | ||||
2012 | ||||||||
First Quarter | $ | 35.40 | $ | 15.60 | ||||
Second Quarter | $ | 22.40 | $ | 10.00 | ||||
Third Quarter | $ | 11.98 | $ | 7.22 | ||||
Fourth Quarter | $ | 11.76 | $ | 5.85 | ||||
2011 | ||||||||
First Quarter | $ | 218.00 | $ | 70.00 | ||||
Second Quarter | $ | 117.20 | $ | 45.60 | ||||
Third Quarter | $ | 69.60 | $ | 24.60 | ||||
Fourth Quarter | $ | 68.40 | $ | 22.60 |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | 2,012,163 | (1) | $ | 7.13 | 797,250 | (2) |
2. The foregoing amendment to the Company’s 2014 Equity Incentive Plan (the "2014 Plan") to increase the number of shares available for future issuance thereunder to 4,161,892 from 2,400,000 on February 27, 2014 in recognition of the increased Common Stock presently outstanding since the initial stockholder approval of the 2014 Plan and recommended that the stockholders vote “FOR” the below resolution, which it has deemed is in the best interests of the Company and its stockholders;
IN WITNESS WHEREOF, the Patent Acquisition
Name: Anthony Hayes
Title: Chief Executive Officer
B-1
Appendix B
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 exceed5.2.7 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 exceedC-1
VOTE BY INTERNET | ||
SPHERIX INCORPORATED 6430 ROCKLEDGE DRIVE SUITE 503 BETHESDA, MD 20877 | Before The Meeting- Go towww.proxyvote.com | |
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | ||
During The Meeting- Go towww.virtualshareholdermeeting.com/SPEX | ||
You may attend the Special Meeting via the internet and vote during the Special Meeting until voting is closed. Have the information that is printed in the box marked by the arrow available and follow the instructions. | ||
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | ||
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | ||
VOTE BY PHONE - 1-800-690-6903 | ||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL | ||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | ||
VOTE IN PERSON | ||
Attend and vote at the Special Meeting being held at the law firm of Nixon Peabody LLP, 437 Madison Avenue, 24th Floor, New York, NY 10022. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |||
M98332-P71181 | KEEP THIS PORTION FOR YOUR RECORDS | ||
DETACH AND RETURN THIS PORTION ONLY | |||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
SPHERIX INCORPORATED | ||||||||||||
The Board of Directors recommends you voteFOR Proposals 1, 2, 3 and 4: | ||||||||||||
For | Against | Abstain | ||||||||||
1. | To approve an amendment to the Certificate of Incorporation to effect a reverse stock split. | ☐ | ☐ | ☐ | ||||||||
2. | To approve an amendment to the Certificate of Incorporation to reduce the number of shares of common stock that the Spherix Incorporated is authorized to issue. | ☐ | ☐ | ☐ | ||||||||
3. | To approve an amendment to Spherix Incorporated 2014 Equity Incentive Plan to increase the number of shares of common stock authorized to be issued pursuant to the plan. | ☐ | ☐ | ☐ | ||||||||
4. | To authorize the adjournment of the Special Meeting if necessary or appropriate. | ☐ | ☐ | ☐ | ||||||||
THE PROXIES are authorized to vote in their discretion upon such other business, if any, as may properly come before the Special Meeting or any adjournment thereof. | ||||||||||||
For address changes and/or comments, please check this box and write them on the back where indicated. | ||||||||||||
Yes | No | |||||||||||
Please indicate if you plan to attend this meeting. | ☐ | ☐ | ||||||||||
NOTE:Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | ||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||
To the Stockholders of Spherix Incorporated:
The Special Meeting (“Special Meeting”) of Spherix Incorporated (“Spherix”) will be held as a virtual meeting on Monday, February 22, 2016, at 9:00 a.m. Pacific Time/12:00 p.m. Eastern Time, to vote on the following matters:
1. | The approval of an amendment to the Certificate of Incorporation to effect a reverse stock split; | |
2. | The approval of an amendment to the Certificate of Incorporation to reduce the total number of shares of common stock that Spherix is authorized to issue; | |
3. | The approval of an amendment to Spherix Incorporated 2014 Equity Incentive Plan to increase the number of shares of common stock authorized to be issued under the plan; and | |
4. | To authorize the adjournment of the Special Meeting if necessary or appropriate. |
The proxy statement contains information regarding the Special Meeting, including information on the matters to be voted on prior to and during the Special Meeting. If you have chosen to view our proxy statements over the Internet instead of receiving paper copies in the mail, you can access our proxy statement and vote atwww.proxyvote.com.
Your vote is important.Whether or not you expect to attend the Special Meeting, we encourage you to promptly vote these shares by one of the methods listed on the reverse side of this proxy card.
You will be able to attend the Special Meeting via live audio webcast by visiting Spherix’s virtual meeting website atwww.virtualshareholdermeeting.com/SPEX on Monday, February 22, 2016, at 9:00 a.m. Pacific Time/12:00 p.m. Eastern Time. Upon visiting the meeting website, you will be prompted to enter the 16-digit Control Number provided to you on your Notice of Internet Availability of Proxy Materials or on your proxy card if you receive materials by mail. The unique Control Number allows us to identify you as a stockholder and will enable you to securely log on, vote and submit questions during the Special Meeting on the meeting website. Further instructions on how to attend and participate in the Special Meeting via the Internet, including how to demonstrate proof of stock ownership, are available atwww.proxyvote.com.
Sincerely,
Anthony Hayes, CEO
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Notice and Proxy Statement is available atwww.proxyvote.com. |
M98333-P71181 |
PROXY | ||||
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SPHERIX INCORPORATED | ||||
The undersigned hereby appoints Anthony Hayes and Frank Reiner, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Spherix Incorporated Common Stock which the undersigned is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Special Meeting of the Company to be held February 22, 2016 or any adjournment thereof, with all powers which the undersigned would possess if present at the Meeting. | ||||
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD WILL BE VOTED FOR PROPOSAL 1, 2, 3 AND 4, AND SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. | ||||
Address Changes/Comments: ______________________________________________________________________________ | ||||
________________________________________________________________________________________________________ | ||||
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) | ||||
(Continued and to be marked, dated and signed, on the other side.) | ||||