As filed with the U.S. Securities and Exchange Commission on December 9, 2013

July 3, 2017

Registration No. 333-

333-218216

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549

FORM

_______________

Amendment No. 1

to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
Spherix Incorporated

_______________

SPHERIX INCORPORATED

(Exact name of registrant as specified in its charter)


_______________

Delaware8734283652-0849320

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)Number)


7927 Jones Branch Drive, Suite 3125
Tysons Corner, VA 22102
(703) 992-9260

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Phone:703-992-9325

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Anthony Hayes

Chief Executive Officer

Spherix Incorporated

7927 Jones Branch Drive, Suite 3125
Tysons Corner, VA 22102
(703) 992-9260

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Phone:703-992-9325

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies

Copies to:

Tara Guarneri-Ferrara
Sichenzia Ross

Robert F. Charron, Esq.  

Sarah E. Williams, Esq.

Ellenoff Grossman & Schole LLP  

1345 Avenue of the Americas

New York, New York 10105

Telephone: (212) 370-1300

Richard A. Friedman, FerenceEsq.

Stephen A. Cohen, Esq.

Sheppard, Mullin, Richter & Hampton LLP

61 Broadway, 32nd Floor

30 Rockefeller Plaza

New York, NY 10006

Telephone:10112

Tel.: (212) 930-9700

Facsimile: (212) 930-9725
James E. Baker, Jr.
Baxter, Baker, Sidle, Conn & Jones, P.A.
120 E. Baltimore Street, Suite 2100
Baltimore, MD 21202
Telephone: (410) 385-8122
Facsimile: (410) 230-3801
653-8700




_______________

Approximate date of commencement of proposed sale to the public:public: As soon as practicable after the effective date of this Registration Statement.

registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  [X]


¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [  ]


¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [  ]


¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   [  ]


¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of large“large accelerated filer,, “accelerated “accelerated filer,” “smaller reporting company,” and smaller reporting company“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]¨Accelerated filer [  ]¨
Non-accelerated filer  [  ]
 (do¨ (Do not check if a smaller reporting company)
Smaller reporting company [X]x
Emerging growth company¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.                ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to Be Registered
Amount to Be
Registered (1)
 
Proposed Maximum
Offering Price
Per Unit
  
Proposed Maximum
Aggregate
Offering Price
  
Amount of
Registration Fee
 
Common stock, $0.0001 par value per share902,055 shares $8.63(2) $7,784,734.65(2) $1,002.67 
Common stock, $0.0001 par value per share (3)
1,400,560 shares $8.63(2)  12,086,832.80(2)  1,556.78 
Total2,302,615 shares          2,559.45 

Title of Each Class of Securities to be
Registered
 Proposed
Maximum
Aggregate
Offering Price(1)(2)
(3)
  Amount of
Registration
Fee
 
Common Stock, $0.0001 par value per share $  $ 
         
Total $3,450,000  $399.86 

(1) Pursuant to____________
(1)Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 416457(o) under the Securities Act of 1933, as amended, this registration statement also covers suchamended.

(2)

Includes the offering price of any additional shares that the underwriters have the right to purchase from the Registrant to cover over-allotments, if any.

(3)Pursuant to Rule 416(a), the securities being registered hereunder include such indeterminate number of additional securities as may hereafter be offered or issuedissuable to prevent dilution resulting from stock splits, stock dividends recapitalizations or certain other capital adjustments.similar transactions.

(2)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, based on the average of the high and low prices reported on the NASDAQ Stock Market on December 5, 2013.

(3)Represents shares of common stock underlying the Company’s Series Convertible Preferred Stock which will be exchanged for shares of Series D-1 Convertible Preferred Stock on a one for one basis, at which time this will represent shares of Common Stock underlying the Company’s Series D-1 Convertible Preferred Stock.

The Registrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrantregistrant shall file a further amendment thatwhich specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statementthe registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


 


The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission declares our registration statementis effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any statejurisdiction where the offer or sale is not permitted.

Subject to completion, dated December 9, 2013
PROSPECTUS
SPHERIX INCORPORATED
2,302,615

PRELIMINARY PROSPECTUSSubject to CompletionDated July 3, 2017

Shares of Common Stock

    This prospectus relates to the disposition from time to time of up to 2,302,615

We are offering shares of our common stock, including 1,400,560 shares of common stock issuable upon conversion of outstanding shares of Series D Convertible Preferred Stock, which the Company anticipates exchanging for shares of Series D-1 Convertible Preferred Stock on a one for one basis, prior to the effectiveness of this prospectus. Each share of Series D Convertible Preferred Stock is (and each share of Series D-1 Convertible Preferred Stock will be) convertible into ten shares of common stock, which are held by the selling stockholders named in this prospectus. One selling stockholder acquired the common stock from us in connection with our acquisition of a patent portfolio from the selling stockholder on July 24, 2013 and the balance of the selling stockholders will acquire shares of Series D-1 Convertible Preferred Stock in connection with the exchange of shares of Series D Convertible Preferred Stock held by them. The shares of Series D Convertible Preferred Stock held by such stockholders were originally issued to them in connection with our acquisition of North South Holdings, Inc. (“North South”) in exchange for securities of North South held by them. We are not selling any common stock under this prospectus and will not receive any of the proceeds from the sale of shares by the selling stockholders. All references in this prospectus to Series D/Series D-1 Preferred Stock shall refer to shares of the Company’s Series D Preferred Stock which will be exchanged for shares of Series D-1 Preferred Stock on a one for one basis, prior to effectiveness of this prospectus.

    The selling stockholders may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. We provide more information about how the selling stockholders may sell their shares of common stock in the section entitled “Plan of Distribution” on page 41. The selling stockholders will bear all commissions and discounts, if any, attributable to the sale or disposition of the shares, or interests therein. We will bear all costs, expenses and fees in connection with the registration of the shares. We will not be paying any underwriting discounts or commissions in this offering.
par value $0.0001 per share.

Our common stock is tradedlisted on Thethe NASDAQ Capital Market under the symbol “SPEX.”“SPEX”. On December 6, 2013,June 29, 2017, the lastclosing price as reported sale price of our common stockon the NASDAQ Capital Market was $8.74$3.92 per share.

    An investment

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 311 of this prospectus for more information on these risks. 

prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacydetermined if this prospectus is truthful or accuracy of this prospectus.complete. Any representation to the contrary is a criminal offense.

Per ShareTotal(1)
Public offering price$$
Underwriting discount (2)$$
Proceeds, before expenses, to us (3)$$

 

(1)       The public offering price is $     per share of common stock.

(2)       The underwriter will receive other compensation in addition to the underwriting discount. See “Underwriting” beginning on page 66 of this prospectus for a description of the compensation payable to the underwriter.

(3)       We estimate the total expenses of this offering payable by us, excluding the underwriting discount, will be approximately $    . 

The

We have granted the underwriters an option for a period of 45 days from the date of this prospectus is ________, 2013.to purchase up to an additional          shares of common stock at the public offering price, less the underwriting discount.

We anticipate that delivery of the shares against payment will be made on or about     , 2017.

Laidlaw & Company (UK) Ltd.



TABLE OF CONTENTS

Prospectus dated           , 2017

 Page2

TABLE OF CONTENTS

PROSPECTUS SUMMARY5
Prospectus Summary1
Risk FactorsTHE OFFERING38
Special Note Regarding Forward Looking Statements10
Use of ProceedsSUMMARY OF CONSOLIDATED FINANCIAL DATA109
Market for Our Common Stock and Related Stockholder Matters10
Management’s Discussion and Analysis of Financial Condition and Results of OperationsRISK FACTORS1211
Business19
Management22
Executive Compensation26
Certain Relationships and Related Transactions28
Security Ownership of Certain Beneficial Owners and ManagementCAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS29
Selling Stockholders
DILUTION30
USE OF PROCEEDS32
Description of Securities
MARKET PRICE OF OUR COMMON STOCK33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS35
Plan of Distribution41
Legal MattersBUSINESS4140
Experts41
Where You Can Find Additional InformationPROPERTIES42
Index to Financial StatementsF-1
LEGAL PROCEEDINGS43
MANAGEMENT45
EXECUTIVE AND DIRECTOR COMPENSATION49
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT55
DESCRIPTION OF CAPITAL STOCK57
UNDERWRITING66
LEGAL MATTERS73
EXPERTS73
WHERE YOU CAN FIND MORE INORMATION AND INCORPORATION BY REFERENCE74

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in or incorporated by reference in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in or incorporated by reference in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale of common stock.

To the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information contained in any document incorporated by reference filed with the U.S. Securities and Exchange Commission (the “SEC”) before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any statement in a document incorporated by reference is inconsistent with a statement in another document incorporated by reference having a later date, the statement in the document having the later date modifies or supersedes the earlier statement.

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Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus and any free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any free writing prospectus applicable to that jurisdiction.

This prospectus and the documents incorporated by reference in this prospectus contain market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe that these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data presented or incorporated by reference in this prospectus, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and any related free writing prospectus. Accordingly, investors should not place undue reliance on this information.

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PROSPECTUS SUMMARY

Overview 

This summary highlights certain information about us, this offering and selected information contained elsewhere in this prospectus and in the documents incorporated by reference. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our securities. For a more complete understanding of our company and this offering, we encourage you to read and consider carefully the more detailed information contained in or incorporated by reference in this prospectus, including the information contained under the heading “Risk Factors” beginning on page 11 of this prospectus, and the information included in any free writing prospectus that we have authorized for use in connection with this offering.

Throughout this prospectus, the terms “we,” “us,” “our,” and “our company” refer to Spherix Incorporated, (“we” ora Delaware corporation and its consolidated subsidiaries unless the “Company”) iscontext requires otherwise.

Company Overview

We are an intellectual property company that owns patented and unpatented intellectual property.  We wereSpherix Incorporated was formed in 1967 as a scientific research company and for much of our history pursued drug development, including through Phase III clinical studies, which were largely discontinued in 2012.  ThroughIn 2012 and 2013, we shifted our acquisitionfocus to being a firm that owns, develops, acquires and monetizes intellectual property assets.

In July 2013, we acquired 7 patents in the field of seven patentsmobile communications from Rockstar Consortium US LP (“Rockstar”) and.  This acquisition of several hundred patents issuedrepresented the first transaction believed to Harris Corporationhave been completed by Rockstar with any publicly traded company. Rockstar was launched in 2011 as a result of our acquisition of North South, we have expanded our activities in wireless communications and telecommunication sectors including antenna technology, Wi-Fi, base station functionality, and cellular. 


Our activities generally include the acquisition and development of patents through internal or external research and development.  In addition, we seek to acquire existing rights toan intellectual property through the acquisition of already issued patents and pending patent applications, both in the United States and abroad.  We may alone, or in conjunction with others, develop products and processes associated with our intellectual property and license our intellectual propertylicensing company to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes.  Using our patented technologies, we employ strategies seeking to permit us to derive value from licensing, commercialization, settlement and litigation from our patents.  We will continue to seek to obtain patents from inventors and patent owners to monetize patent portfolios.  

On April 2, 2013, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with our wholly-owned subsidiary, Nuta Technology Corp., a Virginia corporation (“Nuta”), North South and the stockholders of North South.  On August 30, 2013, we entered into an amendment to the Merger Agreement to amend, among other things, the terms of the merger consideration.  On September 10, 2013, we consummated the merger and North South merged into Nuta, with Nuta continuing as the surviving corporation and owner of North South’s intellectual property, and in accordance with the terms of the Merger Agreement, we issued 1,203,153 shares of our common stock and 1,379,685 shares of our Series D Convertible Preferred Stock, each of which is convertible into shares of common stock on a one-for-ten basis, to the former stockholders of North South.  

Through our acquisition of North South, we acquiredmanage a patent portfolio consistingrelated to the pre-bankruptcy technology and businesses of Nortel Networks (“Nortel”).  Rockstar was formed by Apple, Inc., Microsoft Corporation, Sony Corporation, Blackberry Limited and LM Ericsson Telephone Company. 

In September 2013, we acquired North South Holdings, Inc. (“North South”) and its 222 U.S. patents in the fields of wireless communications, satellite, solar, and radio frequency as well asand 2 U.S. patents in the field of pharmaceutical technology. Prior to the Merger,distribution. The 222 patents were developed by Harris Corporation, a leader in defense communications and electronics and acquired by North South acquired and developed patents through internal and/or external research and development and acquired issued U.S. and foreign patents and pending patent applications. We license our patents to companies seeking to develop products and processes that embodied our patented invention or to companies whose products and processes infringed our intellectual property. Priorprior to our acquisition of North South, North South commencedSouth.

In December 2013, we acquired an additional 101 patents and patent applications from Rockstar in consideration for approximately $60 million of our securities consisting of common stock and preferred stock.  The patents had been developed by Nortel and acquired by Rockstar following Nortel’s bankruptcy in 2011.  The December 2013 acquisition included patents covering internet access and video and data transmission, among other things.  We believe that many of these Nortel/Rockstar patents are standard essential patents, meaning they potentially cover various industry standards in wide use (although there is no assurance that a court or third-party would agree with such description).

Since our shift in focus to an intellectual property monetization platform, we have not generated any significant revenues.  We have incurred losses from operations for the years ended December 31, 2016 and commercialization efforts2015 of $8.6 million and $52.0 million, respectively. Our net income attributable to common stockholders was approximately $25.0 million, including $31.5 million of deemed capital contribution on extinguishment of preferred stock for the year ended December 31, 2016.  Our accumulated deficit was $141.7 million at December 31, 2016.  

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On November 23, 2015, we and RPX Corporation (“RPX”) entered into a Patent License Agreement (the “RPX License Agreement”) under which the Company granted RPX the right to sublicense various patent license rights to certain RPX clients. The consideration to the Company included: (i) the transfer to the Company for cancellation of its remaining outstanding Series I Redeemable Convertible Preferred Stock (the “Series I Preferred Stock”) then held by filingRPX, as to which a $5,000,000 mandatory redemption payment would have been due from the Company on or by December 31, 2015; (ii) the transfer to the Company for cancellation of 13%, or 57,076 shares, of its Series H Convertible Preferred Stock (the “Series H Preferred Stock”) then held by RPX, having a total carrying amount of $4,765,846 at the time the stock was issued to Rockstar; (iii) cancellation of the only outstanding security interest on 101 of the Company’s patents and patent infringement litigation against T-Mobile USA on geo-location technology ownedapplications acquired from Rockstar that originated at Nortel, which security interest had previously been transferred to RPX by North South, as well as two lawsuits on pharmaceutical distribution,Rockstar (“RPX Security Interest”); and (iv) $300,000 in cash to the Company.

In consideration of the above, we granted RPX the rights to grant: (i) to Juniper Networks, Inc. (“Juniper”), a non-sublicensable, non-transferrable sublicense solely to use the six patents that had been asserted against Juniper by the Company (“Asserted Patents”); and (ii) to Apple, Blackberry, Cisco, Google, Huawei, Ericsson, Microsoft and Sony, to the extent those parties did not already have licenses to our patents, a non-sublicensable, non-transferrable sublicense to use our existing portfolio. Prior to our ownership of the patents originating at Nortel, each of Apple, Blackberry, Ericsson, Microsoft and Sony had previously been granted full licenses to those patents. In addition, we separately granted Huawei a license with respect to Huawei’s network routers and switches. We also granted RPX the rights to grant Cisco and Google a sublicense under patents transferred to us through November 23, 2017. We have since dismissed our then-existing litigations against Cisco and Juniper and Cisco requested dismissal of its two petitions requestinginter partes re-examination (“IPR”) of certain of our patents at the Patent Trial and Appeal Board of the United States Patent and Trademark Office.

Further, we agreed, until May 23, 2016 (the “Standstill Period”) that: (a) we and RPX would engage in good faith negotiations for the grant of additional license rights to RPX’s other members in exchange for additional consideration to us; (b) we would not divest, transfer, or exclusively license any of our current patents; (c) neither RPX nor any RPX affiliate would challenge, or knowingly and intentionally assist others in challenging, the validity, enforceability, or patentability of any of our patents in any court or administrative agency having jurisdiction to consider the issue; and (d) we would not bring an action against current RPX clients for patent infringement.

Following the Standstill Period, as a result of the release of the RPX Security Interest, the patents may be leveraged, divested, transferred or exclusively licensed in a manner that is beneficial to us and our stockholders. We retained the right to bring claims under the patents at any time against other parties who are not licensees or beneficiaries under the RPX License. We also retained rights, following the Standstill Period, to bring claims under the patents against current RPX clients who did not become licensees or beneficiaries during the Standstill Period and, with respect to Juniper, under all of the patents other than the six Asserted Patents.

In March 2016, we entered into an agreement (which was subsequently amended in April and May 2016) with Equitable IP Corporation (“Equitable”) to facilitate the monetization of our patents (the “Monetization Agreement”). Pursuant to the Monetization Agreement, the Company is working together with Equitable to further develop and revise our ongoing litigation plan. See Note 4 to the Company’s audited financial statements for additional details surrounding the Monetization Agreement.

On May 23, 2016, we and RPX, entered into a second, separate Patent License Agreement (the “Second RPX License”) under which we acquired upon consummationgranted RPX the right to sublicense various patent rights only to current RPX clients (as of May 23, 2016). In exchange for the rights we granted under the Second RPX License, we received the following consideration: (i) a cash payment made to us in May 2016 in the amount of $4,355,000; and (ii) cancellation of the Merger.remaining 381,967 shares of our outstanding Series H Convertible Preferred Stock currently held by RPX, having a total carrying amount of $31,894,244 at the time the stock was issued to Rockstar.

In consideration of the above, we granted RPX the rights to grant to its current clients: (i) a fully paid portfolio license, to the extent such parties did not already have licenses to the Company’s patents; (ii) a covenant-not-to-sue current RPX clients for supply of chipsets; (iii) a standstill of litigation involving any patents acquired in the next five years.

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On July 24, 2013,

In connection with the Second RPX License, we closedalso granted to Alcatel-Lucent a license to the portfolio acquired from North South.

Under a separate agreement between us and RPX, we granted RPX the ability to grant to VTech Telecommunications Ltd. (“VTech”) a sublicense for a fully paid portfolio license in exchange for an additional $20,000 in cash consideration.

The license granted under the terms of the RPX License described herein does not extend to entities/companies that are not clients of RPX and provide chipsets or other hardware to current RPX clients.

In January of 2017, we settled our patent litigation against Uniden Corporation and Uniden America Corporation (collectively “Uniden”) and granted Uniden a license limited to the patents we originally asserted against Uniden and VTech, including U.S. Patent Nos. 5,581,599 (the “599 Patent”); 5,752,195; 5,892,814; 6,614,899; and 6,965,614 (See “Legal Proceedings” for a description of the Uniden litigation). The Company’s appeal at the Federal Circuit against the Patent and Trademark Office for its decision of patent invalidity of the ‘599 Patent will continue without Uniden as a party (See “Legal Proceedings”).

Our principal executive offices are located at One Rockefeller Plaza, 11th Floor New York, NY 10020, and our telephone number is 703-992-9325.

Our common stock trades on the acquisitionNASDAQ Capital Market under the symbol SPEX.

Recent Developments

On June 30, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”), for the purchase of a groupan aggregate of patents in the mobile communication sector from Rockstar in which we paid to Rockstar certain consideration, including 176,9916,800,000 shares of common stock, which are being registered pursuant to this prospectus.


We anticipate commencing an exchange with holderspar value $0.0001 (the “Shares”), of our outstanding sharesHoth, for a purchase price of Series D Convertible Preferred Stock pursuant to which such holders could exchange shares$675,000. As of Series D Preferred Stock for sharesJune 30, 2017, Hoth had a total of Series D-1 Convertible Preferred Stock on a one-for-one basis. An aggregate of 725,06417,000,000 shares of common stock issued and outstanding. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for the treatment of eczema. Hoth intends to develop BioLexa’s applications in the aesthetic dermatology field to help treat and reduce post-procedure infections, accelerate healing and improve clinical outcomes for patients undergoing procedures. Hoth will be implementing FDA testing procedures for BioLexa. In addition to the former stockholdersPurchase Agreement, the Company and Hoth entered into a Registration Rights Agreement, pursuant to which Hoth is obligated to register for resale on a registration statement on Form S-1 under the Securities Act, all of North Souththe shares, no later than June 30, 2018. Further, the Company, Hoth and 1,400,560 sharesHoth’s existing shareholders have entered into a Shareholders Agreement, pursuant to which Spherix shall have a right to appoint one director to the board of directors of Hoth for so long as the Company holds at least 10% of the issued and outstanding common stock underlying 140,056 shares of Series D/D-1 Convertible Preferred Stock issued to our Series D Convertible Preferred Stockholders, are being registered pursuant to this prospectus. The rights of the Series D-1 Convertible Preferred Stock are substantially identical to the rights of the Series D Convertible Preferred Stock except for certain modifications relating to conversion limitations. All references in this prospectus to Series D/Series D-1 Preferred Stock shall refer to shares of the Company’s Series D Preferred Stock which will be exchanged for shares of Series D-1 Preferred Stock on a one for one basis, prior to effectiveness of this prospectus.
                    We were incorporated in Delaware in 1967.  Hoth.

Available Information

Our principal executive office is located at 7927 Jones Branch Drive, Suite 3125, Tysons Corner, VA, 22102. Our telephone number is (703) 992-9260 and our websiteInternet address is www.spherix.com.  TheWe make available free of charge on www.spherix.com our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on our website is not a partthe operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and should not be construed as being incorporated by reference into, this prospectus of this prospectus.


As used in this prospectus, unless otherwise specified, references toinformation statements, and other information regarding issuers that file electronically with the “Company,” “we,” “our” and “us” refer to Spherix Incorporated and, unless otherwise specified, its direct and indirect subsidiaries.
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The Offering

SEC at http://www.sec.gov.

Common Stock Offered by the Selling Stockholders:7 

THE OFFERING

UpCommon stock outstanding prior to 2,302,615this offering4,979,898 shares.
Common stock offered       shares.
Option to purchase additional sharesWe have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional    shares of common stock including 1,400,560at the public offering price, less the underwriting discount.
Common stock to be outstanding after this offering       shares.
Use of proceeds

We estimate that our net proceeds from this offering will be approximately $    million. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds from this offering will be approximately $     million.

We intend to use the net proceeds of this offeringfor working capital and general corporate purposes.

Risk factorsSee “Risk Factors” beginning on page 11 of this prospectus, as well as other information included in this prospectus, for a discussion of factors you should read and consider carefully before investing in our securities.
NASDAQ Capital Markets symbolOur common stock is listed on the NASDAQ Capital Markets under the symbol “SPEX.”

The number of shares of our common stock to be outstanding after this offering as shown above is based on 4,979,898 shares outstanding as of July 3, 2017 and excludes as of that date:

·312, 984 shares of our common stock issuable upon exercise of outstanding options at a weighted average exercise price of $82.39 per share;

·1,250,311 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $9.21 per share (without giving effect to any of the anti-dilution adjustment provisions thereof); and

·2,926 shares of common stock issuable upon the conversion of outstanding shares ofour Series D/D and D-1 Convertible Preferred Stock, each of which is convertible into ten shares of common stock.Stock.

·
Common Stock Outstanding before this Offering:2,619,395
Common Stock Outstanding after this Offering (Assuming conversion of all shares of Series D/D-1 Convertible Preferred Stock being offered):4,019,955
Use of Proceeds:We will not receive any proceeds from the sale of shares in this offering by the selling stockholders.
NASDAQ SymbolSPEX
Risk FactorsYou should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 3 of this prospectus before deciding whether or not to invest in269,115 shares of our common stock to be reserved for potential future issuance pursuant to our 2012, 2013 and 2014 Equity Incentive Plans, combined.

Except as otherwise indicated herein, all information in this prospectus assumes no exercise of the underwriters’ option to purchase up to an additional    shares of common stock.

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RISK FACTORS
             You should carefully consider

SUMMARY OF CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated financial data. We have derived the risks described below before making an investment decision. The risks described belowfollowing consolidated statements of operations data for the years ended December 31, 2016 and 2015 and the consolidated balance sheet data as of December 31, 2016 from our audited consolidated financial statements contained in our annual report on Form 10-K for the fiscal year ended December 31, 2016 and incorporated by reference in this prospectus. We have derived the summary statements of operations data for the three months ended March 31, 2017 and 2016 and the summary balance sheet data as of March 31, 2017 from our unaudited interim condensed financial statements contained in our quarterly report for the period ended March 31, 2017 and incorporated by reference in this prospectus. Our historical results for prior periods are not necessarily indicative of results to be expected for any future period. The summary consolidated financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the only ones we face. Additionalrelated notes thereto contained in our filings referenced above and incorporated by reference in this prospectus. The summary consolidated financial data in this section is not intended to replace our consolidated financial statements and the related notes thereto.

Statement of Operations Data

($ in thousands)

  Three Months Ended March 31,  Year Ended December 31 
  2017  2016  2016  2015 
  (Unaudited)  (Unaudited)       
Revenues $327  $72  $877  $33 
                 
Operating costs and expenses                
Amortization of patent portfolio  338   531   2,135   6,317 
Compensation and related expenses (including stock-based compensation)  589   312   1,950   1,724 
Professional fees  285   705   2,293   2,780 
Impairment of goodwill and intangible assets        2,713   40,600 
Rent  22   22   84   88 
Other selling, general and administrative  62   63   253   534 
Total operating expenses  1,296   1,633   9,428   52,043 
Loss from operations  (969)  (1,561)  (8,551)  (52,010)
                 
Other income (expenses), net  172   (30)  (182)  276 
Fair value adjustments for warrant liabilities  (122)  1,542   2,257   269 
Total other (expenses) income  50   1,512   2,075   545 
                 
Net loss $(919) $(49) $(6,476) $(51,465)
Net income (loss) attributable to common stockholders $(919) $(716) $25,004  $(42,303)
                 
Net loss per share, basic and diluted  (0.19)  (0.26)        
Basic         $6.76  $(24.98)
Diluted         $6.51  $(24.98)
                 
Weighted average number of common shares outstanding, basic and diluted  4,943,929   2,705,864         
Basic          3,700,090   1,693,365 
Diluted          3,838,366   1,693,365 

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Balance Sheet Data

($ in thousands)

  March 31,  December 31, 
  2017  2016  2016  2015 
  (Unaudited)  (Unaudited)       
ASSETS                
Current assets                
Cash and cash equivalents $210  $494  $134  $142 
Marketable securities  5,083   1,468   6,025   3,392 
Prepaid expenses and other assets  145   292   135   330 
Total current assets  5,438   2,254   6,294   3,864 
                 
Property and equipment, net  5   7   6   5 
Patent portfolios and patent rights, net  4,613   9,268   4,951   9,799 
Deposit  26   26   26   26 
Total assets $10,082  $11,555  $11,277  $13,694 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
Accounts payable and accrued expenses $175  $355  $123  $384 
Accrued salaries and benefits  339   111   446   645 
Warrant liabilities  824   1,417   702   2,959 
Short-term deferred revenue  1,145   290   1,216   290 
Short-term lease liabilities  187   178   183   178 
Total current liabilities  2,670   2,351   2,670   4,456 
                 
Long-term deferred revenue  3,009   188   3,245   259 
Long-term lease liabilities  -   184   44   229 
Total liabilities  5,679   2,723   5,959   4,944 
                 
Series I redeemable convertible preferred stock, $0.0001 par value; no shares issued and outstanding at December 31, 2016 and December 31, 2015; liquidation preference of $167 per share  -   -   -   - 
                 
Commitments and contingencies                
                 
Stockholders' equity                
Preferred Stock, $0.0001 par value, 50,000,000 shares authorized;                
Series A: no shares issued and outstanding at  December 31, 2016 and December 31, 2015 and no shares issued and outstanding at March 31, 2017 and March 31, 2016; liquidation preference $0.0001 per share                
Convertible preferred stock  -   -   -   - 
Series C: no shares issued and outstanding at December 31, 2016 and December 31, 2015 and no shares issued and outstanding at March 31, 2017 and March 31, 2016; liquidation preference $0.0001 per share  -   -   -   - 
Series D: 4,725 shares issued and outstanding at December 31, 2016 and December 31, 2015 and 4,725 shares issued and outstanding at March 31, 2017 and March 31, 2016; liquidation value of $0.0001  per share  -   -   -   - 
Series D-1: 834 shares issued and outstanding at December 31, 2016 and December 31, 2015 and 834 issued and outstanding at March 31, 2017 and March 31, 2016; liquidation value of $0.0001  per share  -   -   -   - 
Series F-1: no shares issued and outstanding at December 31, 2016 and December 31, 2015 and no shares issued and outstanding at March 31, 2017 and March 31, 2016; liquidation preference $0.0001 per share  -   -   -   - 
Series H:  no shares and 381,967 shares issued and outstanding at December 31, 2016 and December 31, 2015 and no shares and 381,967 shares issued and outstanding at March 31, 2017 and March 31, 2016, respectively; liquidation preference $83.50 per share  -   -   -   - 
Series J: no shares issued and outstanding at December 31, 2016 and December 31, 2015 no shares issued and outstanding at March 31, 2017 and March 31, 2016; liquidation preference $0.0001 per share  -   -   -   - 
Series K: no shares and 1,240 shares issued and outstanding at December 31, 2016 and December 31, 2015 and no shares and 50 shares issued and outstanding at March 31, 2017 and March 31, 2016, respectively; liquidation preference $1,000 per share  -   -   -   - 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 4,943,941, 4,943,941 and 2,539,859 shares issued at March 31, 2017, December 31, 2016 and December 31, 2015, respectively; 4,943,929, 4,943,929 and 2,539,847 shares outstanding at March 31, 2017, December 31, 2016 and December 31, 2015, respectively  -   -   -   - 
Additional paid-in-capital  147,335   144,418   147,331   144,287 
Treasury stock, at cost, 12 shares at March 31, 2017, December 31, 2016 and December 31, 2015  (264)  (264)  (264)  (264)
Accumulated deficit  (142,668)  (135,322)  (141,749)  (135,273)
Total stockholders' equity  4,403   8,832   5,318   8,750 
Total liabilities and stockholders' equity $10,082  $11,555  $11,277  $13,694 

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RISK FACTORS

There are numerous risks we are not presently aware of or that we currently believe are immaterial may also impairaffecting our business, operations. Oursome of which are beyond our control. An investment in our common stock involves a high degree of risk and may not be appropriate for investors who cannot afford to lose their entire investment. If any of the following risks actually occur, our business, financial condition or operating results could be harmed by any of these risks. Thematerially harmed. This could cause the trading price of our common stock couldto decline, due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also referaddition to the other information containedrisks outlined below, risks and uncertainties not presently known to us or incorporated by reference into this prospectus, includingthat we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating results and financial statements and related notes.

condition include, without limitation, the following:

Risks Related to Our Business

Because we have a limited operating history to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by an early-stage company.

Since we have a limited operating history in our current business of patent licensing and monetization, it will make it difficult for investors and securities analysts to evaluate our business and prospects.  You must consider our prospects in light of the risks, expenses and difficulties we face as an early stage company with a limited operating history.  Investors should evaluate an investment in our securities in light of the uncertainties encountered by early stage companies in an intensely competitive industry and in which the potential licenses and/or defendants from which the Company seeks to obtain recoveries are largely well-capitalized companies with resources (financial and otherwise) significantly greater than the Company’s.  There can be no assurance that our efforts will be successful or that we will be able to become profitable.

We continue to incur operating losses and may not achieve profitability.

Our loss from operations for the three months ended March 31, 2017 and for the years ended December 31, 2016 and 2015 was $1.0 million, $8.6 million and $52.0 million, respectively. Our net loss attributable to common stockholders for the three months ended March 31, 2017 was $0.9 million, our net income attributable to common stockholders for the year ended December 31, 2016 was $25.0 million, and our net loss attributable to common stockholders for the year ended December 31, 2015 was $42.3 million. Our accumulated deficit for the three months ended March 31, 2017 and for the year ended December 31, 2016 was $142.7 million and $141.7 million, respectively. We recognized $327,000 and $877,000 in revenue in the three months ended March 31, 2017 and the year ended December 31, 2016, respectively. Our ability to become profitable depends upon our ability to generate revenue from the monetization of intellectual property. We do not know when, or if, we will generate any revenue from such monetization. Even though our revenue may increase, we expect to incur significant additional losses while we grow and expand our business. We cannot predict if and when we will achieve profitability. Our failure to achieve and sustain profitability could negatively impact the market price of our common stock.

We expect to need additional capital to fund our growing operations and if we are unable to obtain sufficient capital, we may be forced to limit the scope of our operations.

We expect that for our business to grow we will need additional working capital.  If adequate additional debt and/or equity financing is not available on reasonable terms or at all, we may not be able to continue to expand our business or pay our outstanding obligations, and we will have to modify our business plans accordingly.  These factors would have a material adverse effect on our future operating results and our financial condition.

If we reach a point where we are unable to raise needed additional funds to continue as a going concern, we will be forced to cease our activities and dissolve the Company.  In such an event, we will need to satisfy various creditors and other claimants, severance, lease termination and other dissolution-related obligations and we may not have sufficient funds to pay to our stockholders.

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Further impairment charges could have a material adverse effect on our financial condition and results of operations.

We are required to assess goodwill for impairment if events occur or circumstances changed that would more likely than not reduce our enterprise fair value below its book value. In addition, we are required to test our finite-lived intangible assets for impairment if events occur or circumstances change that would indicate the remaining net book value of the finite-lived intangible assets might not be recoverable. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business, potential government actions and other factors. As a result of decline in the market value of our common stock during the year ended December 31, 2016, we recorded a $2.7 million impairment charge to our intangible assets. If the fair value of our reporting units or finite intangible assets is less than their book value in the future, we could be required to record additional impairment charges. A continued decline of the market price of our common stock could result in additional impairment charges in the future. The amount of any impairment could be significant and could have expandeda material adverse effect on our reported financial results for the period in which the charge is taken.

The focus of our business is to commercializing, developing and monetizingmonetize intellectual property, including through licensing and enforcement.  We may not be able to successfully monetize the patents or other licensed technology which we acquire and thus may fail to realize all of the anticipated benefits of such acquisition.

There

We acquired our patents and patent applications during 2013 in three transactions which significantly changed the focus of our business and operations.  We currently own and license several hundred patent assets and although we may seek to commercialize and develop products, alone or with others, there is no assurance that we will be able to successfully commercialize acquire,or develop orproducts and such commercialization and development is not a core focus of our business.  There is significant risk involved in connection with our activities in which we seek to monetize the patent portfolios that we acquired from Rockstar and North SouthSouth. 

In March 2016, the Company entered into an agreement (which was subsequently amended) with Equitable to facilitate the monetization of the Company’s patents (the “Monetization Agreement”). Pursuant to the Monetization Agreement, the Company has worked together with Equitable to develop and Rockstar.revise the Company’s ongoing litigation plan. Under the Monetization Agreement, Equitable is obligated to use its best commercially reasonable efforts to monetize the Company’s patents. To that end, Equitable has filed ten litigations, which are currently pending. The Company will share net monetization revenue derived from all monetization activity equally with Equitable. To facilitate the litigation plan, approximately 186 of over 330 of the Company’s patents and applications have been assigned to Equitable, which will pay all maintenance and prosecution fees going forward. No assigned patents may be transferred by Equitable to a third party without the Company’s consent. In the event that all terms of the Monetization Agreement are met by December 2017, the Company will further assign approximately 140 additional patents and applications to Equitable for monetization. The Company has retained a grant-back license to practice all transferred patents.

Our business is commonly referred to as a non-practicing entity model (or “NPE”) since we do not currently commercialize or develop products under the recently acquired patents.  As an entity, we have limited prior experience as an NPE.  The acquisition of the patents and an NPE business model could fail to produce anticipated benefits, or could have other adverse effects that we do not currently foresee.  Failure to successfully monetize theseour patent assets or to operate an NPE business may have a material adverse effect on our business, financial condition and results of operations.

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In addition, the acquisition of the patent portfolios is subject to a number of risks, including, but not limited to the following:

·There is a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets.  During that time lag, material costs are likely to be incurred that would have a negative effect on our results of operations, cash flows and financial position;position, lagging any potential revenues generated by such activity; and

·The integration of a patent portfolio will be a time consuming and expensive process that may disrupt our operations.  If our integration efforts are not successful, our results of operations could be harmed.  In addition, we may not achieve anticipated synergies or other benefits from such acquisition.

·If we initiate a patent infringement suit against potential infringers, or if potential licensees initiate a declaratory judgment action or administrative review action against us, such potential infringers and/or licensees may successfully invalidate our patents, or a fact finder may find that the potential infringer’s products do not infringe our patents. Thus, we may not successfully monetize the patents. These activities are inherently risky, time consuming and costly.

Therefore, there is no assurance that the monetization of the patent portfolios we acquire will be successful, will occur timely or in a timeframe that is capable of prediction or will generate enough revenue to recoup our investment.


Our operating history makes it difficult to evaluate our current business and future prospects.

We have, prior to engaging in the patent monetization sector, been involved in businessespresently rely primarily involving research and development in furtherance of drug and pharmaceutical products and processes, including nutritional supplements and related services.  Prior to the acquisition of our patent assets, our business consisted entirely of our biotechnology research and development unit. We have no operating history in executing our additional new business which includes, among other things, creating, commercializing, prosecuting, licensing, litigating or otherwise monetizing patent assets. Our lack of operating history in this sector makes it difficult to evaluate our additional new business model and future prospects.

We will be initially reliant exclusively on the patent assets we acquired from North South and Rockstar.Rockstar, which we are monetizing primarily through our agreement with Equitable.  If we are unable to commercialize, license or otherwise monetize such assets and generate revenue and profit through those assets or by other means, there is a significant risk that our business will fail.
We have recently acquired a patent portfolio from Rockstar and North South that we plan to commercialize, license or monetize. fail.

If our efforts to generate revenue from such assetsour patent portfolios acquired from Rockstar and North South fail, we will have incurred significant losseslosses.  We may not seek and may be unable to acquire additional assets.assets and therefore may be wholly reliant on our present portfolios for revenue.  If this occurs,we are unable to generate revenue from our current assets and fail to acquire any additional assets, our business will likely fail.

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In connection with our new line of business, we may commence legal proceedings against certain companies whose size and weresources could be substantially greater than ours. We expect such litigation to be time-consuming, lengthy and costly, which may adversely affect our financial condition and our ability to survive or operate our business,.

even if the patents are valid and the cases we bring have merit.

To license or otherwise monetize our patentintellectual property assets, which may constitute a significant focus of our activities, we may be required to commence legal proceedings against certain companies, pursuant to which welarge, well established and well-capitalized companies. We may allege that such companies infringe on one or more of our patents.  Our viability could be highly dependent on the outcome of this litigation, and there is a risk that we may be unable to achieve the results we desire from such litigation, which failure would harm our business to a great degree. In addition, thelitigation.  The defendants in this litigation brought by us are likely to be much larger than us and have substantially more resources than we do, which couldwould make success of our litigation efforts subject to factors other than the validity of our patents or infringement claims asserted.  Furthermore, as a public company, our level of cash resources and ability to incur expenditures on enforcing infringement claims is available to the public, including the entities against whom we seek to enforce our patents, and defendants may engage in tactics in an effort for us to utilize our remaining resources. The inability to successfully enforce our patents against larger more difficult.well-capitalized companies could result in realization through settlement or election to not pursue certain infringers, or less value from our patents, and could result in substantially lower than anticipated revenue realized from infringements and lower settlement values.

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We anticipate that these legal proceedings against infringers of our patents may continue for several or more years and may require significant expenditures for legal fees and other expenses.  Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical.  In addition, courts and the laws are constantly changing in a manner that could increase our fees and expenses for pursuing infringers, and also could result in our assumption of legal fees of defendants if we are unsuccessful.  Once initiated, we may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other parties’ proprietary rights.  The defendants or other third parties involved in the lawsuits in which we are involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement.  Potential defendants could challenge our patents and our actions by commencing lawsuits seeking declaratory judgments declaring our patents invalid, not infringed, or for improper or unlawful activities.  If such defenses or counterclaims are successful, they may preclude our ability to obtain damages for infringement or derive licensing revenue from the patents.  A negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact our business.  For example, on July 1, 2015, the United States District Court for the Eastern District of Virginia issued a Markman Order interpreting certain key claims in favor of the defendants in one of our actions against Verizon, resulting in the dismissal of our claims against Verizon with respect to one of our patents. Additionally, we anticipate that our legal fees and other expenses will be material and will negatively impact our financial condition and results of operations and may result in our inability to continue our business.

Parties who are alleged infringers of our patent rights may also challenge the validity of our patents in proceedings before the United States Patent and Trademark Office.  These potential proceedings includeex parte reexaminations,inter partes review, or covered business method patent challenges.  These proceedings could result in certain of our patent claims being dismissed or certain of our patents being invalidated.  We would expend significant legal fees to defend against such actions.

Federal courts are becoming more crowded and, as a result, patent enforcement litigation is taking longer.

Our patent enforcement actions are almost exclusively prosecuted in federal court. Federal trial courts that hear our patent enforcement actions also hear criminal cases. Criminal cases always take priority over our actions. As a result, it is difficult to predict the length of time it will take to complete an enforcement action. Moreover, we believe there is a trend in increasing numbers of civil lawsuits and criminal proceedings before federal judges and, as a result, we believe that the risk of delays in our patent enforcement actions will have a greater effect on our business in the future unless this trend changes.

We have been the subject of litigation and, due to the nature of our business, may be the target of future legal proceedings that could have an adverse effect on our business and our ability to monetize our patents.

In the ordinary course of business, we, along with our wholly-owned subsidiaries, will initiate litigation against parties whom we believe have infringed on our intellectual property rights and technologies. The initiation of such litigation exposes us to potential counterclaims initiated by the defendants.

The Company may become subject to similar actions in the future which will be costly and time consuming to defend, the outcome of which are uncertain.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud.  Any inability to provide reliable financial reports or to prevent fraud could harm our business.  The Sarbanes-Oxley Act of 2002 requires management to evaluate and assess the effectiveness of our internal control over financial reporting.  In order to continue to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls.  If we fail to maintain the adequacy of our internal controls over financial reporting, we could be subject to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports.  We cannot assure you that in the future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that our internal control over financial reporting is effective.  If we fail to fully comply with the requirements of the Sarbanes-Oxley Act, our business may be harmed and our stock price may decline.

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Our assessment, testing and evaluation of the design and operating effectiveness of our internal control over financial reporting resulted in our conclusion that, as of December 31, 2016, our internal control over financial reporting was not effective, due to our lack of segregation of duties, and lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected.  We can provide no assurance as to conclusions of management with respect to the effectiveness of our internal control over financial reporting in the future.

We may seek to internally develop additional new inventions and intellectual property, which would take time and be costly.  Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.

activities.

Part of our additional new business may include the internal development of new inventions or intellectual property that we will seek to monetize.  However, thisFor example, as a result of our acquisition of certain shares of common stock of Hoth Therapeutics, Inc. (“Hoth”) in June 2017, we have indirectly acquired certain sublicensing rights for BioLexa products developed by Chelexa Biosciences, Inc., for the treatment of eczema. Hoth is developing BioLexa’s applications in the aesthetic dermatology field to help treat and reduce post-procedure infections, accelerate healing and improve clinical outcomes for patients undergoing procedures and also intends to implement FDA testing procedures for BioLexa. Should we choose to assist in the development of BioLexa’s applications and/or internally develop any other inventions or intellectual property, such aspect of our business would likelywill require significant capital and wouldwill take time to achieve.  Such activities couldmay also distract our management team from its present business initiatives, which could have a material and adverse effect on our business.  There is also the risk that our initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of our investments in time and resources in such activities.

In addition, even if we are able to internally develop new inventions, in order for those inventions to be viable and to compete effectively, we would need to develop and maintain, and we would heavily rely upon, a proprietary position with respect to such inventions and intellectual property.  However, there are significant risks associated with any such intellectual property we may develop principally, including the following:

·patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;
·we may be subject to interference proceedings;
·we may be subject to opposition proceedings in the U.S. or foreign countries;
·any patents that are issued to us may not provide meaningful protection;
·we may not be able to develop additional proprietary technologies that are patentable;
·other companies may challenge patents issued to us;
·other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies;
·other companies may design around technologies we have developed; and
·enforcement of our patents wouldcould be complex, uncertain and very expensive.

We cannot be certain that patents will be issued as a result of any future applications, or that any of our patents, once issued, will provide us with adequate protection from competing products.  For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope.  In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we will be the first to make our additional new inventions or to file patent applications covering those inventions.  It is also possible that others may have or may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business.  As to those patents that we may license or otherwise monetize, our rights will depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.  Our failure to obtain or maintain intellectual property rights for our inventions would lead to the loss our business.

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Moreover, patent application delays could cause delays in recognizing revenue from our internally generated patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market.

We may be reliant on third parties to generate revenue for us.

In early 2016, we entered into a Monetization Agreement pursuant to which other more well-capitalized entities have the right to enforce our patent portfolio in exchange for royalties from enforcement proceeds. We may also enter into similar such agreements in the future. These agreements generally do not impose any affirmative obligation on the part of our contractual counterparties to enforce any rights under our patents. If these counterparties do seek to enforce rights under our patents, legal proceedings against infringers of our patents may continue for several or more years and it may be a significant period of time before we derive any income from these arrangements. These arrangements may also preclude us from enforcing these patents ourselves. Failure of these third parties to successfully enforce our patents may have an adverse effect on our revenues.

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Our ability to raise additional capital may be adversely affected by certain of our agreements.

Our ability to raise additional capital for use in our operating activities may be adversely impacted by the terms of a securities purchase agreement, dated as of July 15, 2015 (the “Securities Purchase Agreement”), between us and the investors who purchased securities in our July 2015 offering of our common stock and warrants for the purchase of our common stock. The Securities Purchase Agreement provides that, until the warrants issued thereunder are no longer outstanding, we will not affect or enter into a variable rate transaction, which includes issuances of securities whose prices or conversion prices may vary with the trading prices of or quotations for the shares of our common stock at any time after the initial issuance of such securities, as well as the entry into agreements where our stock would be issued at a future-determined price. These warrants may remain outstanding as late as January 22, 2021, when the warrants expire in accordance with their terms. These restrictions may have an adverse impact on our ability to raise additional capital, or to use our cash to make certain payments that we are contractually obligated to make.

New legislation, regulations or court rulings related to enforcing patents could harm our new line of business and operating results,.

or could cause us to change our business model.

If Congress, the United States Patent and Trademark Office or courts implement new legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders, these changes could negatively affect our new business model.business.  For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect our ability to assert our patent or other intellectual property rights.

In addition, on September 16, 2011,

On December 5, 2013, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law. The Leahy-Smith Act includes a number of significant changes to United States House of Representatives passed a patent law. These changes include provisions that affectreform titled the way patent applications will be prosecuted and may also affect patent litigation. The U.S. Patent Office is currently developing regulations and procedures to govern administration“Innovation Act” by a vote of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act recently became effective. Accordingly, it is too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

On February 27, 2013, US Representatives DeFazio and Chaffetz introduced HR845.  In general, the bill known as the SHIELD Act (“Saving High-tech Innovators from Egregious Legal Disputes”), seeks to assess legal fee liability to plaintiffs in patent infringement actions for defendants costs.  In the event that the bill becomes law, the potential obligation to pay the legal fees of defendants in patent disputes could have a material adverse effect on our business or financial condition.
On June 4, 2013, the Obama Administration issued executive actions and legislative recommendations. The legislative measures recommended by the Obama Administration include requiring patentees and patent applicants to disclose the “Real Party-in-Interest”, giving district courts more discretion to award attorney’s fees to the prevailing party, requiring public filing of demand letters such that they are accessible to the public, and protecting consumers against liability for a product being used off-the shelf and solely for its intended use.
The executive actions includes ordering the USPTO to make rules to require the disclosure of the Real Party-in-Interest by requiring patent applicants and owners to regularly update ownership information when they are involved in proceedings before the USPTO (e.g. specifying the “ultimate parent entity”) and requiring the USPTO to train its examiners to better scrutinize functional claims to prevent allowing overly broad claims.

On October 23, 2013,325-91.  Representative Bob Goodlatte, with bipartisan support, introduced a new set of proposed patent reforms titled the “Innovation Act.”Innovation Act on October 23, 2013.  The Innovation Act, as passed by the House, has a number of proposed major proposed changes.  Some of the proposed changes include a heightened pleading requirement for the filing of patent infringement claims.  It requires a particularized statement with detailed specificity regarding how each asserted claim term corresponds to the functionality of each accused instrumentality.  The Innovation Act, as passed by the House, also includes a provisionfee-shifting provisions which provide that, allows prevailing defendants to collect attorney fees from non-plaintiffs who have substantial interest inunless the asserted patent. Moreover, a patentee who gives a covenant not to sue to a defendant will be deemed a non-prevailing party and, therefore, subjectof a patent infringement litigation positions were objectively reasonable, such non-prevailing party would have to attorney fees.
pay the attorney’s fees of the prevailing party.

The Innovation Act also calls for discovery to be limited until after claim construction.  The patent infringement plaintiff must also disclose anyone with a financial interest in either the asserted patent or the patentee and must disclose the ultimate parent entity.  When a manufacturer and its customers are sued at the same time, the suit against the customer would be stayed as long as the customer agrees to be bound by the results of the case.

On April 29, 2014, the U.S. Supreme Court relaxed the standard for fee shifting in patent infringement cases.  Section 285 of the Patent Act provides that attorneys’ fees may be awarded to a prevailing party in a patent infringement case in “exceptional cases.”

In Octane Fitness, LLC v. Icon Health& Fitness, Inc., the Supreme Court overturned the U.S. Court of Appeals for the Federal Circuit decisions limiting the meaning of “exceptional cases.”  The U.S. Supreme Court held that an exceptional case “is simply one that stands out from others with respect to the substantive strength of a party’s litigation position” or “the unreasonable manner in which the case was litigated.”  The U.S. Supreme Court also rejected the “clear and convincing evidence” standard for making this inquiry.  The Court held that the standard should be a “preponderance of the evidence.”

In Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., the U.S. Supreme Court held that a district court’s grant of attorneys’ fees is reviewable by the U.S. Court of Appeals for the Federal Circuit only for “abuse of discretion” by the district court instead of the de novo standard that gave no deference to the district court.

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This pair of decisions lowered the threshold for obtaining attorneys’ fees in patent infringement cases and increased the level of deference given to a district court’s fee-shifting determination.

These two cases will make it much easier for district courts to shift a prevailing party’s attorneys’ fees to a non-prevailing party if the district court believes that the case was weak or conducted in an abusive manner.  Defendants that get sued for patent infringement by non-practicing entities may elect to fight rather than settle the case because these U.S. Supreme Court decisions make it much easier for defendants to get attorneys’ fees.

On June 19, 2014, the U.S. Supreme Court decided Alice Corp. v. CLS Bank International in which the Court addressed the question of whether patents related to software are patent eligible subject matter.  The Supreme Court did not rule that patents related to software were per se invalid or that software-related inventions were unpatentable. The Supreme Court outlined a test that the courts and the USPTO must apply in determining whether software-related inventions qualify as patent eligible subject matter.  

Following in the wake of the Supreme Court’sAlicedecision, the lower courts have operated with a lack of guidance regarding patent eligibility. The Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent appeals, has increasingly entered one-sentence orders under Federal Rule of Civil Procedure 36, in which it upholds decisions of patent invalidity with no guidance as to why invalidity was upheld.For example, in each of the following appeals from the U.S. district courts involving substantial issues under the Alice doctrine, the Federal Circuit entered a Rule 36 order, saying only in one sentence that the district court record supported the entry of judgment below.

1.Becton Dickinson and Co. v. Baxter Int’l Inc., Appeal No. 15-1918 (decided May 9, 2016) re: remote pharmacy monitoring.

2.IP Learn-Focus, LLC. v. Microsoft Corp., Appeal No. 15-1863 (decided July 11, 2016) re: a computer learning system comprising particular combinations of different types of sensors (e.g. optical sensors, nonoptical sensors and imaging sensors) and software programming, applied to MS’s Kinect device.

3.Novo Tranforma Techs. L.L.C. v. Sprint Spectrum, L. P., Appeal No. 15-2012 (decided September 23, 2016) re: a payload delivery system that eliminates the incompatibility between different communication services employing different media for communicating information.

4.Broadband iTV Inc. v. Hawaiian Tele., Inc., Appeal No. 16-1082 (decided September 26, 2016) re: automated control of video-on-demand technology.

5.Blue Spike LLC v. Google, Inc., Appeal No. 16-1054 (decided October 10, 2016) re: alternatives to digital watermarking by creating a “Signal Abstract”, a smaller digital representation of the digital signal that can be used for identification purposes.

6.Concaten, Inc. v. AmeriTrak Fleet Solutions, LLC, Appeal No. 16-1112 (decided October 11, 2016) re: a snow management system where real-time data is collected from a plurality of working snowplows and that data was then used to optimize the routing and operation of subsequent snowplow operations.

7.GT Nexus, Inc. v. Inttra, Inc., Appeal No. 16-1267 (decided October 11, 2016) re: a computer network architecture called “common carrier system” that integrates existing automated carrier booking and tracking systems and enables multiple shippers and multiple carriers to communicate across a common platform.

8.Netflix Inc. v. Rovi Corp., Appeal No. 15-1917 (decided November 7, 2016) re: automated viewing recommendations and book-marking in interactive program guides.

9.American Needle, Inc. v. Zazzle Inc., Appeal No. 16-1550 (decided November 10, 2016) re: selling objects online using a two-dimensional format to preview merchandise in three dimensions.

10.Personalized Media Commc’n LLC v. Amazon.com, Inc., Appeal No. 15-2008 (decided December 7, 2016) re: seven distinct network control applications from seven different and patentably distinct patents.

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11.MacroPoint LLC v. FourKites Inc., Appeal No. 16-1286 (decided December 8, 2016) re: five vehicle tracking applications.

12.Voxathon LLC v. FCA US LLC, Appeal No. 16-1614 (decided December 9, 2016) re: technology for allowing drivers to access telephone calls through vehicle entertainment and data systems.

Several of the parties receiving these Rule 36 judgments have requested re-hearings, asking the Federal Circuit to provide Section 101 guidance en banc, but to date, none of these requests have taken up by the Court of Appeals.

On January 20, 2015, the U.S. Supreme Court decided another patent case, Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.  InTeva, the Court overturned the long-standing practice that claim construction decision made by district courts were given de novo review on appeal.  Instead, the Supreme Court held that when claim construction is based on extrinsic evidence, a district court’s findings of subsidiary facts are to be reviewed for clear error, while its ultimate claim construction is to be reviewed de novo.  This change in how claim construction decisions are reviewed on appeal may have an impact on how parties handle patent litigation in the district courts.  This could increase our litigation expenses.  The full impact of theTeva decision on patent litigation at the district court level is yet to be determined.

On May 26, 2015, the U.S. Supreme Court decidedCommil USA LLC v. Cisco Systems, Inc. In this case, the Supreme Court held that a good faith belief that a patent is invalid does not provide an accused infringer with a defense against a charge of inducing patent infringement. The Court stated that permitting such a defense would undermine the statutory presumption of validity enjoyed by issued U.S. patents under 35 U.S.C. § 282. The long term effect of this ruling is yet to be seen as it is implemented by the district courts. However, this ruling has eliminated a defense available to parties accused of inducing patent infringement. This result could be beneficial to our patent enforcement efforts.

On December 1, 2015, the Federal Rules of Civil Procedure were amended to require a heightened pleading standard for a plaintiff when filing a patent infringement complaint. Prior to the amendment, patent complaints could follow the general pleading provided in the model patent complaint provided by Form 18. Form 18 has now been eliminated. Patent infringement complaints must now satisfy the pleading standards established by the Supreme Court’s landmark decisions inTwombly andIqbal, which require a patent plaintiff to demonstrate that its claims are “plausible.” It may likely result in more challenges to the sufficiency of patent complaints, which will increase the cost of litigation. This requirement may also impact the amount of research that is required before a patent infringement complaint can be filed.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become enacted as laws.laws in their current or modified forms.  Compliance with any new or existing laws or regulations could be difficult and expensive, decrease the value of our intellectual property portfolio, increase the risk of unlicensed infringement of our intellectual property, or otherwise affect the manner in which we conduct our business and negatively impact our business, prospects, financial condition and results of operations.

Regulatory developments and pending litigation may render our business model less profitable and may have a material adverse effect on our results of operations.

We may negotiate with leading technology companies to invest in, aggregate and acquire or in-license additional portfolios of patents and other intellectual property for monetization. Recent regulatory developments, as well as pending litigation in the industry that is continuing to establish new laws and rules for the licensing and/or assertion of patents, may make this business model more difficult to execute, more risky and/or less profitable. As noted, new draft legislation, if proposed and passed by Congress, might place more significant hurdles to the enforcement of our patent rights, allow defendants increased opportunities to challenge our patents in court and in the USPTO, and increase the risks and costs of patent litigation for all parties, including us. In addition, in various pending litigation and appeals in the United States Federal courts, various arguments and legal theories are being advanced to potentially limit the scope of damages a patent licensing company such as we might be entitled to. While we reject many of these arguments as improperly limiting the rights granted to legitimate patent holders under the Constitution and US patent laws, any one of these pending cases could result in new legal doctrines that could make our patent portfolios less valuable or more costly to enforce.

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In addition, competition authorities in various countries and regions, as well as judicial actions in the United States and abroad are examining the rights and obligations of holders of standard essential patents (SEPs), and in some cases imposing restrictions and further obligations on the licensing and enforcement of SEPs. These changes in law and/or regulation may make our licensing programs more difficult, may render some or all SEP patents held by us unenforceable, or impose other restrictions, costs, impediments or harm to our patent portfolios.

We are exploring and evaluating strategic alternatives and there can be no assurance that we will be successful in identifying, or completing any strategic alternative or that any such strategic alternative will yield additional value for shareholders.

Our management and Board of Directors has commenced a review of strategic alternatives which could result in, among other things, a sale, a merger, consolidation or business combination, asset divestiture, partnering or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure you that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our shareholders than that reflected in the current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms.

Our acquisitions of patent assets may be time consuming, complex and costly, which could adversely affect our operating results.

results.

Acquisitions of patent or other intellectual property assets, which are and will be critical to our business plan, are often time consuming, complex and costly to consummate.  We may elect to not pursue any additional patents while we focus our efforts on monetizing our existing assets.  We may utilize many different transaction structures in our acquisitions and the terms of such acquisition agreements tend to be heavily negotiated.  As a result, we expect to incur significant operating expenses and will likely be required to raise capital during the negotiations even if the acquisition is ultimately not consummated.consummated, or if we determine to acquire additional patents or other assets.  Even if we are able to acquire particular patent assets, there is no guarantee that we will generate sufficient revenue related to those patent assets to offset the acquisition costs.costs, and we may be required to pay significant amounts of deferred purchase price if we monetize those patents above certain thresholds.  While we will seek to conduct confirmatory due diligence on the patent assets we are considering for acquisition, we may acquire patent assets from a seller who does not have propercomplete analysis of infringements or claims, have valid or sole title or ownership to those assets, or otherwise provides us with flawed ownership rights, including invalid or unenforceable assets.  In those cases, we may be required to spend significant resources to defend our interest in the patent assets and, if we are not successful, our acquisition may be invalid,worthless, in which case we could lose part or all of our investment in the assets.

We may also identify patent or other intellectual property assets that cost more than we are prepared to spend with our own capital resources.  We may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of any patent assets or, if consummated, proves to be unprofitable for us.  Acquisitions involving issuance of our securities could be dilutive to existing stockholders and could be at prices lower than those prices reflected in the trading markets.  These higher costs could adversely affect our operating results and, if we incur losses, the value of our securities will decline.  The integration of acquired assets may place a significant burden on management and our internal resources.  The diversion of management attention and any difficulties encountered in the integration process could harm our business.

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In addition, we may acquire patents and technologies that are in the early stages of adoption in the commercial, industrial and consumer markets.adoption.  Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at which our licensees willor others adopt our patents and technologies in their products and services.  As a result, there can be no assurance as to whether technologies we acquire or develop will have value that can be realized through licensing or other activities.

We may be unsuccessful at integrating future acquisitions.

If we find appropriate opportunities in the future, we may acquire businesses to strategically increase the number of patents in our portfolio and pursue monetization. For example, on June 30, 2017, the Company acquired a stake in Hoth Therapeutics, Inc. (“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth has a sublicense from Chelexa Biosciences, Inc. to use Chelexa’s BioLexa products for the treatment of eczema and such sublicense includes the right to further sublicense to third parties to make, use, have made, import, offer for sale and sell BioLexa products. There can monetize.be no guarantee that Hoth will be successful in its efforts to monetize its sublicense agreement with Chelexa.

As we acquire businesses or substantial stakes in certain businesses, the process of integration may produce unforeseen operating difficulties and expenditures, fail to result in expected synergies or other benefits and absorb significant attention of our management that would otherwise be available for the ongoing development of our business. In addition, in the event of any future acquisitions, we may record a portion of the assets we acquire as goodwill, other indefinite-lived intangible assets or finite-lived intangible assets. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The recoverability of goodwill and indefinite-lived intangible assets is dependent on our ability to generate sufficient future earnings and cash flows. Changes in estimates, circumstances or conditions, resulting from both internal and external factors, could have a significant impact on our fair valuation determination, which could then have a material adverse effect on our business, financial condition and results of operations. We cannot guarantee that we will be able to identify suitable acquisition opportunities, consummate any pending or future acquisitions or that we will realize any anticipated benefits from any such acquisitions.

If we are unable to successfully monetize our patent assets, or if we cannot obtain sufficient capital to see our legal proceedings to fruition, our business model may be subject to change.

Our current business model of monetizing patent assets primarily through litigation against companies infringing on our intellectual property results in the potential for sporadic income. This makes us dependent on successful outcomes of our litigation claims, as well as obtaining financing from third-party sources to fund these litigations. If we are unable to generate revenue and are unable to raise additional capital on commercially reasonable terms, or if changes in law make our current business model infeasible, then we may determine to change our business model in a manner that would be anticipated to generate revenue on a more regular basis. If we determine to change our business model, it may be difficult to predict our future prospects. Furthermore, we may incur significant expenses in any such shift in business model, or our management may have to devote significant resources into developing, or may not be well suited for, any such new business model.

We have ongoing financial obligations to certain stockholders under the terms of our acquisition of certain patents from Rockstar. Our failure to comply with our obligations to these stockholders could have a material adverse effect on the value of our assets, our financial performance and our ability to sustain operations.

Rockstar is entitled to receive a contingent recovery percentage of future profits from licensing, settlements and judgments against defendants with respect to patents purchased by us from Rockstar.  In particular, once we recover a certain amount of proceeds pertaining to the patents acquired from Rockstar in June 2013, which amount will not exceed $8.0 million, net of certain expenses, we will be required to make a payment of up to $13.0 million to Rockstar within six months of such recovery.  Furthermore, once we recover a certain level of proceeds pertaining to each portfolio of patents we acquired from Rockstar, we will be required to make participation payments to RPX which, depending on how much we recover, could range from 30% of the amount we recover to 70% of the amount we recover in any given quarter, net of certain expenses.  Our ability to fund these payments, as well as other payments that may become due in respect of our acquisition of patents from Rockstar in December 2013, will depend on the liquidity of our assets, recoveries, alternative demands for cash resources and access to capital at the time.  Furthermore, our obligation to fund these payments could materially adversely impact our liquidity and financial position. 

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In certain acquisitions of patent assets, we may seek to defer payment or finance a portion of the acquisition price.  This approach may put us at a competitive disadvantage and could result in harm to our business.

business.

We have limited capital and may seek to negotiate acquisitions of patent or other intellectual property assets where we can defer payments, or finance a portion of the acquisition price.price or have an obligation to make contingent payments upon recovery of value from those assets.  These types of debt financing, or deferred payment or contingent arrangements may not be as attractive to sellers of patent assets as receiving the full purchase price for those assets in cash at the closing of the acquisition. Asacquisition, and, as a result, we might not compete effectively against other companies in the market for acquiring patent assets, many of whom have greater cash resources than we have.  In addition, any failureWe may also finance our activities by issuance of debt which could require interest and amortization payments which we may not have the ability to satisfyrepay, in which case we could be in default under the terms of loan agreements.  We may pledge our debt repayment obligations may resultassets as collateral and if we are in adverse consequences todefault under our operating results.


agreements, we could lose our assets through foreclosure or similar processes or become insolvent or bankrupt in which case investors could lose their entire investment.

Any failure to maintain or protect our patent assets or other intellectual property rights could significantly impair our return on investment from such assets and harm our brand, our business and our operating results.

results.

Our ability to operate our new line of business and compete in the intellectual property market largely depends on the superiority, uniqueness and value of our acquired patent assets and other intellectual property.  To protect our proprietary rights, we will rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions.  No assurances can be given that any of the measures we undertake to protect and maintain our assets will have any measure of success.

Following the acquisition of patent assets, we will likely be

We are required to spend significant time and resources to maintain the effectiveness of thoseour assets by paying maintenance fees and making filings with the United States Patent and Trademark Office.USPTO.  We may acquire patent assets, including patent applications, which require us to spend resources to prosecute the applications with the United States Patent and Trademark Office.USPTO prior to issuance of patents.  Further, there is a material risk that patent related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or invalidity claims) will be asserted or prosecuted against us, and such assertions or prosecutions could materially and adversely affect our business.  For instance, in connection withinter partes review in our now-settled litigations with VTech and Uniden, the Patent Trial and Appeals Board has found that certain portions of the claims relating to certain of our patents are invalid. Regardless of whether any such claims are valid or can be successfully asserted, defending such claims could cause us to incur significant costs and could divert resources away from our other activities.

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Despite our efforts to protect our intellectual property rights, any of the following or similar occurrences may reduce the value of our intellectual property:

·our applications for patents, trademarks and copyrights may not be granted and, if granted, may be challenged or invalidated;
·issued trademarks, copyrights, or patents may not provide us with any competitive advantages when compared to potentially infringing other properties;
·our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or
·our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we acquire and/or prosecute.

Moreover, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business or enforce our patents against infringers in the future or from which competitors may operate.foreign countries.  If we fail to maintain, defend or prosecute our patent assets properly, the value of those assets would be reduced or eliminated, and our business would be harmed.

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Weak global economic conditions may cause infringing parties to delay entering into licensing agreements, which could prolong our litigation and adversely affect our financial condition and operating results.

results.

Our business plan depends significantly on worldwide economic conditions, and the United States and world economies have recently experienced weak economic conditions.  Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values.  This response could have a material negative effect on the willingness of parties infringing on our assets to enter into licensing or other revenue generating agreements voluntarily.  Entering into such agreements is critical to our business plan, and our failure to do so could cause material harm to our business.


If we are unablenot able to adequately protect our intellectual property from unauthorized use, it could diminish the value of our products and services, weaken our competitive position and reduce our revenue.

Our success depends in large part on our ability to identify unauthorized use of our intellectual property.  We believe that our trade secrets and non-patented technology may be key to identifying and differentiating our products and services from those of our competitors.  We may be required to spend significant resources to monitor and police our intellectual property rights.  If we fail to successfully enforce our intellectual property rights, the value of our products and services could be diminished and our competitive position may suffer.

We rely on a combination of copyright, trademark and trade secret laws, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights.  Third-parties could copy or otherwise obtain and use our property without authorization or develop similar information and property independently, which may infringe upon our proprietary rights.  We may not be able to detect infringement and may lose competitive position in the market before we do so, including situations which may damage our ability to succeed in licensing negotiations or legal proceedings such as patent infringement cases we may bring.  In addition, competitors may design around our technologies or develop competing technologies.  Intellectual property protection may also be unavailable or limited in some foreign countries.

If we resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive.  In addition, our proprietary rights could be at risk if we are unsuccessful in, or cannot afford to pursue, those proceedings, or that contingent fees could be a significant portion of our recovery.  We will also rely on trade secrets and contract law to protect some of our proprietary technology.  We will enter into confidentiality and invention agreements with inventors, employees and consultants and common interest agreements with parties associated with our litigation efforts.  Nevertheless, these agreements may not be honored and they may not effectively protect our right to our privileged, confidential or proprietary information or our patented or un-patented trade secrets and know-how.  Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

If we fail to manage our existing assets and patent inventory and third party relationships (such as attorneys and experts) effectively, our revenue and profits could decline and should we fail to acquire additional revenues from license fees, our growth could be impeded.

Our success depends in part on our ability to manage our existing portfolios of patent assets and manage our third party relationships necessary to monetize our assets effectively.  Our attorneys and experts are not bound by long-term contracts that ensure us consistent access to expertise necessary to enforce our patents, which is crucial to our ability to generate license revenues and prosecute infringers.  In addition, attorneys and experts can change the cost of the services they provide, such as contingent fees that we are required to pay, and our arrangements often require an increasing percentage of recoveries to be devoted to attorney’s fees depending on the length of time or stage of the case prior to settlement or recovery, reducing the residual amount available to us following conclusion of a case.  If an attorney, seller, inventor or expert decides not to provide needed assistance in connection with a case, or provides assistance to prospective licensees or defendants, we may not be able to compete effectively.

 Ourtimely replace this expertise with that from other sources or prevent such assistance to others from damaging our claims and prospects for recovery or licensing thus resulting in potentially lost cases, opportunities, or revenues and potentially diminishing the value of our patent assets.  The ability to compete dependsutilize attorneys, sellers’ personnel, inventors or experts will depend on various factors, some of which are beyond our control.

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We may be unable to issue securities under our shelf registration statement, which may have an adverse effect on our liquidity.

We have filed a shelf registration statement on Form S-3 with the SEC.  The registration statement, which has been declared effective, was filed in part uponreliance on Instruction I.B.6. of Form S-3, which imposes a limitation on the strengthmaximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.  At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6. may not exceed one-third of the aggregate market value of our proprietary rights that we will ownoutstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6.  Based on this calculation and as a result of acquisitions in our technologies, brandssale of common stock and content. We intendwarrants that closed on July 21, 2015, we are currently ineligible to relysell securities pursuant to our effective registration statement on Form S-3.   Whether we sell securities under the registration statement will depend on a combinationnumber of U.S. and foreign patents, copyrights, trademark, trade secret laws and license agreements to establish and protect our intellectual property and proprietary rights. The efforts we take to protect our intellectual property and proprietary rights may not be sufficient or effective at stopping unauthorized usefactors, including availability of our intellectual propertyexisting S-3 under the 1/3 limitation calculations set forth in Instruction I.B.6 of Form S-3, the market conditions at that time, our cash position at that time and proprietary rights. In addition, effective trademark, patent, copyrightthe availability and trade secret protection may not be available or cost-effective in every country in which our services are made available. There may be instances whereterms of alternative sources of capital.  Furthermore, Instruction I.B.6. of Form S-3 requires that the issuer have at least one class of common equity securities listed and registered on a national securities exchange. If we are not able to fully protect or utilize our intellectual property in a mannermaintain compliance with applicable NASDAQ rules, we will no longer be able to rely upon that maximizes competitive advantage.Instruction. If we are unable to protectcannot sell securities under our intellectual property and proprietary rights from unauthorized use, the value of our productsshelf registration, we may be reduced,required to utilize more costly and time-consuming means of accessing the capital markets, which could negatively impactmaterially adversely affect our new business.liquidity and cash position.

Risks Related to Ownership of Our inability to obtain appropriate protections for our intellectual property may also allow competitors to enter our markets and produce or sell the same or similar products. In addition, protecting our intellectual property and other proprietary rights is expensive and diverts critical managerial resources. If any of the foregoing were to occur, or if we are otherwise unable to protect our intellectual property and proprietary rights, our business and financial results could be adversely affected.

Our financial resources are limited and we will need to raise additional capital in the future to continue our business.
 Our future capital requirements will depend on many factors.  We cannot ensure that additional funding will be available or, if it is available, that it can be obtained on terms and conditions we will deem acceptable.  Any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders.  These matters involve risks and uncertainties that may prevent us from raising additional capital or may cause the terms upon which we raise additional capital, if additional capital is available, to be less favorable to us than would otherwise be the case.  If we reach a point where we are unable to raise needed additional funds to continue as a going concern, we will be forced to cease our activities and dissolve the Company.  In such an event, we will need to satisfy various severances, lease termination and other dissolution-related obligations.
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We have sustained losses in the past and we may sustain losses in the foreseeable future.
    We have incurred losses from operations in prior years, including 2012.  Our loss from continuing operations for the year ended December 31, 2012 was $2.9 million and out net loss was $3.9 million and for the year ended December 31, 2012.  The Company’s accumulated deficit was $35.3 million at December 31, 2012.  Our loss from continuing operations for the nine month period ended September 30, 2013 was $9.3 million and the Company’s accumulated deficit was $49.1 million at September 30, 2013.  We may not return to profitable operations.
Common Stock

We face evolving regulation of corporate governance and public disclosure that may result in additional expenses and continuing uncertainty.

 Changing laws, regulations

As a public company, we incur significant legal, accounting and standards relating to corporate governance and public disclosure, including theother expenses. The Sarbanes-Oxley Act of 2002, SEC regulationsor SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ StockGlobal Market LLC rules are creating uncertainty for public companies. We are presently evaluating and monitoring developments with respect to new and proposedother applicable securities rules and cannot predict or estimate theregulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.  Our management and other personnel devote a substantial amount of the additional costs we may incur or the timing of these costs. For example,time towards maintaining compliance with the internal control requirements of Section 404 of the Sarbanes-Oxley Act has to date required the commitment of significant resources to document and test the adequacy of our internal control over financial reporting. Our assessment, testing and evaluation of the design and operating effectiveness of our internal control over financial reporting resulted in our conclusion that, as of December 31, 2012, our internal control over financial reporting was not effective, as a result of the reclassification from equity to liability of warrants issued between November 2009 and February 2012. Similarly, we concluded that our internal control over financial reporting was not effective as of September 30, 2013, due to the Company’s lack of segregation of duties, and difficulty in applying complex accounting principles, including fair value of derivatives, options and warrants as well as stock based compensation accounting. We can provide no assurance as to conclusions of management with respect to the effectiveness of our internal control over financial reporting in the future.these requirements. These new or changed laws,rules, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.  This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.  We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest the resources necessary to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.  If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, due to ambiguities related to practice or otherwise, regulatory authorities may initiate legal proceedings against us, which could be costly and time-consuming, and our reputation and business may be harmed.

If we are forced to resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive. In addition, our proprietary rights could be at risk if we are unsuccessful in, or cannot afford to pursue, those proceedings. We will also rely on trade secrets and contract law to protect some of our proprietary technology. We will enter into confidentiality and invention agreements with our employees and consultants. Nevertheless, these agreements may not be honored and they may not effectively protect our right to our un-patented trade secrets and know-how. Moreover, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Risks Related to Ownership of Our Common Stock.
The price of our common stock has been highly volatile due to several factors that will continue to affect the price of our stock.

Our common stock has traded as low as $4.07 and as high as $218.00 between January 1, 2011 and September 30, 2013 (on a split-adjusted basis). Some of the factors leading to this volatility include:

·relatively small amounts of our stock trading on any given day;
·fluctuations in our operating results;
·announcements of technological innovations or new products that we or our competitors make;
·developments with respect to patents or proprietary rights; and
·recent economic downturn and market instability.
-8-

Our common stock may be delisted from The NASDAQ Capital Market if we fail to comply with continued listing standards.


Our common stock is currently traded on The NASDAQ Capital Market under the symbol “SPEX.”  If we fail to meet any of the continued listing standards of The NASDAQ Capital Market, our common stock could be delisted from The NASDAQ Capital Market.  These continued listing standards include specifically enumerated criteria, such as:


·a $1.00 minimum closing bid price;
·stockholders’ equity of $2.5 million;
·500,000 shares of publicly-held common stock with a market value of at least $1 million;
·300 round-lot stockholders; and
·compliance with NASDAQ’s corporate governance requirements, as well as additional or more stringent criteria that may be applied in the exercise of NASDAQ’s discretionary authority.

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On April 20, 2012,March 24, 2015, we received a deficiency notice from NASDAQ regardingthat the bid price of our common stock. Followingstock no longer met NASDAQ’s continued listing requirements.  According to the notice, in order to regain compliance with the NASDAQ listing rules, our common stock would need to have a 1closing bid price of at least $1.00 per share for 20at least 10 consecutive trading days no later than September 21, 2015. On September 22, 2015, we received a letter from NASDAQ granting us an additional 180 days, or until March 21, 2016, to regain compliance. On March 4, 2016, our common stock underwent a 1-for-19 reverse stock split,split. As of the close of trading on October 8, 2012, NASDAQ provided confirmation to us that we have regained compliance with Marketplace Rule 5550(a)(2) sinceMarch 17, 2016, the closing bid price of itsour common stock had tradedwas at least $1.00 per share or greater for at least ten (10)10 consecutive business days. This is the second timetrading days and, accordingly, we employed a reversed stock split to avoid NASDAQ delisting.


On September 25, 2012, we received written notification from NASDAQ advising us that the minimum number of publicly held shares of our common stock had fallen below the minimum 500,000 shares required for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Rule 5550(a)(4). As a result of our November 2012 private placement transaction, we have been advised by NASDAQ that we have regained compliance with this requirement.

On December 31, 2012, our total stockholders’ equity was $854,000, and was below the $2.5 millionNASDAQ’s continued listing standard required by NASDAQ. In March 2013,requirements. There can be no assurance that we exchanged with certain investors the warrants issuedwill be able to remain in November 2012 for Series C Preferred Stock, effectively increasing total stockholders’ equitycompliance in the aggregate by approximately $2.7 million.
future. In particular, our share price may continue to decline for a number of reasons, including many that are beyond our control. See “Our share price may be volatile and there may not be an active trading market for our common stock”.

If we arefail to comply with NASDAQ’s continued listing standards, we may be delisted thenand our common stock will trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board securitiesor OTCQX market, and then only if one or more registered broker-dealer market makers comply with quotation requirements.  In addition, delisting of our common stock could depress our stock price, substantially limit liquidity of our common stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of our common stock would likely result in our common stock becoming a “penny stock” under the Exchange Act.  

Our share price may be volatile and there may not be an active trading market for our common stock.

There can be no assurance that the market price of our common stock will not decline below its present market price or that there will be an active trading market for our common stock.  The market prices of technology or technology related companies have been and are likely to continue to be highly volatile.  Fluctuations in our operating results and general market conditions for technology or technology related stocks could have a significant impact on the volatility of our common stock price.  We have experienced significant volatility in the price of our common stock.  From January 1, 2015 through March 31, 2017, the share price of our common stock (on a split-adjusted basis) ranged from a high of $21.47 to a low of $0.85. The reason for the volatility in our stock is not well understood and may continue.  Factors that may have contributed to such volatility include, but are not limited to:

·developments regarding regulatory filings;
·our funding requirements and the terms of our financing arrangements;
·technological innovations;
·introduction of new technologies by us or our competitors;
·material changes in existing litigation;
·changes in the enforceability or other matters surrounding our patent portfolios;
·government regulations and laws;
·public sentiment relating to our industry;
·developments in patent or other proprietary rights;
·the number of shares issued and outstanding;
·the number of shares trading on an average trading day;
·performance of companies in the non-performing entity space generally;
·announcements regarding other participants in the technology and technology related industries, including our competitors;
·block sales of our shares by stockholders to whom we have sold stock in private placements, or the cessation of transfer restrictions with respect to those shares; and
·market speculation regarding any of the foregoing.

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We could fail in future financing efforts or be delisted from The NASDAQ Capital Market if we fail to receive stockholder approval when needed.


We are required under the NASDAQ rules to obtain stockholder approval for any issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding before the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to be a “public offering” by NASDAQ. Funding of our operations in the futureand acquisitions of assets may require issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding, but we might not be successful in obtaining the required stockholder approval for such an issuance. If we are unable to obtain financing due to stockholder approval difficulties, such failure may have a material adverse effect on our ability to continue operations.

Our shares of common stock are thinly traded and, as a result, stockholders may be unable to sell at or near ask prices, or at all, if they need to sell shares to raise money or otherwise desire to liquidate their shares.


Our common stock has been “thinly-traded” meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence,Our trading volumes are further adversely affected by the 1-for-19 reverse stock split that was effective as of March 4, 2016. In addition, we believe that due to the limited number of shares of our common stock outstanding, an options market has not been established for our common stock, limiting the ability of market participants to hedge or otherwise undertake trading strategies available for larger companies with broader shareholder bases which prevents institutions and others from acquiring or trading in our securities. Consequently, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.

-9-

Dividends on our common stock are not likely.

 We do not anticipate paying cash dividends on our common stock in the foreseeable future.  Investors must look solely to appreciation in the market price of the shares of our common stock to obtain a return on their investment.

Because of the Rights Agreement and “Anti-Takeover”“anti-takeover” provisions in our Certificate of Incorporation and Bylaws, a third party may be discouraged from making a takeover offer that could be beneficial to our stockholders.

Effective as of January 24, 2013, and as amended and restated on June 9, 2017, we adopted a new shareholder rights plan. The effect of this rights plan and of certain provisions of our Certificate of Incorporation, By-Laws, and the anti-takeover provisions of the Delaware General Corporation Law, could delay or prevent a third party from acquiring us or replacing members of our Board of Directors, or make more costly any attempt to acquire control of the Company, even if the acquisition or the replacementsBoard designees would be beneficial to our stockholders. These factors could also reduce the price that certain investors might be willing to pay for shares of the common stock and result in the market price being lower than it would be without these provisions.

In addition, defendants in actions seeking to enforce our patents may seek to influence our Board of Directors and stockholders by acquiring positions in the Company to force consideration of settlement or licensing proposals that may be less desirable than other outcomes such as litigation with respect to our monetization or patent enforcement activities. The effect of such influences on our Company or our corporate governance could reduce the value of our monetization activities and have an adverse effect on the value of our assets. The effect of anti-takeover provisions could impact the ability of prospective defendants to obtain influence in the Company or representation on the Board of Directors or acquire a significant ownership position and such result may have an adverse effect on the Company and the value of its securities.

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Dividends on our common stock are not likely.

During the last four years, we have not paid cash dividends on our common stock, and we do not anticipate paying cash dividends on our common stock in the foreseeable future.  Investors must look solely to the potential for appreciation in the market price of the shares of our common stock to obtain a return on their investment.

It may be difficult to predict our financial performance because our quarterly operating results may fluctuate.

Our revenues, operating results and valuations of certain assets and liabilities may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our results of operations as an indication of our future performance. Our results of operations may fall below the expectations of market analysts and our own forecasts. If this happens, the market price of our common stock may fall significantly. The factors that may affect our quarterly operating results include the following:

·fluctuations in results of our enforcement and licensing activities or outcome of cases;
·fluctuations in duration of judicial processes and time to completion of cases;
·the timing and amount of expenses incurred to negotiate with licensees and obtain settlements from infringers;
·the impact of our anticipated need for personnel and expected substantial increase in headcount;
·fluctuations in the receptiveness of courts and juries to significant damages awards in patent infringement cases and speed to trial in the jurisdictions in which our cases may be brought and the accepted royalty rates attributable to damages analysis for patent cases generally, including the royalty rates for industry standard patents which we may own or acquire;
·worsening economic conditions which cause revenues or profits attributable to infringer sales of products or services to decline;
·changes in the regulatory environment, including regulation of NPE activities or patenting practices, that may negatively impact our or infringers practices;
·the timing and amount of expenses associated with litigation, regulatory investigations or restructuring activities, including settlement costs and regulatory penalties assessed related to government enforcement actions;
·Any changes we make in our Critical Accounting Estimates described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of our periodic reports;
·the adoption of new accounting pronouncements, or new interpretations of existing accounting pronouncements, that impact the manner in which we account for, measure or disclose our results of operations, financial position or other financial measures; and
·costs related to acquisitions of technologies or businesses.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel and the continued contributions of our executive officers, each of whom may be difficult to replace. In particular, Anthony Hayes, our Chief Executive Officer, is important to the management of our business and operations and the development of our strategic direction. The loss of the services of any such individual and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

26
SPECIAL NOTE

Because an increasing amount of our outstanding shares may become freely tradable, sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.

As of December 31, 2016, we had outstanding 4,943,929 shares of common stock, of which our directors and executive officers owned 72,284 shares which are subject to the limitations of Rule 144 under the Securities Act.

In general, Rule 144 provides that any non-affiliate of ours, who has held restricted common stock for at least six-months, is entitled to sell their restricted stock freely, provided that we are then current in our filings with the SEC.

An affiliate of the Company may sell after six months with the following restrictions:

·we are current in our filings,
·certain manner of sale provisions,
·filing of Form 144, and
·volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed the greater of 1% of the total number of outstanding shares or, the average weekly trading volume during the four calendar weeks preceding the filing of a notice of sale.

Because almost all of our outstanding shares are freely tradable (subject to certain restrictions imposed by lockup agreements executed by the holders thereof) and the shares held by our affiliates may be freely sold (subject to the Rule 144 limitations), sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.

Risk Related to this Offering

Management will have broad discretion as to the use of the net proceeds from this offering, and we may not use these proceeds effectively.

We intend to use the net proceeds from this offering for working capital and general corporate purposes. Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our product candidates and cause the price of our common stock to decline.

You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase.

Because the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on a public offering price of $       per share, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of approximately ($      ) per share in the net tangible book value of the common stock. See the section entitled “Dilution” in this prospectus for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.

In addition, we have a significant number of stock options, warrants and convertible preferred stock outstanding. To the extent that outstanding stock options, warrants have been or may be exercised or other shares issued, you may experience further dilution.

27

Future sales of substantial amounts of our common stock could adversely affect the market price of our common stock.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If additional capital is raised through the sale of equity or convertible debt securities, or perceptions that those sales could occur, the issuance of these securities could result in further dilution to investors purchasing our common stock in this offering or result in downward pressure on the price of our common stock, and our ability to raise capital in the future.

The exercise of outstanding options and warrants to acquire shares of our common stock would cause additional dilution, which could cause the price of our common stock to decline.

In the past, we have issued options and warrants to acquire shares of our common stock. At March 31, 2017, there were 312,984 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $82.39 per share and 1,250,311 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $9.21 per share, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation, capital raising transactions or other strategic transactions. To the extent these options and warrants are ultimately exercised, existing holders of our common stock would experience additional dilution which may cause the price of our common stock to decline.

A large number of shares issued in this offering may be sold in the market following this offering, which may depress the market price of our common stock.

A large number of shares issued in this offering may be sold in the market following this offering, which may depress the market price of our common stock. Sales of a substantial number of shares of our common stock in the public market following this offering could cause the market price of our common stock to decline. If there are more shares of our common stock offered for sale than buyers are willing to purchase, then the market price of our common stock may decline to a market price at which buyers are willing to purchase the offered shares of our common stock and sellers remain willing to sell the shares. All of the securities issued in the offering will be freely tradable without restriction or further registration under the Securities Act.

28

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKINGFORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. Such statements, includewhich reflect the views of our management with respect to future events and financial performance. These forward-looking statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limitedare subject to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks anda number of uncertainties and actual results may differ materially from those discussed in any such statement. Factorsother factors that could cause actual results to differ materially from such statements. Forward-looking statements are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “targets” and similar expressions. Such forward-looking statements include the risks described in greater detailmay be contained in the following paragraphs. Allsections “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” among other places in this prospectus. Readers are cautioned not to place undue reliance on these forward-looking statements, in this documentwhich are made as of the date hereof, based on the information available to usmanagement at this time and which speak only as of the date hereof, and we assumethis date. We undertake no obligation to update or revise any forward-looking statement. Market data used throughoutstatements, whether as a result of new information, future events or otherwise. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under “Risk Factors.”

The identification in this document of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You may rely only on the information contained in this prospectus.

We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of our common stock means that information contained in this prospectus is based on published third party reports orcorrect after the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information.


You should review carefully the section entitled “Risk Factors” beginning on page 3date of this prospectus. This prospectus for a discussionis not an offer to sell or solicitation of an offer to buy these and other risks that relate to our business and investingsecurities in any circumstances under which the offer or solicitation is unlawful.

29

DILUTION

If you purchase shares of our common stock.

USE OF PROCEEDS

stock in this offering, you will experience dilution to the extent of the difference between the price per share you pay in this offering and the net tangible book value per share of our common stock immediately after this offering. The net proceeds from any dispositiontangible book value of our common stock on March 31, 2017 was approximately $(0.2) million, or approximately $(0.04) per share. Net tangible book value per share is equal to the shares covered hereby would be receivedamount of our total tangible assets, less total liabilities, divided by the selling stockholders. We will not receive anyaggregate number of shares of our common stock outstanding.

After giving effect to the proceeds from any suchassumed sale by us of shares of our common stock in this offering at an assumed public offering price of $     per share of common stock,the last reported sale price of our common stock on The Nasdaq Capital Market on July __, 2017,after deducting the underwriting discount and estimated offering expenses payable by us, our as adjusted net tangible book value as of    , 2017 would have been approximately $    , or approximately $    per share of common stock. This represents an immediate increase in net tangible book value of approximately $    per share to existing stockholders and an immediate dilution of approximately $    per share to new investors purchasing shares of our common stock in this offering. The following table illustrates this per share dilution:

Assumed public offering price per share

 $[●] 
Net tangible book value per share as of March 31, 2017 $(0.04)
Increase per share attributable to new investors in this offering    
     
As adjusted net tangible book value per share as of March 31, 2017 after giving effect to this offering $[●] 
     
Dilution per share to investors participating in this offering $[●] 

Each $    increase (decrease) in the assumed public offering price of $    per share would increase (decrease) our as adjusted net tangible book value after this offering by $     million, or $     per share, and the dilution per share to new investors by $    per share, assuming that the number of shares of common stock offered by us, as set forth above, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. We may also increase or decrease the number of shares of common stock we are offering from the assumed number of shares of common stock set forth above. An increase (decrease) of     shares of common would increase (decrease) our as adjusted net tangible book value after this prospectus.offering by $     million, or $     per share, and the dilution per share to new investors by $    per share, assuming that the public offering price remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. The information discussed above is illustrative only and will adjust based on the actual public offering price, the actual number of shares that we offer in this offering, and other terms of this offering determined at pricing.

30

The number of shares of our outstanding common stock reflected in the discussion and table above is based on 4,979,898 shares of common stock outstanding as of July 3, 2017 and excludes, as of that date:

·312, 984 shares of our common stock issuable upon exercise of outstanding options at a weighted average exercise price of $82.39 per share;

·1,250,311 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $ 9.21 per share (without giving effect to any of the anti-dilution adjustment provisions thereof); and

·2,926 shares of common stock issuable upon the conversion of our Series D and D-1 Preferred Stock.

·269,115 shares of our common stock to be reserved for potential future issuance pursuant to our 2012, 2013 and 2014 Equity Incentive Plans, combined.

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $    million based on an assumed offering price of $    , the last reported sale price of our common stock on the NASDAQ Capitals Market on    , 2017. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds from this offering will be approximately $     million.

An $     increase (decrease) in the assumed public offering price of $     per share of our common stock would increase (decrease) the expected net cash proceeds of the offering to us by approximately $    . An increase (decrease) of    in the assumed number of shares sold in this offering would increase (decrease) the expected net cash proceeds of the offering to us by approximately $    , assuming a public offering price of $    per share.

We intend to use the net proceeds of this offering for working capital and general corporate purposes. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we will have upon completion of the offering. Accordingly, we will retain broad discretion over the use of these proceeds.

32

MARKET FORPRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS


As of December 9, 2013, the number of stockholders of record of the Company’s common stock was approximately 687 which does not include stockholders whose shares are held in street or nominee names.  The Company’s

Our common stock is tradedlisted on the NASDAQ Capital Market under the symbol SPEX.  No dividends were paid in 2012 or 2011.

-10-

“SPEX.”

The following table sets forth the quarterly quotes of high and low closing prices for our common stock on the NASDAQ Capital Market, as applicable, for each quarterly period during our fiscal years ended December 31, 2016 and 2015, and the quarter ended March 31, 2017 and June 30, 2017.

Period High  Low 
2015        
First Quarter $21.47  $14.82 
Second Quarter $15.58  $9.12 
Third Quarter $11.02  $3.99 
Fourth Quarter $10.07  $2.66 
         
2016        
First Quarter $2.66  $1.71 
Second Quarter $3.07  $1.86 
Third Quarter $2.36  $1.26 
Fourth Quarter $1.51  $0.87 
         
2017        
First Quarter $1.38  $1.02 
Second Quarter (through June 29, 2017) $4.75  $0.91 

Holders

As of June 29, 2017, the last reported bysales price reported on the NASDAQ Capital Market for our common stock was $3.92 per share. As of the periods indicated (all adjusted for the September 2012 reverse stock split).


Period High  Low 
2013      
First Quarter $14.99  $5.51 
Second Quarter $11.05  $4.07 
Third Quarter $27.86  $4.54 
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 
On December 6, 2013, the closing pricedate of this prospectus, we had approximately 122 holders of our common stock, as reported by the NASDAQ Capital Market, was $8.74.  As of December 9, 2013, we had approximately 687 holdersstock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock excluding stockholders whose shares are held in streetthe names of various security brokers, dealers, and registered clearing agencies. 

Dividends

During the last four years, we have not declared or nominee names.  We believe thatpaid any cash dividends on our capital stock, and we do not anticipate paying cash dividends in the number of beneficial owners is substantially greater than the number of record holders because a large portion of our common stock is held of record through brokerage firms in “street name.”future. 

33

Reverse Stock Splits
In September 2012 and in May 2011, the Company effected reverse stock splits of its common stock in response to NASDAQ deficiency notices concerning the bid price of the Company’s common stock.
On September 21, 2012, the Company effected a reverse stock split of the Company’s outstanding common stock at an exchange ratio of 1-for-20.  As a result of the reverse stock split, every 20 shares of the Company’s issued and outstanding common stock were combined into one share of common stock.  No fractional shares of common stock were issued as a result of the reverse stock split.  Instead, fractional shares that would otherwise result from the reverse stock split were purchased by the Company based on the closing price of the stock on September 21, 2012.
On May 6, 2011, the Company effected a one-for-ten reverse split of its common stock.  The Company implemented the reverse stock split

Securities authorized for issuance under the authority granted to the Board of Directors by the Company’s stockholders at the annual meeting of stockholders held on November 17, 2009.  The reverse stock split reduced the number of outstanding shares of common stock from 25,624,872 shares to 2,562,488 shares.

Following both reverse stock splits, the Company’s common stock price increased and the Company regained compliance with the NASDAQ minimum bid price rule.
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Equity Compensation PlanPlans Information

The following table provides information about the Company’sour common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’sour existing equity compensation plans as of December 31, 2012.


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  7,1631 $22.34   2,750 
Equity compensation plans not approved by securities holders  1,3992 $97.27   N/A 
Total  8,562       2,750 

2016.

        Number of securities 
        remaining available for 
        future issuance under 
  Number of securities to  Weighted average  equity compensation 
  be issued upon exercise  exercise price of  plans (excluding 
  of outstanding options,  outstanding options,  securities reflected in 
Plan Category warrants and rights (1)  warrants and rights  column (1)) (2) 
Equity compensation plans approved by security holder  312,984  $82.39   269,115 
Equity compensation plans not approved by security holder  -   -   - 
   312,984       269,115 

1.  (1)Consists of options to acquire 7,163282 shares of our common stock issued to our key employees and directors.
2.  Consists of warrants to purchase 1,399under the 2012 Equity Incentive Plan, 105,610 shares of our common stock issued tounder the 2013 Equity Incentive Plan and 207,092 shares of our placement agent with respect tocommon stock under the January 2011, October 2011 and February 2012 offerings.2014 Equity Incentive Plan.

3.  (2)Consists of shares of common stock available for future issuance under our equity incentive plan.plans.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

       The following

Forward-Looking Statements

You should read this discussion together with the Financial Statements, related Notes and analysis of our results of operations andother financial condition should be read in conjunction with (i) our unaudited interim condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2013 and 2012 (ii) audited financial statements for the fiscal years ended December 31, 2012 and 2011 and the notes thereto and (iii) the section entitled “Business”,information included elsewhere in this prospectus. Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).


Overview

We are an intellectual property company that owns patented and unpatented intellectual property.

Through our acquisition of seven patents from Rockstar and acquisition of patents issued to Harris Corporation and CompuFill LLC in connection with our acquisition of North South, we have expanded our activities in wireless communications and telecommunication sectors including antenna technology, Wi-Fi, base station functionality, and cellular. 

Using our patented technologies we employ strategies seeking to permit us to derive value from licensing, commercialization, settlement and litigation from our patents.  We intend to continue to seek to obtain patents from inventors and patent owners to monetize patent portfolios.

Results of Operations

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012
During the three months ended September 30, 2013, we incurred a loss from operations of $9,316,768, an increase of $8,683,123 or 1,370%, as compared to $633,645 for the same period in 2012 and net loss from continuing operations of $9,279,983, an increase of $8,705,581 or 1,516%, as compared to $574,402 for the same period in 2012 as a result of stock based compensation expenses (increase of $7,393,855) as a result of the options issued under the 2013 plan, increased professional fees and acquisition related costs incurred in connection with the acquisition of North South (increase of $479,933) as well as an increase in the fair value of the warrant liability and amortization expenses related to the patents acquired by the Company.

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During the three months ended September 30, 2013, we generated $1,837 of revenue from certain licensing and product sales. In the three months ended September 30, 2012, we generated $16,710 in revenue.

During the three months ended September 30, 2013, we incurred $9,318,605 in operating expenses. These costs relate to the amortization of the patents as well as research and development costs, stock based compensation expenses, professional feesThe following discussion contains assumptions, estimates and other selling, generalforward-looking statements that involve a number of risks and administrative expenses including acquisition costs relateduncertainties. These risks could cause our actual results to the acquisition of North South. The increasediffer materially from those anticipated in operating expenses of $8,668,250 from 2012 or 1,333%  for the same period in 2012 when we had $650,355 in operating expenses consists of increases in research and development costs, professional fees and other selling, general and administrative expenses.

During the three months ended September 30, 2013, we recorded interest income of $202 and had a fair value adjustment of $36,583 on the warrant liability, comparedthese forward-looking statements. All references to $830 and $58,413 for the same period in 2012. Fair value adjustments for warrant liabilities is the result of the change in the carrying amount of the warrant liability caused by changes in the fair value as determined using a Black-Scholes option valuation method.  The change from the beginning of the year was the result of an increase in the Company’s stock price during the three months ended September 30, 2013.  The decrease in the Company’s stock price led to the result in the same three month period ended September 30, 2012.
Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
During the nine months ended September 30, 2013, we incurred a loss from operations of $11,173,934, an increase of $8,807,454 or 372%, as compared to $2,366,480 for the same period in 2012 and net loss from continuing operations of $13,783,660, an increase of $12,160,559 or 749%, as compared to $1,623,101 for the same period in 2012 a result of stock based compensation expenses (increase of $7,362,135), increased professional fees incurred in connection with the acquisition of North South (increase of $680,638)“we,” “us,” “our” and the result of the fair value adjustments on the warrants due“Company” refer to price fluctuations of our common stock.

During the nine months ended September 30, 2013, we generated $7,811 of revenue from certain licensing and product sales. In the nine months ended September 30, 2012, we generated $16,710 in revenue.

During the nine months ended September 30, 2013, we incurred $11,181,745 in operating expenses. These costs relate to the amortization of the patents as well as research and development costs, stock based compensation expenses, professional fees and other selling, general and administrative expenses including acquisition costs related to the merger with North South. The increase in operating expenses of $8,798,555 from 2012 or 369%  for the same period in 2012 when we had $2,383,190 in operating expenses consists of increases in research and development costs, professional fees and other selling, general and administrative expenses.

During the nine months ended September 30, 2013, we recorded interest income of $739 and had a fair value adjustment of ($2,610,465) on the warrant liability, compared to $2,774 and $740,605 for the same period in 2012. Fair value adjustments for warrant liabilities is the result of the change in the carrying amount of the warrant liability caused by changes in the fair value as determined using a Black-Scholes option valuation method.  The change from the beginning of the year was the result of an increase in the Company’s stock price during the nine months ended September 30, 2013.  The decrease in the Company’s stock price led to the opposite result in the same nine month period ended September 30, 2012.
Fiscal Year Ended December 31, 2012 Compared to Fiscal Year Ended December 31, 2011

Revenue
      Revenue in 2012 is primarily related to royalty fees from an oil detection agreement.  No substantial revenue is expected from the Biospherics segment until the Company is successful in selling or licensing its technology.

Research and Development
Research and development (“R&D”) expenditures relate solely to the Biospherics segment and consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers, and other expenses related to our efforts to develop SPX106T for use in lowering triglyceride and cholesterol levels.  We expense our research and development costs as they are incurred.  The Company does not intend to incur any material R&D costs for its Biospherics unit in 2013 or thereafter and currently is seeking buyers to acquire the Biospherics inventory and business in whole or in part or to joint venture or license such business.  The Company believes it is unlikely that a buyer may be identified and as a result may liquidate or dispose of its inventory of Tagatose for which material storage fees are being incurred.  The Company may be required to incur costs for disposal and cessation of this segment.
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The decrease in R & D costs in 2012 of $919,000 from 2011 reflects the completion of SPX106T preclinical studies.  No further studies are presently planned.

Selling, General and Administrative
Our selling, general and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, professional fees and other corporate expenses, including facilities-related expenses.  S,G&A expenses were consistent between years.  Severance/retention expense for the continuing staff is being recognized evenly over the required performance period from the date of each agreement, with $40,000 recognized in 2012 and the remaining$475,000 to be recognized during the first half of 2013.  No severance expenses were incurred in 2011.

Other Income from Change in Fair Value of Warrants
Other Income from change in fair value of warrants is the result of decreases in the carrying amount of the warrant liability caused by changes in the fair value as determined using a Black-Scholes option valuation method.  The difference between the other income from change in fair value of warrants realized in 2011 compared to 2012 is the result of a more pronounced change in the Company’s stock price for the year ending 2011.
Loss on Issuance of Warrants
The loss on issuance of warrants reflects the difference in the fair market value of the warrants as determined using a Black-Scholes option valuation method and the proceeds received.  The proceeds received from Warrants issued with other instruments (such as common stock or preferred stock) are determined based upon the fair value of liability classified warrants with the residual allocated to the other instruments.  The increase between years is directly related to the change in the Company’s stock price between years.

Interest Income

                Interest income in 2012 and 2011 was primarily derived from interest earned on the net proceeds of our equity offerings.

Other Income
In October 2010, the Company was awarded two one-time grants from the U.S. Government under the Patient Protection and Affordable Care Act.  The awards were for the Company’s diabetes and triglyceride research.  As a result, in 2011 the Company recognized $51,000 in other income and a related tax expense of $14,000.  No grants were recognized in 2012.

Gain on Settlement of Obligations
              On January 14, 2011, BiosphericsSpherix Incorporated, a wholly-owned subsidiary of the Company, filed a Complaint For Injunction Relief And Damages in The United States District Court For The District Of Maryland against Inalco S.p.A. (the “Complaint”).  The Complaint alleged that Inalco had breached the 2009 Manufacturing Support and Supply Agreement as Inalco (i) refused to supply D-tagatose previously paid for by Biospherics, (ii) refused to provide a promised bank guarantee, and (iii) shut-down its D-tagatose production facilities.  On March 16, 2011, both parties signed a settlement agreement whereby Inalco agreed to supply Spherix with 8.5 metric tons of D-tagatose, which has been received by Spherix, and both parties have agreed to release each other from any other obligations under the previous agreement.  As a result, the Company recognized a gain of $600,000 in March 2011 on the release from its purchase obligation.
              In January 2011, the Company entered into a Letter Agreement with Gilbert V. Levin and M. Karen Levin pursuant to which the Company agreed to make a one-time lump sum payment of $450,000 to the Levins in full satisfaction of the Company’s obligation to make a series of continuing payments to the Levins relating to their prior employment by the Company.  Per the terms of the agreement, Gilbert V. Levin resigned as a member of the Board of Directors of the Company on January 13, 2011.  The Company’s estimated liability to the Levins at December 31, 2010, and prior to the above agreement was approximately $695,000.  The $450,000 lump sum payment was made on January 31, 2011, and the Company recognized the $245,000 difference as a gain on settlement of obligations in January 2011.
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Income Tax Expense
   The 2011 income tax expense was directly related to the above mentioned U.S. government grants in the Other Income discussion.  No tax expense was incurred in 2012.

Discontinued Operations
              The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale noted above.  The Spherix Consulting segment generated nearly all of the Company’s revenue and provided technical support for the Company’s Biospherics segment.
  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)
Sales Backlog

                None.
Liquidity and Capital Resources

The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding revenue.

The Company intends to finance its activities through:

•           managing current cash and cash equivalents on hand from our past equity offerings,
•           seeking additional funds raised through the sale of additional securities in the future,
•           increasing revenue from the monetization of its patent portfolios, license fees, and new business ventures.

The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer term business plan. The working capital was $1.1 million, $4.0 million and $4.6 million at September 30, 2013,  December 31, 2012, and December 31, 2011 respectively and, cash on hand was $2.5 million $4.5 million and $4.9 million, respectively. Upon closing of the Merger on September 10, 2013, the North South cash balance (approximately $2.7 million) became available for the operations of the Company.  Management believes that this cash on hand will be sufficient to sustain operations for the next twelve months, including payment of severances aggregating $475,000 which have been paid in the first half of 2013.

The Company used the proceeds from the sale of the $500,000 promissory note to North South to fund certain expenses incurred in connection with the North South Merger.

    The Company in November of 2013 sold an aggregate of 304,250 shares of its newly designated Series F Preferred Stock and 48,438 shares of common stock to five accredited investors for gross proceeds to the Company of $2,235,000 pursuant to subscription agreements. The effective purchase price per share of Common Stock and 156,250 of the Series F Preferred Stock was $6.40 for $1,310,000 of such investment and 148,000 shares of Series F Preferred Stock was $6.25 for $925,000 of such investment. The proceeds of the sale of the common stock and Series F Convertible Preferred Stock will be used to further the operations of the Company.
Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical.  The Company may be forced to litigate against others to enforce or defend its intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims or initiate inter parties reviews in an effort to avoid or limit liability and damages for patent infringement or case the Company to incur additional costs as a strategy. If such efforts are successful, they may have an impact on the value of the patents and preclude the Company from deriving revenue from the patents, the patents could be declared invalid by a court or the US Patent and Trademark Office, in whole or in part, or the costs of the Company can increase.
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As a result, a negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact the Company’s business. Additionally, the Company anticipates that legal fees which are not included in contingency fee arrangements, experts and other expenses will be material and could have an adverse effect on its financial condition and results of operations if its efforts to monetize these patents are unsuccessful.
       In addition, the costs of enforcing the Company’s patent rights may exceed its recoveries from such enforcement activities. Accordingly, in order for the Company to generate a profit from its patent enforcement and monetization activities, the revenues from such enforcement and monetization activities must be high enough to offset both the cash outlays and the contingent fees payable from such revenues including any profit sharing arrangements with inventors or prior owners of the patents. The Company’s failure to monetize its patent assets or the occurrence of unforeseen circumstances that could have a negative impact on the Company’s liquidity could significantly harm its business.

Should the Company be unsuccessful in its efforts to execute its business plan, it could become necessary for the Company to reduce expenses, curtail its operation or explore various alternative business opportunities or possibly suspend or discontinue its business activities.

Critical Accounting Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).  This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period.  The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, valuation of warrants, the valuation of assets acquired and common and preferred stock issued in the acquisition of North South and the valuation allowance related to the Company’s deferred tax assets.  

              Spherix’s critical accounting policies are those it believes are the most important in determining its financial condition and results, and require significant subjective judgment by management as a result of inherent uncertainties.  A summary of the Company’s significant accounting policies is set out in the notes to the consolidated financial statements.  Such policies are discussed below.

Accounting for Taxes and Valuation Allowances

We currently have significant deferred tax assets, resulting from net operating loss carry forwards.  These deferred tax assets may reduce taxable income in future periods.  Based on the Company’s lossesDelaware corporation and its accumulated deficit,consolidated subsidiaries unless the Company has provided a full valuation allowance against the net deferred tax asset.  Cumulative losses weigh heavily in the overall assessment of valuation allowances.

               We expect to continue to maintain a full valuation allowance on future tax benefits until an appropriate level of profitability is sustained, or we are able to develop tax strategies that would enable us to conclude that it is more likely than not that a portion of our deferred tax assets would be realizable.

Accounting for warrants
The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”).  The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own 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 choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

The Company assessed the classification of its common stock purchase warrants as of the date of each offering and determined that such instruments met the criteria for liability classification.  The warrants are reported on the consolidated balance sheet as a liability at fair value using the Black-Scholes valuation method.  Changes in the estimated fair value of the warrants result in the recognition of other income or expense.
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Stock-based Compensation

We account for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award.  Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant.  These options generally vest over a four- to ten-year period.

The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield.  The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option.  The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant.  The expected volatility assumption is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns.
Our model includes a zero dividend yield assumption, as we have not historically paid nor do we anticipate paying dividends on our common stock.  Our model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions.

The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded.  Our estimate of pre-vesting forfeitures is primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the options vest.

Fair Value of Financial Instruments

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The Company uses three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

Revenue Recognition

The Company currently derives its revenues from past production payments. Past production payment revenues are royalty payments for the use of the Company’s intellectual property and where payments are made as part of a settlement of a patent infringement dispute. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability is reasonably assured. Based on the criteria enumerated in Accounting Standards Codification (“ASC”) 605, the Company records its revenues and costs associated with its patent enforcement activities gross on the consolidated statement of operations.

Cost of Revenues

Cost of revenues include the costs and expenses incurred in connection with the Company’s patent enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.

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Inventor Royalties and Contingent Legal Expenses

Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense.

Contingent legal fees are expensed in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred.

Intangible Assets – Patent Portfolios

Intangible assets include the Company’s patent portfolios with original estimated useful lives ranging from 6 months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis.  Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent.

Goodwill
 Under ASC No. 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise.
 Goodwill impairment is tested at least annually or when factors indicate potential impairment using a two-step process that begins with an estimation of the fair value of each reporting unit. Step 1 is a screen for potential impairment pursuant to which the estimated fair value of each reporting unit is compared to its carrying value.
 The Company estimates the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and margins multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a Step 2 test is required.
New Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit , or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.

For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted.
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BUSINESS
General
context requires otherwise.

Overview

We are an intellectual property company that owns patented and unpatented intellectual property. We wereSpherix Incorporated was formed in 1967 as a scientific research company and for much of our history pursued drug development including through Phase III clinical studies which were largely discontinued in 2012. In 2012 and 2013, we shifted our focus to being a firm that owns, develops, acquires and monetizes intellectual property assets. Through our acquisitionacquisitions of seven108 patents and patent applications from Rockstar Consortium US, LP and acquisition of several hundred patents issued to Harris Corporation as a result of our acquisition of North South, we have expanded our activities in wireless communications and telecommunication sectors including antenna technology, Wi-Fi, base station functionality and cellular.

Our activities generally include the acquisition and development of patents through internal or external research and development. In addition, we seek to acquire existing rights to intellectual property through the acquisition of already issued patents and pending patent applications, both in the United States and abroad. We may alone, or in conjunction with others, develop products and processes associated with our intellectual property and license our intellectual property to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes. Using our patented technologies, we employ strategies seeking to permit us to derive value from licensing, commercialization, settlement and litigation from our patents. We will continue to seek to obtain patents from inventors and patent owners to monetize patent portfolios.

Recent Developments

On June 30, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”), for the purchase of 6,800,000 shares of common stock, par value $0.0001 (the “Shares”), of Hoth, for a purchase price of $675,000. As of June 30, 2017, Hoth had a total of 17,000,000 shares of common stock issued and outstanding. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for the treatment of eczema. Hoth intends to develop BioLexa’s applications in the aesthetic dermatology field to help treat and reduce post-procedure infections, accelerate healing and improve clinical outcomes for patients undergoing procedures. Hoth will be implementing FDA testing procedures for BioLexa. In addition to the Purchase Agreement, the Company and Hoth entered into a Registration Rights Agreement, pursuant to which Hoth is obligated to register for resale on a registration statement on Form S-1 under the Securities Act, all of the shares, no later than June 30, 2018, Further, the Company, Hoth and Hoth’s existing shareholders have entered into a Shareholders Agreement, pursuant to which Spherix shall have a right to appoint one director to the board of directors of Hoth for so long as the Company holds at least 10% of the issued and outstanding common stock of Hoth.

Critical Accounting Policies

Accounting for Warrants

We account for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of Accounting Standards Codification (“ASC”) 815,Derivatives and Hedging (“ASC 815”).  We classify as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).  We classify 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 choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. We classify these derivative warrant liabilities on the consolidated balance sheet as a current liability.

We assess the classification of our common stock purchase warrants as of the date of each offering and determined that such instruments met the criteria for liability classification.  The warrants are reported on the consolidated balance sheets as a warrant liability at fair value using the Black-Scholes valuation method.  Changes in the estimated fair value of the warrants result in the consolidated statement of operations as “change in the fair value of warrant liabilities”.

35

On April 2, 2013,

Results of Operations

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

During the three months ended March 31, 2017, revenue was approximately $0.3 million, which is the amortization of deferred revenue related to patent license agreements we entered into with RPX Corporation (“RPX”) on November 23, 2015 and May 22, 2016 (the “RPX License Agreements”). During the Mergerthree months ended March 31, 2016, revenue was approximately $72,000, which is the amortization of deferred revenue related to the RPX License Agreement dated November 23, 2015.

During the three months ended March 31, 2017 and 2016, we incurred a loss from operations of approximately $1.0 million and $1.6 million, respectively. The decrease in net loss was primarily attributed to a $0.2 million decrease in amortization expenses related to the Rockstar patents acquired by the Company during 2013 due to a $2.7 million impairment of intangible assets in 2016.

During the three months ended March 31, 2017 and 2016, other income was approximately $50,000 as compared to approximately $1.5 million of other income for the comparable prior period.  The decrease in other income was primarily attributed to a $1.7 million decrease in change in fair value of warrant liabilities.

Fiscal Year Ended December 31, 2016 Compared to Fiscal Year Ended December 31, 2015

For the year ended December 31, 2016, we incurred a loss from operations of $8.6 million, a decrease of $43.4 million, as compared to $52.0 million in 2015. The decrease in net loss was primarily attributed to a $37.9 million decrease in impairment charge taken against the goodwill and intangible assets, and $4.2 million decrease in amortization of patent portfolio expense, partially offset by a $226,000 increase in compensation and related expenses. During the years ended December 31, 2016 and 2015, we recorded $2.1 million and $6.3 million, respectively, in amortization expenses related to the Rockstar patents acquired by the Company during 2013.

For the year ended December 31, 2016, revenue was approximately $0.9 million, which is the amortization of deferred revenue related to RPX License Agreements. For the year ended December 31, 2015, the revenue was nominal.

For the year ended December 31, 2016, we recorded income related to a non-cash fair value adjustment on our warrant liability of approximately $2.3 million, compared to $269,000 of income in 2015. Fair value adjustments for warrant liabilities is the result of the change in the carrying amount of the warrant liability caused by changes in the fair value as determined using a Black-Scholes valuation method.  In addition, during the year ended December 31, 2016, we recorded other expenses, net of $182,000 compared to other income, net of $276,000 in 2015.  During the year ended December 2015, the Company received $295,000 related to the settlement of the Huawei case in 2015.

For the year ended December 31, 2016, we incurred a $31.5 million of deemed capital contribution on preferred stock related to the cancellation of 381,967 shares of Series H Preferred Stock pursuant to the RPX license agreement compared with Nuta,a $9.5 million of deemed capital contribution on preferred stock related to the assignment to us of 29,940 shares of our wholly-owned subsidiary, North SouthSeries I Preferred Stock and 57,076 shares of our Series H Preferred Stock and the stockholders of North South.  On August 30, 2013, we entered into an amendmentsubsequent cancellation thereof pursuant to the MergerRPX license agreement.

36

Liquidity and Capital Resources

We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding revenue.

We intend to finance our activities through:

·managing current cash and cash equivalents on hand from our past equity offerings,
·seeking additional funds raised through the sale of additional securities in the future,
·seeking additional liquidity through credit facilities or other debt arrangements, and
·increasing revenue from the monetization of its patent portfolios, license fees and new business ventures.

Cash Flows from Operating Activities - For the three months ended March 31, 2017 and 2016, net cash used in operations was approximately $0.8 million and $1.5 million, respectively. The cash used in operating activities for the three months ended March 31, 2017 primarily resulted from $0.1 million of change in fair value of warrant liabilities and amortization expenses of $0.3 million, partially offset by $0.4 million of changes in assets and liabilities. The cash used in operating activities for the three months ended March 31, 2016 primarily resulted from $1.5 million of change in fair value of warrant liabilities and $0.7 million of changes in assets and liabilities, partially offset by significant non-cash charges related to amortization expenses of $0.5 million and stock-based compensation expense of $0.1 million.

For the year ended December 31, 2016, net cash provided by operations was $70,000 compared to net cash used in operations of $4.6 million for the year ended December 31, 2015.  

The cash provided by operating activities for the year ended December 31, 2016 primarily resulted from significant non-cash charges related to impairment of intangibles of $2.7 million, amortization expenses of $2.1 million, stock-based compensation expense of approximately $0.6 million and approximately $3.5 million of deferred revenue, partially offset by approximately $6.5 million net loss and $2.3 million of change in fair value of warrant liabilities. The cash used in operating activities for the year ended December 31, 2015 primarily resulted from our net loss of $51.5 million and a fair value adjustment of warrant liabilities of $0.3 million, offset by significant non-cash charges related to impairment of goodwill and intangibles of $40.6 million, amortization expenses of $6.3 million, stock-based compensation expense of $0.4 million, plus a $0.2 million increase in cash from changes in operating assets and liabilities.

Cash Flows from Investing Activities -For the three months ended March 31, 2017 and 2016, net cash provided by investing activities was approximately $0.9 million and $1.9 million, respectively. The cash provided by investing activities primarily resulted from our sale of marketable securities for the three months ended March 31, 2017 of $5.0 million, partially offset by our purchase of marketable securities of $4.1 million. The cash provided by investing activities primarily resulted from our sale of marketable securities for the three months ended March 31, 2016 of $5.3 million, partially offset by purchase of marketable securities of $3.5 million, and purchase of property and equipment of $2,000.

For the year ended December 31, 2016, net cash used in investing activities was approximately $3.0 million. The cash used in investing activities primarily resulted from our purchase of marketable securities for the year ended December 31, 2016 of approximately $18.0 million and purchase of property and equipment of approximately $4,000, partially offset by sale of marketable securities of approximately $15.1 million. For the year ended December 31, 2015, net cash provided by investing activities was $0.1 million. We purchased $8.0 million and sold $8.1 million of marketable securities in 2015.

On June 30, 2017, we paid approximately $0.7 million in cash to purchase our interest in Hoth. This purchase will reduce our working capital balance by $0.7 million as of June 30, 2017.

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Cash Flows from Financing Activities - For the three months ended March 31, 2017 and 2016, there were no financing activities.

Our business will require significant amounts of capital to sustain operations and make the investments we need to execute our longer term business plan. Our accumulated deficit amounted to approximately $142.7 million at March 31, 2017, compared to approximately $141.7 million at December 31, 2016.  Our existing liquidity is not sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements for the foreseeable future. We will need to obtain additional debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly-traded company or from the litigations in which we participate. If we attempt to obtain additional debt or equity financing, we cannot assume that such financing will be available to us on favorable terms, or at all.

Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical.  We may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which we are involved may allege defenses and/or file counterclaims or initiate inter parties reviews in an effort to avoid or limit liability and damages for patent infringement or cause us to incur additional costs as a strategy. If such efforts are successful, they may have an impact on the value of the patents and preclude us from deriving revenue from the patents, the patents could be declared invalid by a court or the United States Patent and Trademark Office, in whole or in part, or the costs could increase.

Should we be unsuccessful in our efforts to execute our business plan, it could become necessary for us to reduce expenses, curtail operations or explore various alternative business opportunities or possibly suspend or discontinue our business activities.

Pursuant to the RPX License Agreement, the security interest that RPX held in favor of our patents acquired from Rockstar was extinguished. Accordingly, we now have greater flexibility to amend, amongmonetize our patent portfolio, including through the sale of our patents or sublicensing our patents to third parties who can pursue their own monetization strategies with respect to those patents in exchange for royalties or some other things,consideration.

We have filed a shelf registration statement on Form S-3 with the SEC. The registration statement, which has been declared effective, was filed in reliance on Instruction I.B.6. of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.  At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6. may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6.  Based on this calculation and primarily as a result of our sale of $2,500,000 of common stock for the purchase of common stock on August 8, 2016 we are not currently eligible to sell any securities pursuant to our effective registration statement on Form S-3. Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.

Rockstar will be entitled to receive a contingent recovery percentage of future profits (“Participation Payments”) from licensing, settlements and judgments against defendants with respect to patents purchased under the merger consideration.  On September 10, 2013,First Patent Purchase Agreement; however, no payment is required unless the Company receives a recovery. The Participation Payments under the First Patent Purchase Agreement are equal to zero percent until the Company recovers with respect to patents purchased under the First Patent Purchase Agreement at least (a) $8.0 million or (b) if we consummatedrecover less than $17.0 million, an amount equal to $5.0 million plus $3.0 million times a fraction equal to total recoveries minus $10.0 million, divided by $7.0 million (clause (a) or (b), as applicable, being the merger“Initial Return”), in each case net of certain expenses.  Once we obtain recoveries in excess of the Initial Return, we are required to make a payment to Rockstar of $13.0 million, payable only from the proceeds of such recovery, within six months after such recovery. In addition, no later than 30 days after the end of each quarter in which we make such a recovery, we are required to pay to Rockstar a percentage of such recovery, net of certain expenses, scaling from 30% if such cumulative recoveries net of certain expenses are less than or equal to $50.0 million, to 70% to the extent cumulative recoveries net of certain expenses are in excess of $1.0 billion.  

Rockstar will also be entitled to receive Participation Payments from licensing, settlements and North South merged into Nuta,judgments against defendants with Nuta continuing asrespect to patents purchased under the surviving corporationSecond Patent Purchase Agreement; however, no payment is required unless we receive a recovery. The Participation Payments under the Second Patent Purchase Agreement are equal to zero percent until we recover with respect to patents purchased under the Second Patent Purchase Agreement at least $120.0 million, net of certain expenses.  Once we obtain recoveries in excess of that amount, we are required to pay to Rockstar 50% of our recovery in excess of that amount, no later than 30 days after the end of each quarter in which we make such a recovery.  

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Our ability to fund these Participation Payments or the $13.0 million contingent payment will depend on the liquidity of our assets, recoveries, alternative demands for cash resources and owneraccess to capital at the time. Furthermore, our obligation to fund Participation Payments could adversely impact our liquidity and financial position.

Net cash flows provided by financing activities during the year ended December 31, 2016 was $2.9 million compared to net cash provided by financing activities of North South’s intellectual property.$3.8 million in the year ended December 31, 2015. The cash provided by financing activities for the year ended December 31, 2016, primarily resulted from approximately $2.1 million net proceeds from underwritten public offering of 1,592,357 shares of the Company’s common stock and $0.8 million proceeds from exercise of 200,000 shares of warrants, partially offset by the payment for the cancellation of common stock of approximately $4,000. Cash provided by financing activities for the year ended December 31, 2015, resulted from the redemption of 5,601 shares of Series I Preferred Stock and proceeds received from the issuance of common stock, preferred stock and warrants. In accordanceconnection with the termsredemption of the Merger Agreement,Series I Preferred Stock, we issued 1,203,153paid RPX $0.9 million. In July 2015, we sold 301,026 shares of our common stock and 1,379,685warrants to purchase up to an aggregate of 370,263 shares of our common stock (on a split-adjusted basis), yielding net proceeds of approximately $1.3 million, excluding the proceeds, if any, from the exercise of the warrants. In December 2015, we sold 726,315 shares of our common stock, 1,240 shares of our Series DK Convertible Preferred Stock which is convertible intoand warrants to purchase up to an aggregate of 1,894,723 shares of our common stock, on a one-for-ten basis, toyielding net proceeds of approximately $3.4 million, after deducting placement agent fees and other estimated offering expenses, excluding the former stockholders of North South.  


Through our acquisition of North South, we own a patent portfolio consisting of 222 U.S. patents inproceeds, if any, from the fields of wireless communications, satellite, solar and radio frequency, as well as 2 U.S. patents in pharmaceutical technology. Prior to the Merger, North South acquired and developed patents through internal and/or external research and development and acquired issued U.S. and foreign patents and pending patent applications. We license our patents to companies seeking to develop products and processes that embodied our patented invention or to companies whose products and processes infringed our intellectual property. Prior to our acquisition of North South, North South commenced monetization and commercialization efforts by filing patent infringement litigation against T-Mobile USA on geo-location technology owned by North South, as well as two lawsuits on pharmaceutical distribution, the rights to which we acquired upon consummationexercise of the Merger.warrants.

Contractual Obligations

Future minimum rental payments required as of December 31, 2016, including Bethesda office lease obligation are as follows ($ in thousands):

  Lease Payments 
Year Ended December 31, 2017  220 
Year Ended December 31, 2018  45 
  $265 

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On July 24, 2013, we closed on the acquisition of a group of patents in the mobile communication sector from Rockstar in which we paid to Rockstar certain consideration, including 176,991 shares of common stock, which are being registered pursuant to this prospectus.

We anticipate commencing an exchange with holders of our outstanding shares of Series D Convertible Preferred Stock pursuant to which such holders could exchange shares of Series D Preferred Stock for shares of Series D-1 Convertible Preferred Stock on a one-for-one basis. An aggregate of 725,064 shares of common stock issued to the former stockholders of North South and 1,400,560 shares of common stock underlying 140,056 shares of Series D/D-1 Convertible Preferred Stock issued to our Series D Convertible Preferred Stockholders, are being registered pursuant to this prospectus. The rights of the Series D-1 Convertible Preferred Stock are substantially identical to the rights of the Series D Convertible Preferred Stock except for certain modifications relating to conversion limitations.  All references in this prospectus to Series D/Series D-1 Preferred Stock shall refer to shares of the Company’s Series D Preferred Stock which will be exchanged for shares of Series D-1 Preferred Stock on a one for one basis, prior to effectiveness of this prospectus

              Our principal executive offices are located at 7927 Jones Branch Drive, Suite 3125, Tysons Corner, Virginia 22102, and our telephone number is (703) 992-9260.
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Available Information

              Our principal Internet address is www.spherix.com.  We make available free of charge on www.spherix.com our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Industry

BUSINESS

Overview And Market Opportunity


Under U.S. law an inventor or patent owner has the right to exclude others from making, selling or using their patented invention. Unfortunately, in the majority of cases, infringers are generally unwilling, at least initially, to negotiate or pay reasonable royalties for their unauthorized use of third-party patents and will typically fight any allegations of patent infringement. Inventors and/or patent holders, without sufficient legal, financial and/or expert technical resources to bring and continue the pursuit of legal action, may lack credibility in dealing with potential licensees and as a result, are often ignored. As a result of the reluctance of patent infringers to negotiate and ultimately take a patent license for the use of third-party patented technologies, patent licensing and enforcement often begins with the filing of patent enforcement litigation. However, the majority of patent infringement contentions settle out of court based on the strength of the patent claims, validity, and persuasive evidence and clarity that the patent is being infringed.

Due to the relative infancy of the IP monetization industry, we believe that the absolute size of our market opportunity is very significant but difficult to quantify.

Our Business Model

We are a patent commercialization company that realizes revenuefocused on generating revenues from the monetization of intellectual property, or IP.  Such monetization includes, but is not limited to, acquiring IP from patent holders in order to maximize the value of the patent holdings by conducting and managing a licensing campaign.campaign, or through the settlement and litigation of patents.  We intend to generate revenues and related cash flows from the granting of intellectual property rights for the use of patented technologies that we own, or that we manage for others.

others, or that others manage on our behalf by agreement. To date, we have generated minimal revenues and no assurance can be provided that our business model will be successful.

We continually work to enhance our portfolio of intellectual property through acquisition and strategic partnerships. Our mission is to partner with inventors, or other entities, who own undervalued intellectual property. We then work with the inventors or other entities to commercialize the IP. Currently, we own over 230 patents.    

Our Products Andand Services

We acquire IP from patent holders in order to maximize the value of their patent holdings by conducting and managing a licensing campaign. Some patent holders tend to have limited internal resources and/or expertise to effectively address the unauthorized use of their patented technologies or they simply make the strategic business decision to outsource their intellectual property licensing. They can include individual inventors, large corporations, universities, research laboratories and hospitals. Typically, we, or an operating subsidiary, acquiresacquire a patent portfolio in exchange for a combinationsecurities of the Company, an upfront cash payment, a percentage of our operating subsidiary'ssubsidiary’s net recoveries from the licensing and enforcement of the portfolio, or a combination of the two.

foregoing.

On June 30, 2017, we acquired 6,800,000 shares of Hoth Therapeutics, Inc. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for the treatment of eczema.

Competition

We expect to encounter significant competition from others seeking to acquire interests in intellectual property assets and monetize such assets. This includes an increase in the number of competitors seeking to acquire the same or similar patents and technologies that we may seek to acquire.  Most of our competitors have much longer operating histories, and significantly greater financial and human resources, than we do. Entities such as Vringo, Inc. (NYSE MKT: VRNG), VirnetX Holding CorpCorp. (NYSE MKT: VHC), Acacia Research Corporation (NASDAQ: ACTG), RPX Corporation (NASDAQ: RPXC), Marathon Patent Group, Inc. (NASDAQ: MARA) and others presently market themselves as being in the business of creating, acquiring, licensing or leveraging the value of intellectual property assets. We expect others to enter the market as the true value of intellectual property is increasingly recognized and validated. In addition, competitors may seek to acquire the same or similar patents and technologies that we may seek to acquire, making it more difficult for us to realize the value of its assets.

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We also compete with venture capital firms, strategic corporate buyers and various industry leaders for technology acquisitions and licensing opportunities.  Many of these competitors may have more financial and human resources than we do.  As we become more successful, we may find more companies entering the market for similar technology opportunities, which may reduce our market share in one or more technology industries that we currently rely upon to generate future revenue.

Other companies may develop competing technologies that offer better or less expensive alternatives to our patented technologies that we may acquire and/or out-license.  Many potential competitors may have significantly greater resources than we do.  Technological advances or entirely different approaches developed by one or more of our competitors could render certain of the technologies owned or controlled by our operating subsidiaries obsolete and/or uneconomical.

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Intellectual Property and Patent Rights


Our intellectual property is primarily comprised of trade secrets, patented know-how, issued and pending patents, copyrights and technological innovation.


We have a

The portfolio we are working with Equitable to monetize pursuant to the Monetization Agreement is currently comprised of 229over 290 patents and patent applications (the “Portfolio”).  The Portfolio includes both U.S. patents, 2and foreign patents and 5 openpending patent applications in the wireless communications and telecommunication sectors including data, optical and voice technology, antenna technology, Wi-Fi, base station functionality, and cellular.  We also own patents related to artificial sweetener and prescription refill technology. 


Most of ourthe patents in the Portfolio are publicly accessible on the Internet website of the U.S. Patent and Trademark Office at www.uspto.gov.


www.uspto.gov.

The lives of ourthe patent rights in the Portfolio have a wide duration.  Certain patents have already expired andduration ranging from 2017 to 2026. 

On June 30, 2017, the latest patents do not expire until 2026.

Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”), for the purchase of 6,800,000 shares of common stock of Hoth. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for the treatment of eczema.

Patent Enforcement Litigation


We, Equitable or its subsidiaries may often be required to engage in litigation to enforce our patents andthe patent rights. We are, or may become a party to ongoingrights associated with the Portfolio. Such patent enforcement related litigation allegingtypically involves allegations of infringement by third parties of certain of the patented technologies owned or controlled by us.


Research and Development

We have not expended funds for research and development costs since inception.

claimed in the Portfolio. 

Employees


As of December 9, 2013,March 31, 2017, we had 2have four full-time employee and no part-time employees.   We believe our employee relations to be good.employees, none of which are represented by a labor union or covered by a collective bargaining agreement.  

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Property

The Company’s offices are

PROPERTIES

Our main office is located in Tysons Corner, VirginiaNew York, New York where we lease one office under a lease that expires in July 2018 with a monthly payment of $3,149 for one office. We lease a space in Williamsburg, VA for $1,500 a month. We also lease office space in Longview, Texas under a renewable lease with monthly payments of $1,958; and Bethesda, Maryland, where it leases 837under a lease with monthly payments of $15,107 that expires in March 2018. We believe that the New York, Maryland, Virginia and 5,000 square feet of office space under leases that expire on August 31, 2014 and March 31, 2018, respectively. The Company’s monthly lease payment for the Virginia rental is $1,883.25 per month and $13,402.62 per month for the Maryland rental.  The Company’s subsidiary, Nuta Technology Corp., is located in the Tysons Corner, Virginia office.  The capacity of the Tysons Corner and BethesdaTexas facilities are adequate for the Company’s currentsufficient to meet our needs.  The Company also leases office space in New York, NY on a month-to-month basis at a monthly rate of $6,000.

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Legal Proceedings

LEGAL PROCEEDINGS

In the ordinary course of business, we actively pursue legal remedies to enforce our intellectual property rights and to stop unauthorized use of the technology in our technology.patent portfolio. Other than ordinary routine litigation incidental to the business and other than as set forth below, we know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.


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except for those described below.

Spherix Incorporated v. ElizabetheanUniden Corporation et al., Case No. 3:13-cv-03496-M, in the United States District Court Associates III Limited Partnership

for the Northern District of Texas

On August 30, 2013, we initiated litigation against Uniden Corporation and Uniden America Corporation (collectively “Uniden”) in Spherix Incorporated v. Uniden Corporation et al , Case No. 3:13-cv-03496-M, in the United States District Court for the Northern District of Texas (“the Court”) for infringement of U.S. Patent Nos. 5,581,599; 5,752,195; 6,614,899; and 6,965,614 (collectively, the “Asserted Patents”). The Companycomplaint alleges that Uniden has commencedmanufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. We seek relief in the form of a lawsuit against the landlordfinding of infringement of the Bethesda, Maryland office claiming that the assignmentAsserted Patents, an accounting of the lease to the purchaser of the Spherix Consulting business was permitted under the lease and seeking termination of the leaseall damages sustained by us as a result of Uniden’s infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorney’s fees and costs. On June 3, 2014, in an effort to narrow the landlord's failurecase, the parties filed a stipulation dismissing without prejudice all claims and counterclaims related to consentU.S. Patent No. 5,752,195. On September 4, 2014, Uniden America Corporation, together with VTech Communications, Inc., filed a request for inter partes review (“IPR”) of U.S. Patent No. 5,581,599 (the “‘599 Patent”) and 6,614,899 (the “‘899 Patent”) in the United States Patent and Trademark Office. On March 3, 2015, the U.S. Patent Trial and Appeal Board “PTAB”) entered decisions instituting, on limited grounds, IPR proceedings regarding a portion of the claims for the two Spherix patents. On March 19, 2015, the Court issued its Markman order, construing a total of 13 claim terms that had been disputed by the parties. On April 2, 2015, we filed an Amended Complaint with Jury Demand and the parties filed a Settlement Conference Report informing the Court that the parties have not yet resumed settlement negotiations.  On September 10, 2015, the Court stayed the case and ordered the parties to such assignment.file a status report within 10 days of the Patent Office issuing its decision in the IPR proceedings. On October 13, 2015, the Court ordered the case administratively closed until the PTAB issued its final written decisions. On February 3, 2016, the PTAB issued its final decisions in the IPR proceedings, finding invalid eight of the 15 asserted claims of U.S. Patent No. 5,581,599 the 599 Patent and all asserted claims of the ‘899 patent. Our deadline to file a Notice of Appeal of the PTAB’s decision to the United States Court of Appeals for the Federal Circuit was set for April 6, 2016. On February 29, 2016, at the parties’ joint request, the Court ordered that the stay of the case remain in effect for 30 days so the parties may work to resolve the case without further Court intervention.The parties timely filed a Joint Status Report on March 31, 2016, in which we requested that the stay remain in effect pending the Federal Circuit issuing a ruling in connection with the appeal of IPR2014-01431 relating to the ‘599 Patent. On April 1, 2016, we filed our Patent Owner’s Notice of Appeal in IPR2014-01431. On April 11, 2016, the Court granted the parties’ motion to continue the stay.  On January 12, 2017, we settled the case with Uniden and Uniden took a license under the Asserted Patents. The lawsuit,appeal to the Federal Circuit continues with the Patent Office as an adverse party.

International License Exchange of America, LLC v. Fairpoint Communications, Inc., Case No. 1:16-cv-00305-RGA, in the United States District Court for the District of Delaware

On April 26, 2016, we initiated litigation against Fairpoint Communications, Inc. in Spherix Incorporated v. Elizabethean Court Associates III Limited Partnership ("Elizabethean")Fairpoint Communications, Inc., Case No., 377142 1:16-cv-00305-RGA, in the United States District Court for the District of Delaware (the “Court”) for infringement of U.S. Patent No. RE40,999 (the “999 Patent”). In the Complaint, we sought relief in the form of a finding of infringement of the ‘999 Patent, damages sufficient to compensate us for Fairpoint’s infringement together with pre-and post-judgment interest and costs, a declaration that the case is currently in discovery,exceptional under 35 U.S.C. § 285, and the parties are followingCompany’s attorney’s fees. On October 13, 2016, Fairpoint filed its answer with no counterclaims. On November 16, 2016, International License Exchange of America, LLC, a wholly-owned subsidiary of Equitable (“ILEA”), filed a motion to substitute itself as the court imposed scheduling order, however, Elizabetheanplaintiff, consistent with our Monetization Agreement with Equitable. On November 17, 2016, the Court granted ILEA’s motion. On June 22, 2017, the Court entered a Scheduling Order setting the Markman hearing for August 22, 2018 and jury trial for October 28, 2019.

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International License Exchange of America, LLC Litigations

Under our Monetization Agreement with Equitable, ILEA has filed the patent infringement litigations listed below.

·On August 12, 2016, litigation against Cincinnati Bell, Inc., case number 1:16-cv-00715-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of U.S. Patent No. RE40,999 (“the ‘999 patent”), U.S. Patent No. 6,970,461, and U.S. Patent No. 7,478,167. On March 8, 2017, Cincinnati Bell filed a motion to dismiss, alleging lack of personal jurisdiction and improper venue. On March 29, 2017, the parties filed a joint motion to stay all deadlines until April 29, 2017, stating that the parties have reached an agreement in principal to resolve all claims asserted in the case. On April 3, 2017, the court granted the parties’ motion to stay all deadlines until April 29, 2017. On May 5, 2017, the Court ordered the parties to file a joint status report by three days from the date of the order. On May 5, 2017, the parties filed a joint stipulation of dismissal and the Court terminated the case.
·On August 12, 2016, litigation against Frontier Communications Corporation, case number 1:16-cv-00714-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On May 16, 2017, ILEA filed an agreed motion to stay all deadlines in the case, stating that the parties had reached an agreement in principal in the case and needed time to finalize the written agreement. On May 19, 2017, the Court granted the motion and stayed all deadlines until June 19, 2017.On June 19, 2017, ILEA filed a notice of voluntary dismissal and the Court terminated the case.
·On August 12, 2016, litigation against Echostar Corporation, case number 1:16-cv-00716-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On April 17, 2017, ILEA filed a notice of voluntary dismissal of the case, and on April 18, 2017, the Court closed the case.
·On August 15, 2016, litigation against ATN International, Inc. Commnet Wireless, LLC Choice Communications LLC, and Choice Communications, LLC (“Choice Wireless”), case number: 1:16-cv-00718-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On April 12, 2017, the parties jointly dismissed the case by filing a stipulation dismissing the case with prejudice.
·On August 15, 2016, litigation against Sprint Corporation and Clearwire Corporation case number 1:16-cv-00719-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On May 1, 2017, ILEA filed a notice of voluntary dismissal of the case, and the court closed the case on May 2, 2017.
·On August 16, 2016, litigation against ViaSat, Inc., case number 1:16-cv-00720-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On March 7, 2017, ViaSat filed a motion to dismiss, alleging failure to state a plausible claim of patent infringement. On March 21, 2017, ILEA filed its brief in opposition to the motion to dismiss. On March 28, 2017, ViaSat filed its reply brief on the motion to dismiss. On May 19, 2017, the Court issued an order granting ViaSat’s motion to dismiss, but granted ILEA leave to amend the complaint no later than three weeks from the date of the order. On May 30, 2017, ILEA filed its amended complaint. The due date for ViaSat’s response is currently July 13, 2017.
·On September 9, 2016, litigation against Fortinet Inc., case number 1:16-cv-00795-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On March 7, 2017, Fortinet filed its answer to the Complaint. On June 14, 2017, the Court ordered the parties to file a status report within three days of the order. On June 16, 2017, the parties filed the joint status report stating that the parties have executed a written settlement agreement resolving the case.
·On September 9, 2016, litigation against GTT Communications, Inc., case number 1:16-cv-00796-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent. On May 19, 2017, the parties filed a motion to extend time to answer the complaint until June 5, 2017. On May, 22, 2017, the Court granted the motion.
·On November 22, 2016, litigation against Alcatel-Lucent SA and Alcatel-Lucent USA Inc., case number 1:16-cv-01077-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent and U.S. Patent Nos. 7,158,515; 6,222,848; 6,578,086; and 6,697,325. On March 28, 2017, ILEA filed a notice of voluntary dismissal of the case and on that date the court closed the case.
·On May 4, 2017, litigation againstNTT Communications ICT Solutions Pty Ltd., NTT America, Inc., and NTT Security (US) Inc., case number 1:17-cv-00508-UNA, in theU.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent and U.S. Patent No. 5,959,990
·On May 15, 2017, litigation against ADTRAN, Inc. case number 1:17-cv-00562-RGA, in the U.S. District Court for the District of Delaware, related to alleged infringement of the ‘999 patent and U.S. Patent Nos. 5,959,990; 6.970,461; 7,478,167; 7,274,704; and 7,277,533.

In July 2016, a Motion for Summary Judgmentlawsuit relating to the ‘999 Patent was dismissed in anticipation of settlement with the counterparty. In May 2017, settlement was reached, pursuant to which the Company has opposed.

LegalLink, Inc. v. Spherix Incorporated
    On October 7, 2013,counterparty granted to Equitable the right to monetize a portfolio of 112 patents (the “Settlement Patents”). Pursuant to the Company’s Monetization Agreement with Equitable, the Company received noticeis entitled to receive a portion of a complaintthe net revenue generated by Equitable’s monetization of the Settlement Patents.

Counterclaims 

In the ordinary course of business, we, or with our wholly-owned subsidiaries or monetization partners, will initiate litigation against parties whom we believe have infringed on our intellectual property rights and technologies. The initiation of such litigation exposes us to potential counterclaims initiated by the defendants. Currently, there are no counterclaims pending against us. In the event such counterclaims are filed, in the Circuit Court of Montgomery County, Maryland, Case No.: 382667-V, in the matter of LegalLink Inc. vs. Spherix Incorporated. LegalLink, Inc., a Merrill Communications Company allegeswe can provide no assurance that the Company failed to honor their contract regarding services provided by LegalLink, Inc. LegalLink, Inc. alleges that the Company owes them $47,309 for services rendered to the Company, thatoutcome of these claims will not have gone unpaid. The Company's legal counsel is reviewing this lawsuita material adverse effect on our financial position and the time to file a responsive pleading has not yet occurred.results from operations.

44

MANAGEMENT


Directors

The following table sets forth information concerningthe name, age and position of each current director of the Company.

      Director
Name Age Position Since
Robert J. Vander Zanden (1)(2)(3) 71 Director and Chairman of the Board 2004
Anthony Hayes 49 

Chief Executive Officer, Director, and Principal Accounting and Financial Officer

 2013
Tim S. Ledwick (1)(2) 59 Director 2015
Eric Weisblum (1)(2)(3) 47 Director 2016

(1) Member of our Management and BoardAudit Committee.

(2) Member of Directors.

      Director 
Name Age Position Since 
Robert J. Vander Zanden 67 Chairman of the Board  2004 
Anthony Hayes 45 Chief Executive Officer and Director  2013 
Michael Pollack 47 Interim Chief Financial Officer  2013 
Douglas T. Brown 59 Director  2004 
Edward M. Karr 43 Director  2012 
Harvey J. Kesner 56 Director  2012 
Alexander Poltorak  56 Director  2013 

our Compensation Committee.

(3) Member of our Nominating Committee.

The biographies of our current directors are as follows:

Dr. Robert J. Vander Zanden


Dr. Robert J. Vander Zanden, a Board member since 2004, having served as a Vice President of R&D withat Kraft Foods International, brings a long and distinguished career in applied technology, product commercialization, and business knowledge of the food science industry to us. Additionally, Mr. Vander Zanden has specific experience in developing organizations designed to deliver against corporate objectives. Dr. Vander Zanden holds a Ph.D. in Food Science and an M.S. in Inorganic Chemistry from Kansas State University, and a B.S. in Chemistry from the University of Wisconsin - Platteville, where he was named a Distinguished Alumnus in 2002. In his 30-year career, he has been with ITT Continental Baking Company as a Product Development Scientist; with Ralston Purina’s Protein Technology Division as Manager Dietary Foods R&D; with Keebler as Group Director, Product and Process Development (with responsibility for all corporate R&D and quality); with Group Gamesa, a Frito-Lay Company, as Vice President, Technology; and with Nabisco as Vice President of R&D for their International Division. With the acquisition of Nabisco by Kraft Foods, he became the Vice President of R&D for Kraft’s Latin American Division. Dr. Vander Zanden retired from Kraft Foods in 2004. He currently holds the title of Adjunct Professor and Lecturer in the Department of Food, Nutrition and Packaging Sciences at Clemson University, where he also is a member of their Industry Advisory Board. His focus on achieving product and process innovation through training, team building and creating positive working environments has resulted in his being recognized with many awards for product and packaging innovation. Dr. Vander Zanden is not now, nor has he been for the past five years, a director of a public, for-profit company other than us.  Mr. Vander Zanden executive experience provides him with valuable business expertise, which the Board believes qualifies him to serve as a director of the Company.

Anthony Hayes


Mr. Anthony Hayes, a director and Chief Executive Officer since 2013, has served as the Chief Executive Officer of North South since March 2013 and since June 2013, has served as a consultant to theour Company. Mr. Hayes was the fund manager of JaNSOME IP Management LLC and JaNSOME Patent Fund LP from August 2012 to August 2013, both of which he co-founded. Mr. Hayes was the founder and Managing Member of Atwater Partners of Texas LLC from March 2010 to August 2012 and a partner at Nelson Mullins Riley & Scarborough LLP from May 1999 to March 2010. Mr. Hayes received his Juris Doctorate from Tulane University School of Law and his B.A. in Economicseconomics from Mary Washington College. The Board believes Mr. Hayes was chosenis qualified to beserve as a director of the Company based on his expansive knowledge of, and experience in, the patent monetization sector.sector, as well as because of his intimate knowledge of the Company through his service as Chief Executive Officer. On March 10, 2017, as a result of Mr. Frank Reiner’s resignation as Chief Financial Officer, Mr. Hayes began serving as the Company’s Principal Accounting Officer.

45

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Tim S. Ledwick

Mr. Michael Pollack


Michael Pollack, 47,Tim S. Ledwick, who joined as a director in 2015, is currently the Chief Financial Officer of Management Health Solutions, a private equity-backed company that provides software solutions and services to hospitals focused on reducing costs through superior inventory management practices. In addition, since 2012 he has beenserved on the board and as Chair of the Audit Committee of Telkonet, Inc. (TKOI) a partner of KBL LLP,smart energy management technology company. From 2007 to 2011, Mr. Ledwick provided CFO consulting services to AdvantageResourcing (former Advantage Human Resourcing, Inc.) a certified public accounting and business advisory$150 million services firm since 2005 and, has over twenty yearsin addition, from 2007-2008 also acted as special advisor to The Dellacorte Group, a middle market financial advisory firm focused on transactions between $100 million and $1 billion. From 2002 through 2006, Tim was a member of experiencethe Board of Directors and Executive Vice President-CFO of Dictaphone Corporation playing a lead role in developing a business plan which revitalized the company, resulting in the successful sale of the firm and delivering a seven times return to shareholders. From 2001-2002, Mr. Ledwick was brought on as CFO to lead the restructuring efforts of Lernout & Hauspie Speech Products, a Belgium-based NASDAQ listed speech technology company, whose market cap had at one point reached a high of $9 billion. From 1999 through 2001, he was CFO of Cross Media Marketing Corp, an $80 million public accountingcompany headquartered in New York City, playing a lead role in the firm`s acquisition activity, tax analysis and consulting to over 100 publicly traded and 250 private companies.capital raising. Mr. Pollack graduated from the University of Maryland with a Bachelors of Arts in Economics. Mr. PollackLedwick is a member of the American InstituteConnecticut Society of Certified Public Accountants as well as licensed to practiceand received his B.B.A. in New Jersey and New York.  Mr. Pollack has never served as a director of a publicly traded company.

Douglas T. Brown

Mr. Douglas T. Brown, a Board Member since 2004, brings to the Board a broad understanding of financial statements, financial markets, and other business aspects.  He is currently Senior Vice President and Manager of the Corporate Banking Government Contracting Group for PNC Bank N.A.,accounting from The George Washington DC.  Mr. Brown has been with PNC and its predecessor bank, Riggs Bank, since 2001 and previously worked for Bank of America, N.A. and its predecessor banks for 16 years as a Loan Officer, as well as a manager of Loan Officers in the Mid-Atlantic region.  Subsequent to 1990, the majority of Mr. Brown’s customers are companies that provided services to the Federal Government and State governments.  Mr. Brown holds a B.A. degree in Political Science from American University and a graduate degreehis M.S. in Finance from Fairfield University. The Stonier Graduate School of Banking at the University of Delaware.  He is not now, nor has he been for the past five years, a director of a public, for-profit company other than us.  Mr. Brown’s executive corporate finance experience provides him with valuable expertise which the Board believes that Mr. Ledwick’s executive experience and financial expertise qualifies him to serve as a director of the Company
Edward M. Karr

Company.

 Eric Weisblum

Mr. Edward M. Karr, a Board member since November 2012, is the founder of RAMPartners SA, an investment management and investment banking firm based in Geneva, Switzerland.  Since 2005, RAMPartners has helped raise more than $200 million for small capitalization companies in fields such as natural resources, high technology, health care, and clean energy.  RAMPartners is a member of Global Alliance Partners (GAP), a network organization of internationally minded financial partners focusing on the capital midmarket.  Prior to founding RAMPartners, Mr. Karr managed a private Swiss asset management, investment banking, and trading firm based in Geneva for six years.  At the firm, he was responsible for all of the capital market transactions, investment, and marketing activities.  In 2004, Futures Magazine named Mr. Karr as one of the world’s Top Traders.  He is a past contributor to CNBC and has been quoted in numerous financial publications.  Mr. Karr’s extensive capital markets experience provides him with valuable expertise which the Board believes qualifies him to serveEric Weisblum, who joined as a director ofin 2016, iscurrently the Company.


Harvey J. Kesner

Mr. Harvey J. Kesner, a Board member since November 2012, and from February 2013 through September 2013 served as interim Chief Executive Officer.  Mr. Kesner is a practicing attorney in New York, New York where he concentrates his practice on corporate finance and securities law. Mr. Kesner graduated from the State University of New York, Binghamton, New York with a B.S. in Management Science, and holds a J.D. and M.B.A., Finance, from the American University, Washington, D.C.  Mr. Kesner was Executive Vice President and General Counsel of American Banknote Corporation until 1990Officer and a director of Zvue,Point Capital Inc. (OTC:PTCI), where he has been employed since 2013 and prior to that was President of Sableridge Capital for five years. In addition to being an active investor in both public and private companies, Mr. KesnerWeisblum provides managerial assistance and guidance to help companies execute on their business strategy. Mr. Weisblum has served asreviewed, invested and worked with numerous public and private companies, and he has overseen the execution of M&A strategy in the micro-cap and small cap markets.  Mr. Weisblum also co-founded Whalehaven, a director of WPCS International Incorporated (NASDAQ: WPCS), a design-build engineering companyhedge fund that focuses on the implementation requirements of communications infrastructure, since September 2013.  Mr. Kesner was appointed as a director of the Company based on his broad knowledge ofhas invested in over 100 public companies and corporate finance.
Alexander Poltorak
Mr. Poltorak, a Board member since October 2013, has been the Chairman and Chief Executive Officer of General Patent Corp., an intellectual property management firm focusing on IP strategy and valuation, patent licensing, enforcement and brokerage since 1989 and the Managing Director of IP Holdings LLC, an affiliate of General Patent Corp, since 2000.to date. Prior to founding General Patent Corp.,Whalehaven, Mr. Poltorak served as the President and Chief Executive Officer of Rapitech Systems,Weisblum was employed by M.H. Meyerson & Co. Inc., a publicly-traded computer technology company, was an Assistant Professorfull-service financial and investment-banking firm, with individual and institutional accounts. At M.H. Meyerson, Mr. Weisblum traded equities on behalf of Physics at Touro Collegenumerous established funds, and Assistant Professororiginated, structured, and placed structured financing transactions. As a result, Mr. Weisblum brings with him nearly 20 years of Biomathematics at Cornellexperience in structuring and trading financial instruments. Mr. Weisblum holds a B.A. from the University Medical College.  He served as an Adjunct Professor of Law at the Globe Institute for Technology and was a guest-lecturer on Intellectual Property Law and Economics at the Columbia UniversityHartford’s Barney School of Engineering and Columbia Business School.  Mr. Poltorak served on the advisory boardBusiness.

Executive Officers

The names of Patent Strategy & Management.  He is the Founder and President of non-for-profit American Innovators for Patent Reform (AIPR).  He was US Co-chair of the subcommittee on Information Exchange of the US-USSR Trade and Economic Counsel. Mr. Poltorak was chosen to be a director of the Company based on his expansive knowledge of, and experience in, the management of intellectual property, particularly patents.

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Directorships
Except as otherwise reported above, none of our directors held directorships in other reporting companies and registered investment companies at any time during the past five years.
Family Relationships
There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was ortheir ages, positions, and biographies as of March 31, 2017 are set forth below. Mr. Hayes’ background is to be selected as a director or officer.
Involvement in Certain Legal Proceedings
To our knowledge, duringdiscussed above under the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has been:
section “Directors.”

·convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
·found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.
·the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
There are no material proceedings to which any director, officer, or affiliate of the Company is a party adverse to the Company or has a material interest adverse to the Company.
Board Responsibilities and Structure
The Board oversees, counsels, and directs management in the long-term interest of Company and its stockholders.  The Board’s responsibilities include establishing broad corporate policies and reviewing the overall performance of Company.  The Board is not, however, involved in the operating details on a day-to-day basis.
Board Committees and Charters
The following table identifies the independent and non-independent current Board and Committee members:
Name IndependentAge AuditCompensationNominating
 Robert Vander Zanden[X][X][X][X]
Douglas T. Brown[X][X][X][X]
Edward M. Karr[X][X][X][X]
Harvey J. Kesner[X]Position
Anthony Hayes 49 

Chief Executive Officer, Director & Principal Accounting and Financial Officer

 
Alexander Poltorak [X]46 

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Meetings of the Board of Directors and Committees

During the fiscal year ended December 31, 2016, our Board held a total of 18 regularly scheduled and special meetings, the Audit Committee held 3 meetings and the Compensation Committee held 5 meetings. The Nominating Committee held 2 meetings during 2016.  None of our incumbent directors attended less than 100% of the Board or committee meetings.

Policy Regarding Attendance at Annual Meetings of Stockholders

Our Company does not have a policy with regard to Board members’ attendance at annual meetings. All of our directors attended our last annual meeting of stockholders.

Code of Ethics

We have adopted a Code of Ethics, which is available on our website atwww.spherix.com.

Audit Committee

We have a standing Audit Committee. The Audit Committee members are Mr. Brown, Chair; Mr. Karr, andLedwick, Chair, Dr. Vander Zanden. Mr. Kesner served as a member of the Audit Committee until February 27, 2013 when he was appointed interim Chief Executive Officer of the Company.Zanden and Eric Weisblum. The Committee has authority to review theour financial records, of the Company, deal with itsour independent auditors, recommend financial reporting policies to the Board, policies with respect to financial reporting, and investigate all aspects of the Company’sour business. The Audit Committee Charter is available for your review on the Company’sour website at www.spherix.com. Each member of the Audit Committee satisfies the independence requirements and other criteria established criteria of theby NASDAQ and the SEC.SEC applicable to audit committee members. The Board of Directors has determined that Mr. Brown and Mr. Karr meetLedwick meets the requirements of an audit committee financial expert as defined in the SEC and NASDAQ rules.

Compensation Committee

The Compensation Committee oversees the Company’scompensation for our executive compensationofficers and recommends various incentives for key employees to encourage and reward increased corporate financial performance, productivity and innovation. Its current members are Mr.  Karr, Chair, Mr. Brown and Dr. Vander Zanden.Zanden, Mr. Weisblum (Chairman), and Mr. Ledwick. The Compensation Committee Charter is available on the Company’sour website at www.spherix.com.

www.spherix.com.

Nominating Committee

The Nominating Committee presents and recommends to the Board, for adoptionapproval by the Board, the proposed Board of Directors for election by the stockholders. Its members are Mr. Karr, Chair, Mr. Brown, Mr. Kesner,Weisblum and Dr.Vander Zanden.Dr. Vander Zanden (Chairman). The Nominating Committee Charter is available on the Company’sour website at www.spherix.com. The Nominating Committee does not have any formal minimum qualifications for director candidates. The Nominating Committee identifies candidates by first evaluating current members of the Board who are willing to continue in service. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Nominating Committee then identifies the desired skills and experience of a new candidate(s).

Among other factors, when considering a prospective candidate, the Nominating Committee considers a candidate’s business experience and skills, attributes pertinent to Company business, personal integrity and judgment, and possible conflicts of interest. To date, the Nominating Committee has not utilized the services of any search firm to assist it in identifying director candidates. The Nominating Committee’s policy is to consider director candidate recommendations from its stockholders which are received prior to any annual meeting of stockholders, including confirmation of the candidate’s consent to serve as a director.

47

 Director Independence
Our

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and anyone who beneficially owns ten percent (10%) or more of our common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of common stock. Anyone required to file such reports also need to provide us with copies of all Section 16(a) forms they file.

Based solely upon a review of (i) copies of the Section 16(a) filings received during or with respect to 2016 and (ii) certain written representations of our officers and directors, we believe that all filings required to be made pursuant to Section 16(a) of the Exchange Act during and with respect to 2016 were filed in a timely manner, with the exception of a Form 3 to be filed by Mr. Weisblum in August 2016, in connection with his appointment to the Board of Directors has determined thatDirectors. Mr. Weisblum filed a majority of the Board consists of members who are currently “independent” as that term is defined under current listing standards of NASDAQ. The Board of Directors considers Messrs. Karr, Vander Zanden, Brown and PoltorakForm 5 on February 9, 2017 to be “independent” as defined by the applicable rules of The NASDAQ Stock Market LLC.report such deficiency.

48

Code of Ethics
       The Company has adopted a Code of Ethics, which is available on the Company’s website at www.spherix.com.

-25-

EXECUTIVE AND DIRECTOR COMPENSATION


The following Summary of Compensation table sets forth the compensation paid by theour Company during the two years ended December 31, 2011 and December 31, 2012,2016, to all Executive Officersexecutive officers earning in excess of $100,000 during any such years.


year.

Summary of Compensation

Name and Principal Position Year 
Salary
($)
  
Bonus
($)
  
Stock
Award
($)
  
Option
Award
($) (1)
  
Non-Equity
Incentive
Plan
Compensation
($) (2)
  
Change in
Pension
Value
and Non-
Qualified
Deferred
Compensation
Earnings ($)
  
All Other
Compen-
sation
($) (3)
  Total ($) 
C. Kruger (3)
Former CEO and COO
 2012  262,573   -   -   3,919   143,222   -   286,443   696,157 
 2011  278,100   -   -   531   139,050   -   -   417,681 
                                  
R. Lodder
Principal Executive Officer and President (4)
 2012  233,398   -   -   2,138   93,359   -   -   328,895 
 2011  226,600   -   -   273   90,640   -   -   317,513 
                                  
R. Clayton
CFO, Treasurer and Corporate Secretary (5)
 2012  212,180   -   -   2,138   74,263   -   -   288,581 
 2011  206,000   -   -   273   72,100   -   -   278,373 

           Stock   Option  Non-Equity
Incentive
Plan
  Change in
Pension
Value and Non-
Qualified
Deferred
  All Other    
Name and Principal Position Year Salary
($)
  Bonus
($)
  Awards
($)
  Awards
($)
  Compensation
($)(1)
  Compensation
Earnings ($)
  Compensation
($)
  Total
($)
 
Anthony Hayes, President, Chief 2016  350,000   225,000   -   6,222   -   -   -   581,222 
Executive Officer and Director (1) 2015  350,000   350,000   -   -   -   -   -   700,000 
Frank Reiner, Interim Chief 2016  271,000   40,000   60,000   -   -   -   -   371,000 
Financial Officer (3) 2015  254,500   80,000   60,000   -   -   -   -   394,500 
Richard Cohen, 2016  -   -   -   -   -   -   -   - 
Chief Financial Officer (5) 2015  120,000   -   -   -   -   -   -   120,000 

(1)  On November 15, 2011, C. Kruger, R. Lodder and R. Clayton were granted stock options for 500, 250, and 250 shares, respectively.  On February 17, 2006, R. Clayton was granted stock options for 100 shares.  Information regarding forfeiture and assumptions made in the valuation are disclosed in Note 10 of the consolidated financial statements included herein.
(2)  (1)Awards pursuant to the Spherix Incorporated 2013 Incentive Compensation Plan and 2014 Incentive Compensation Plan.

(3)  
(4)
(5)
(2)On January 28, 2014, the Compensation Committee adopted a resolution intended to grant Mr. Hayes options to purchase 15,789 shares of common stock options with a term of five years and an exercise price of $110.77, subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. Such options were issued to Mr. Hayes on January 28, 2014. On April 3, 2014 the Compensation Committee adopted a resolution intended to grant Mr. Hayes options to purchase 26,316 shares of common stock options with a term of five years and an exercise price of $54.34 subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. Such options were issued to Mr. Hayes on April 3, 2014. On July 15, 2014 the Compensation Committee adopted a resolution intended to grant Mr. Hayes options to purchase 5,263 shares of common stock options with a term of five years and an exercise price of $34.01 subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. Such options were issued to Mr. Hayes on July 15 2014. On December 16, 2015 the Compensation Committee adopted a resolution to award Mr. Hayes his 2015 target bonus in the amount of $350,000 which was paid on January 13, 2016. On May 3, 2016 the Compensation Committee adopted a resolution to grant Mr. Hayes options to purchase 3,947 shares of common stock options with a term of ten years and an exercise price of $1.98 subject to certain vesting conditions upon agreement of the Compensation Committee and Mr. Hayes. Such options were issued to Mr. Hayes on May 24, 2016. Amount of 2016 bonus is $225,000.

(3)All stock options to Mr. Reiner were granted in accordance with ASC Topic 718. On December 22, 2015, the Compensation Committee adopted a resolution to pay Mr. Reiner a 2015 bonus of $40,000 in cash and $60,000 in shares of common stock in respect of his performance for the 2015 fiscal year which, as of the close of trading on December 21, 2015, would have constituted a total of 21,053 shares. The Compensation Committee also adopted to pay Mr. Reiner a deferred 2014 bonus of $20,000 in cash and $20,000 in cash in lieu of common stock for achieving the target in respective employment agreement. On December 8, 2016, the members of the Compensation Committee adopted a resolution to pay Mr. Reiner a bonus of $40,000 in cash and $60,000 in shares of common stock in respect of his performance for the 2016 fiscal year, which as of the close of trading on December 8, 2016, would have constituted a total of 48,781 shares.

Dr. Kruger
49

(4)Mr. Cohen resigned her position fromas a member of Chord and, simultaneously, as a member of our Board on June 30, 2015, and our monthly fee payable to Chord was further reduced to $10,000 per month. Mr. Cohen’s involvement with the Company ceased on December 3, 2012, following the sale of the Spherix Consulting subsidiary.  Under the terms of Dr. Kruger’s Severance Agreement,June 30, 2015, as did any further compensation paid by the Company paid Dr. Kruger $286,443 in December 2012.
to Mr. Lodder resigned as President of the Company in February 2013.
Mr. Clayton resigned as Chief Financial Officer, Treasurer and Corporate Secretary in March 2013
Cohen.

Outstanding Equity Awards at December 31, 2012

  Option Awards Stock Awards 
            Number  Market 
  Number of  Number of      of Shares  Value of 
  Securities  Securities      or Units  Shares or 
  Underlying  Underlying      of Stock  Units of 
  Unexercised  Unexercised  Option  Option that have  Stock that 
  Options (#)  Options (#)  Exercise  Expiration not Vested  have not 
 Name Exercisable  Unexercisable  Price ($)  Date  (#)  Vested ($) 
 R. Lodder  63   187  $40.00 11/14/2016  1,000   6,830 
 R. Clayton  63   187  $40.00 11/14/2016  1,000   6,830 

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2016

  Option Awards 
  Number of Securities  Number of Securities      
  Underlying Unexercised  Underlying Unexercised  Option Exercise  Option Expiration
Name Options (#) Exercisable  Options (#) Unexercisable  Price ($)  Date
Anthony Hayes  39,472   -  $134.52  4/1/2023
   13,158   -  $54.34  4/3/2019
   5,263   -  $34.01  7/15/2019
   1,974   1,973  $1.98  5/2/2021
Frank Reiner  5,263   -  $88.73  3/15/2024
   2,631   -  $36.86  6/19/2024

Potential Payment upon Termination or Change in Control


We

Under the April 1, 2016 employment agreement with Mr. Hayes, we have agreed to, pay our officers one year salary and health and welfare (COBRA) benefits uponin the event of termination by us without “cause” or followingpursuant to a change in control, grant Mr. Hayes, in addition to reimbursement of any documented, unreimbursed expenses incurred prior to such date, (i) any unpaid compensation and vacation pay accrued during the term of the Employment Agreement, and any other benefits accrued to him under any of our benefit plans outstanding at such time, (ii) twelve (12) months base salary at the then current rate to be paid in a single lump sum within thirty (30) days of Mr. Hayes’ termination, (iii) continuation for a period of twelve (12) months of any benefits as extended to our executive officers from time to time, including but not limited to group health care coverage and (iv) payment on a pro rata basis of any annual bonus or other payments earned in connection with any bonus plans to which Mr. Hayes was a participant as of the date of termination. In addition, any options or restricted stock shall be immediately vested upon termination of Mr. Hayes’s employment without “cause” or pursuant to a change in control.

Under the December 12, 2012 Retention AgreementMarch 14, 2014 employment agreement with Mr. Clayton and an extension letter dated March 29, 2013, Mr. ClaytonFrank Reiner, in the event of a termination or non-renewal of his employment without “cause” or pursuant to the consummation of a change in control, we have agreed to remain as CFOgrant Mr. Reiner in addition to reimbursement of any documented, unreimbursed expenses incurred prior to such date, (i) any unpaid compensation and vacation pay accrued during two years commencing on March 14, 2014 or any then applicable extension of the Company through June 30, 2013term of Mr. Reiner’s employment, and any other benefits accrued to him under any of our benefit plans outstanding at such time, (ii) twelve (12) months’ base salary at the then current rate to be paid in a single lump sum within sixty (60) days of Mr. Reiner’s termination, (iii) continuation for a period of twelve (12) months of any benefits as extended to our executive officers from time to time and (iv) payment on a pro rata basis of any annual bonus or other payments earned in connection with any bonus plans to which Mr. Reiner was a participant as of the date of termination. In addition, any options or restricted stock shall be immediately vested upon termination or non-renewal of Mr. Reiner’s employment without “cause” or pursuant to a change in control. In March 2017, Mr. Reiner and the Company agreed not to payrenew Mr. ClaytonReiner’s employment agreement and Mr. Reiner received his non-renewal compensation. On March 10, 2017, Mr. Reiner and the Company entered into a severance of $212,180 as required byseparation agreement and general release, pursuant to which Mr. Reiner received payments due to him under the terms of his prior employment agreement. Pursuant toagreement as well as a Retention Agreement with Mr. Lodder, Mr. Lodder agreed to remain as principal executive officer through June 30, 2013 and the Company agreed to pay Mr. Lodder a severancelump sum payment of $233,398 as required by the terms$18,504 in lieu of his prior employment agreement. All of the retention payments were made on or before June 30, 2013.


Unless otherwise agreed by the Board of Directors, the other staff members would be entitledright to severance upon termination of employment pursuant tocontinue health insurance coverage under the Company’s severance policy.  The policy provides:

group health plan.

Completed Service YearsSeverance Pay
> 1 year5010 days
1 but less than 2 years15 days
2 but less than 3 years20 days
3 but less than 4 years25 days
4 or more years30 days

Director Compensation
The following table summarizes the compensation paid to non-employee directors during the year ended December 31, 2012.

Name 
Fees Earned
Paid in Cash ($)
  
Options
($)
  All Other Compensation ($)  
Total
($)
 
Douglas T. Brown $22,000  $8,084  $-  $30,084 
Edward M. Karr  3,600   6,980   -   10,580 
Harvey J. Kesner (2)
  3,600   6,980   -   10,580 
Aris Melissaratos (1)
  22,000   8,084   10,500   40,584 
Thomas B. Peter (1)
  17,300   8,084   3,500   28,884 
Robert J. Vander Zanden  32,900   8,084   -   40,984 

(1)  Aris Melissaratos and Thomas B. Peter resigned their positions as Directors of the Company on November 30, 2012.
(2)  On February 29, 2013, Mr. Kesner was elected as interim Chief Executive Officer of the Company.
Non-employee directors receive the following annual compensation for service as a member of the Board for the fiscal year ended December 31, 2012:

Annual Retainer$5,000To be paid in cash at May Board Meeting annually.
Stock Options$10,000To be calculated by dividing $10,000 by the closing stock price the day the Stock Options are awarded; and at the May Board Meeting annually thereafter.  The Options will vest in full on the day of award and will be exercisable for a period of five (5) years.
Board Meeting Fees$2,500To be paid for all in-person Board Meetings.  Members must be present to be paid.
Committee Meeting Fees$800To be paid for all in-person Committee Meetings.  Members must be present to be paid.
Teleconference Fees$300To be paid for all teleconferences called by either the Chairman of the Board, the President, or by the Chairman of the relevant Committee.  Members must be on-line to be paid.
Additional Retainer$5,000To be paid to the Chairman of the Board upon election annually.
Additional Retainer$1,000To be paid to the Chairman of the Audit Committee at May Board Meeting annually.
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Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during the fiscal year ended December 31, 2012 were Mr. Karr, Chair; Mr.  Brown, and Dr. Vander Zanden. None of our members of the Compensation Committee during the fiscal year ended December 31, 2012 served as an officer or employee of the Company, was formerly an officer of the Company, or had any relationship requiring disclosure required by Item 404 of Regulation S-K. 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The current Board of Directors consists of Mr. Douglas T. Brown, Mr. Edward M. Karr, Mr. Harvey J. Kesner, Mr. Anthony Hayes, Dr. Robert J. Vander Zanden and Mr. Alexander Poltorak.  The Board of Directors has determined that Dr. Robert J. Vander Zanden, Mr. Douglas T. Brown, Mr. Edward M. Karr and Mr. Alexander Poltorak are independent directors within the meaning of the applicable NASDAQ rules.  The Company’s Audit, Compensation, and Nominating Committees consist solely of independent directors.

Executive Officer Agreements

On September 10, 2013, the Companywe entered into an employment agreement with Mr. Anthony Hayes pursuant to which Mr. Hayes shall serveserved as the Chief Executive Officer of the Company for a period of two years, subject to renewal. In consideration for his employment, the Company paidwe agreed to pay Mr. Hayes a signing bonus of $100,000 and a base salary of $350,000 per annumannum. In addition, Mr. Hayes was entitled to receive an annual bonus in an amount equal to up to 100% of his base salary if the Company met or exceeded certain criteria adopted by the Compensation Committee. During the year ended December 31, 2015, Mr. Hayes waived his right to receive this bonus.

In February 2015, the members of the Compensation Committee revised the annual bonus structure for Mr. Hayes and established an incentive target bonus (a “Target Bonus”). The amount of the Target Bonus was (i) $350,000 in cash, be payable in a single lump-sum payment promptly following the consummation of a qualifying strategic transaction, and (ii) a discretionary bonus to be determined by the Compensation Committee, in its sole discretion, prior to the earlier of a proxy solicitation in 2015 in relation to a qualifying strategic transaction or the consummation thereof. In December 2015, the members of Compensation Committee evaluated the 2015 achievements and deemed that Mr. Hayes had achieved the criteria for his Target Bonus by consummating five strategic transactions prior to December 31, 2015 that, together reached the applicable bonus threshold. As such, Mr. Hayes’ Target Bonus of $350,000 was made to Mr. Hayes. No additional discretionary bonus was made.

On April 1, 2016, we entered into an employment agreement with Mr. Anthony Hayes pursuant to which Mr. Hayes serves as the Chief Executive Officer for a period of one year, subject to renewal. In consideration for his employment, we agreed to pay Mr. Hayes a base salary of $350,000 per annum. Mr. Hayes will be entitled to receive an annual bonus in an amount equal to up to 100% of his base salary if the Company meetswe meet or exceedsexceed certain criteria adopted by our Compensation Committee. We further agreed to grant executive restricted stock units, pursuant to the Company’s compensation committee.  In the event Mr. Hayes’ employment is terminated, other than for “Cause,” as defined in Mr. Hayes’ employment agreement or by Mr. Hayes without “Good Reason,” as defined in Mr. Hayes’ employment agreement, Mr. Hayes will be entitledCorporation’s 2014 Equity Incentive Plan, with respect to receive severance benefits equal to twelve months of his base salary, continued coverage under the Company’s benefit plans for a period of twelve months and payment of his pro-rated earned annual bonus.


On September 10, 2013, we closed the transactions contemplated by the Merger Agreement dated April 2, 2013, by and among the Company, Nuta, North South and certain shareholders of North South.  North South was merged with and into Nuta, with Nuta as the surviving corporation and holder of the assets of the North South (“Merger”).  As a result of the Merger, holders of the outstanding shares of North South’s outstanding Common Stock received an aggregate of 1,203,153118,512 shares of the Company’s Common Stock and holders of North South’s outstanding Series A Preferred Stock and Series B Preferred Stock received an aggregate of 1,379,685 sharescommon stock. One-half of the Company’s Series D Preferred Stock, eachgrant shall vest if as of which is convertible into 10 shares of Common Stock.  UnderDecember 31, 2016, the Merger Agreement, as amended on August 30, 2013, of the consideration paid, 555,072 shares of Common Stock and 94,493 shares of Series D Preferred Stock shall be paid into escrow for a period of one year to cover certain indemnification obligations.
       On July 24, 2013, the Company closed on the acquisition of a group of patents in the mobile communication sector (the “Purchased Patents”) from Rockstar.  In consideration for the Purchased Patents, the Company paid certain consideration to Rockstar, including 176,991 shares of the Company’s Common Stock.  The shares are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of (i) six months from the issuance of the shares and (ii) the date that the Company’s Common Stock achieves a trading volumeCorporation has pro-forma cash of at least 50,000 shares per day and a closing price of at least $13 per sharefive million dollars ($5,000,000) (cash plus any cash used for a periodBoard-approved extraordinary acquisition or transaction reconstituting the Company’s core operations, less accrued bonuses) and one-half shall vest upon the Company meeting certain agreed upon criteria. As of five consecutive days.  Rockstar willDecember 31, 2016, 59,256 restricted stock units were vested and 59,256 restricted stock units were forfeited.

As of the date of this report, the Compensation Committee has not determined Mr. Hayes’ bonus for 2016.  

On June 30, 2015, our Board of Directors accepted the resignation of Richard Cohen as Chief Financial Officer, effective immediately. In connection therewith, we amended and restated the Company’s consulting agreement with Chord Advisors, LLC (“Chord”) such that Chord would continue to provide us with certain financial accounting and advisory services at a reduced monthly fee of $10,000 from $20,000.

In connection with Mr. Cohen’s resignation, on June 30, 2015, the Board of Directors appointed Frank Reiner as Interim Chief Financial Officer, effective immediately. Pursuant to Mr. Reiner’s employment agreement, the term of Mr. Reiner’s employment is one year and automatically extends for additional one-year terms unless no less than 60 days’ prior written notice of non-renewal is given by Mr. Reiner or us. Mr. Reiner’s base salary under his employment agreement was $235,000 per year, but in connection with being named Interim Chief Financial Officer, the Board of Directors authorized an amendment to Mr. Reiner’s employment agreement to increase Mr. Reiner’s base salary to $271,000. Mr. Reiner is also be entitled to receive an annual bonus if the Compensation Committee of the Board determines that performance targets have been met. The amount of the annual bonus is determined based on our gross proceeds from certain monetization of our intellectual property. In December 2016, the members of the Compensation Committee determined to pay Mr. Reiner $60,000 in shares of common stock and a percentagecash bonus of future profits after recovery of patent monetization costs$40,000 in connection with his performance for the 2016 fiscal year. On March 10, 2017, Mr. Reiner and an initial priority return on investment to the Company.


In February 2013, the Company entered into a Retention Agreement with its former President, Dr. Robert A. Lodder,separation agreement and general release, pursuant to which provides that (i) Dr. Lodder will remain with the Company as an executive officer through June 30, 2013 and receive compensation at the rate previously providedMr. Reiner received payments due to him and (ii) the Company will pay Dr. Lodder a severance of $233,398 as had been provided under the terms of his Employment Agreement,employment agreement as well as a lump sum payment of $18,504 in lieu of his right to continue health insurance coverage under the Company’s group health plan.

51

Director Compensation

The following table summarizes the compensation paid to non-employee directors during the year ended December 31, 2016.

              Change in
Pension
       
           Non-Equity  Value and
Non-
       
  Fees earned
or
        Incentive
Plan
  Qualified
Deferred
  All Other    
  paid in cash
($)
  Stock
Awards ($)
  Option Awards
($)(1)
  Compensation
($)
  Compensation
Earnings ($)
  Compensation
($)
  Total
($)
 
Jeffrey Ballabon (2)  68,796   -   6,222   -   - �� -   75,018 
Eric Weisblum (3)  21,033   -   4,769   -   -   -   25,802 
Robert J. Vander Zanden (4)  81,200   -   6,222   -   -   -   87,422 
Tim Ledwick (5)  70,400   -   6,222   -   -   -   76,622 
Howard E. Goldberg (6)  57,139   -   6,222   -   -   -   63,361 

(1)All stock options were granted in accordance with ASC Topic 718. The aggregate grant date fair value of the option awards was approximately $36,000 and was computed in accordance with FASB ASC Topic 718 (column (d)).

(2)Mr. Ballabon was paid $68,796 in cash compensation for his service as a director for the fourth quarter of 2015 and for all of 2016. In addition, Mr. Ballabon was granted options to purchase 3,947 shares of common stock, with a term of five years and an exercise price of $1.98, with 50% vesting immediately and the remaining 50% vesting on the one year anniversary of the date of issue. Mr. Ballabon resigned as a director on October 26, 2016.

(3)Mr. Weisblum was paid $21,033 in cash compensation for his service as a director in 2016.  In addition, Mr. Weisblum was granted options to purchase 3,947 shares of common stock, with a term of five years and an exercise price of $1.98, vesting with 50% vesting immediately and the remaining 50% vesting on the one year anniversary of the date of issue.

(4)Mr. Vander Zanden was paid $81,200 in cash compensation for his service as a director for the fourth quarter of 2015 and for all of 2016. In addition, Mr. Vander Zanden was granted options to purchase 3,947 shares of common stock, with a term of five years and an exercise price of $1.98, vesting with 50% vesting immediately and the remaining 50% vesting on the one year anniversary of the date of issue.

52

(5)Mr. Ledwick was paid $70,400 in cash compensation for his service as a director for the fourth quarter of 2015 and for all of 2016. In addition, Mr. Ledwick was granted options to purchase 3,947 shares of common stock, with a term of five years and an exercise price of $1.98, vesting with 50% vesting immediately and the remaining 50% vesting on the one year anniversary of the date of issue.

(6)Mr. Goldberg was paid $57,139 in cash compensation for his service as a director in 2016. In addition, Mr. Goldberg was granted options to purchase 3,947 shares of common stock, with a term of five years and an exercise price of $1.98, vesting with 50% vesting immediately and the remaining 50% vesting on the one year anniversary of the date of issue. Mr. Goldberg resigned as a director on October 26, 2016.

Non-employee directors received the following annual compensation for service as a member of the Board for the fiscal year ended December 31, 2016:

Annual Retainer $60,000  To be paid in cash in four equal quarterly installments.
Stock Options  3,947  Options to acquire shares of our common stock, pursuant to and subject to the available number of shares under the 2014 Plan, to be granted on the date of our Annual Meeting. The options will have an exercise price equal to the closing price on the trading day immediately preceding the date of issuance and be exercisable for a period of ten (10) years with 50% vesting immediately on the date of issue and the remaining 50% vesting on the one year anniversary date of the issue so long as the optionee has not been removed as a director of Spherix for cause.
Additional Retainer $5,000  To be paid to the Chairman of the Board upon election annually.

53

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

The current Board of Directors consists of Mr. Tim S. Ledwick, Mr. Anthony Hayes, Dr. Robert J. Vander Zanden and Mr. Eric Weisblum.  The Board of Directors has determined that Dr. Vander Zanden, Mr. Ledwick and Mr. Weisblum are independent directors within the meaning of the applicable NASDAQ rules. Our Audit, Compensation, and Nominating Committees consist solely of independent directors.

Richard Cohen was appointed our Chief Financial Officer on January 6, 2014. In consideration for Mr. Cohen’s services, during 2015, the Company paid to Chord Advisors, LLC, of which Mr. Cohen was terminatedchairman and an equity owner, a monthly fee of $20,000. Total fees of $120,000 were paid to Chord while Mr. Cohen served as our Chief Financial Officer. In connection with the resignation of Mr. Cohen on June 30, 2015, our Board of Directors appointed Frank Reiner as Interim Chief Financial Officer. Pursuant to Mr. Reiner’s employment agreement with the Company, dated as of March 14, 2014, as amended, the term of Mr. Reiner’s employment is one year and automatically extends for additional one-year terms unless no less than 60 days’ prior written notice of non-renewal is given by Mr. Reiner or us. Mr. Reiner’s base salary under his employment agreement was $235,000 per year, but in connection with being named Interim Chief Financial Officer, the Board of Directors authorized an amendment to Mr. Reiner’s employment agreement to increase Mr. Reiner’s base salary to $271,000. On March 10, 2017, Mr. Reiner and the Company entered into a separation agreement and general release, pursuant to which Mr. Reiner received payments due to him under the terms of his Retention Agreement.


Atemployment agreement as well as a lump sum payment of $18,504 in lieu of his right to continue health insurance coverage under the end of December, 2012, the CompanyCompany’s group health plan.

On August 10, 2015, we entered into a Consulting Agreementconsulting agreement with Mr. Howard E. Goldberg (d/b/a Forward Vision Associates, of which Mr. Goldberg is the sole proprietor and owner), on an entity wholly-ownedindependent contractor basis, pursuant to which Mr. Goldberg will, among other services, provide advisory services to us in areas including licensing, litigation and business strategies. Mr. Goldberg was also added as a director at that time. We will pay Mr. Goldberg an agreed upon quarterly retainer amount of $20,400 (calculated on an hourly basis) and, if applicable, upon exhaustion of each quarterly retainer, at an hourly rate to be paid in equity (for the first 50 hours above the quarterly retainer), and subsequently (if applicable) at an hourly rate thereafter in cash. We will reimburse Mr. Goldberg for actual out-of-pocket expenses. The consulting agreement with Mr. Goldberg has an initial term of one year, unless he has completed the desired services by an earlier date or unless the agreement is earlier terminated pursuant to its terms. The consulting agreement with Mr. Kesner,Goldberg may be extended by written agreement of both us and Mr. Goldberg. For the year ended December 31, 2016 and 2015, the Company incurred $40,800 and $42,287, respectively, consulting expenses related to this agreement. Mr. Goldberg resigned as a director of the Company pursuant to which the entity was issued 120,000 shareson October 26, 2016 and as of Common Stock in exchange for its services.   The shares will vest if prior to December 31, 2017, the Company:  (i) closes an acquisition  either approved by the stockholders or in excess of $25 million;  (ii) closesAugust 2016, Mr. Goldberg no longer serves as a private or public financing of at least $7.5 million;  (iii) sells all or substantially all of its assets;  or (iv) otherwise suffers a change in control.  In such an event, the affiliate shall also be entitled to a one-time payment of $250,000. On May 31, 2013, 110,000 shares were transferred by the entity to U.S. Commonwealth Life A.I. at the fair market value of the shares of the Common Stock on May 31, 2013.

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Mr. Kesner’s law firm has provided legal servicesconsultant to the Company in late 2012 and invoiced the Company approximately $40,000 for these services and is included in accrued expenses at December 31, 2012. Mr. Kesner’s law firm billed the Company approximately $474,000 for the nine months ended September 30, 2013.

On November 30, 2012, but effective as of December 3, 2012, Dr. Claire L. Kruger resigned as the Chief Executive Officer/Chief Operating Officer of the Company. In connection with Dr. Kruger’s departure, the Company paid Dr. Kruger her 2012 bonus of $143,000 and a severance of $286,000, both of which were paid during 2012. For the other departing employees the Company agreed to pay a total of $82,000 in 2012 bonuses and approximately $211,000 in severances, which were also paid during 2012.
On December 12, 2012, the Company entered into a Retention Agreement with Mr. Clayton which provides that (i) Mr. Clayton will remain as CFO of the Company through March 31, 2013 and (ii) the Company will pay Mr. Clayton a severance of $212,180 as required by the terms of his prior employment agreement.

We have not adopted written policies and procedures specifically for related person transactions. Our Board of Directors is responsible to approve all related party transactions.transactions, and approved each of the transactions set forth above.

54

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management

The following table setstables set forth certain information concerning the number of shares of our Common Stockcommon stock owned beneficially as of December 9, 2013May 19, 2017 by (i) our officers and directors as a group and (ii) each person (including any group) known to us to own more than 5% of any classour common stock. As of our voting securities, (ii) eachMay 19, 2017 there were 4,943,929 shares of our officers and directors, and (iii) our officers and directors as a group.common stock outstanding. Unless otherwise indicated, it is our understanding and belief that the stockholders listed possess sole voting and investment power with respect to the shares shown.


 
Title of Class
 
 
Name of Beneficial Owner
 
Amount and Nature of Ownership (1)
  
Percent Of Class (2)
 
Principal Stockholders      
Common 
Iroquois Master Fund Ltd. (3)
641 Lexington Avenue 26th Floor
New York, NY 10022
  272,033(3)  9.99%
Common 
Rockstar Consortium US LP (4)
7160 North Dallas Parkway, Suite No. 250
Plano, TX 75024
  176,991(4)  6.8%
Common 
Barry Honig
555 South Federal Highway, #450
Boca Raton, FL 33432
  278,060(5)  9.99%
Common 
Hudson Bay IP Opportunities Master Fund LP (6)
777 Third Avenue 30th Floor
New York, NY 10017
  261,680   9.99%
Common All Principal Stockholders as a Group  988,764   36.77%
Executive Officers and Directors        
Common Robert J. Vander Zanden  76,302(7)  2.91%
Common Anthony Hayes  85,581(8)  3.27%
Common Douglas T. Brown  76,159(9)  2.90%
Common Edward M. Karr  76,013(10)  2.90%
Common Harvey J. Kesner  214,615(11)  8.19%
Common Alexander Poltorak  1,214(12)  * 
Common
 
 
All Executive Officers and Directors as a Group
(six persons)
  529,884   20.17%

*

Title of Class Name of Beneficial
Owner
 Amount and Nature of
Ownership (1)
  Percent of Class Beneficially
Owned (2)
 
Y Executive Officers and Directors        
Common Robert J. Vander Zanden  26,365(3)  1.98%
Common Anthony Hayes  99,023(4)  1.98%
Common Tim S. Ledwick  7,894(5)  1.98%
Common Eric Weisblum   3,947(6)  * 
Common All Directors and Officers as a Group (4 persons)  137,229   2.72%

*Less than 1% of the outstanding shares of the Company Common Stock.

(1) Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

(2) Based on 4,943,929 shares of our common stock.

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stock outstanding as of May 19, 2017 and takes into account the beneficial ownership limitations governing the Series D Preferred Stock, Series D-1 Preferred Stock, and Series K Preferred Stock. Beneficial ownership limitations on our Series H Preferred Stock prevent the conversion or voting of the stock if the number of shares of common stock to be issued pursuant to such conversion or to be voted would exceed, when aggregated with all other shares of common stock or other voting stock owned by the same holder at the time, the number of shares of common stock which would result in such holder beneficially owning more than 4.99% of all of the common stock outstanding at such time. Beneficial ownership limitations on our Series D-1 Preferred Stock prevent the conversion or voting of the stock if the number of shares of common stock to be issued pursuant to such conversion or to be voted would exceed, when aggregated with all other shares of common stock owned by the same holder at the time, the number of shares of common stock which would result in such holder beneficially owning more than 9.99% of all of the common stock outstanding at such time. Beneficial ownership limitations on our Series K Preferred Stock prevent the conversion of the stock if the number of shares of common stock to be issued pursuant to such conversion or to be voted would exceed, when aggregated with all other shares of common stock or other voting stock owned by the same holder at the time, the number of shares of common stock which would result in such holder beneficially owning more than 4.99% of all of the common stock outstanding at such time.

(1) Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.55

(2)  Calculated based on 2,619,395

(3)  Includes 7 shares of common stock outstanding as of December 9, 2013 and takes into account the beneficial ownership limitations governing the Series D-1 Convertible Preferred Stock.

(3)  
Represents (i) 167,274 shares of common stock; (ii) 6,759 shares of common stock issuable upon exercise of warrants and (iii) 98,000 shares of common stock issuable upon conversion of 9,800 shares of Series D/D-1 Convertible Preferred Stock.  Excludes 1,966,610 shares of common stock issuable upon conversion of 196,661 shares of Series D/D-1 Convertible Preferred Stock. The holder of Series D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock.
Iroquois Capital Management LLC (“Iroquois Capital”) is the investment manager of Iroquois Master Fund Ltd. (“IMF”). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As managing members of Iroquois Capital, Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF. As a result of the foregoing, Mr. Silverman and Mr. Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange of 1934, as amended) of these securities held by IMF. Notwithstanding the foregoing, Mr. Silverman and Mr. Abbe disclaim such beneficial ownership.

(4)  John Veschi is the Chief Executive Officer of Rockstar Consortium LLC, general partner of Rockstar Consortium US LP and in such capacity holds voting and dispositive power over the shares held by Rockstar Consortium US LP.

(5)  Represents (i) 44,127 shares of common stock owned by Barry Honig; (ii) 65,933 shares of common stock owned by GRQ Consultants Inc. Roth 401K ("GRQ Roth 401K"), over which Barry Honig holds voting and dispositive power; and (iii) 168,000 shares of common stock issuable upon exercise of 16,800 shares of Series D/D-1 Preferred Stock held by Barry Honig.  Excludes 3,567,530 shares of common stock issuable upon conversion of 356,753 shares of Series D/D-1 Convertible Preferred Stock held by Barry Honig; 364,970 shares of common stock issuable upon conversion of 36,497 shares of Series D/D-1 Convertible Preferred Stock held by GRQ Roth 401K; 69,240 shares of common stock issuable upon conversion of 6,924 shares of Series D/D-1 Convertible Preferred Stock held by GRQ Consultants Inc. 401K over which Barry Honig holds voting and dispositive power; 69,240 shares of common stock issuable upon conversion of 6,924 shares of Series D/D-1 Convertible Preferred Stock held by GRQ Consultants Inc. Defined Benefit Plan, over which Barry Honig holds voting and dispositive power and 78,125 shares of common stock issuable upon conversion of 78,125 shares of Series F-1 Preferred Stock held by Barry Honig. The holder of Series D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock.  The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion.
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(6)  
Represents 261,680 shares of common stock.  Excludes (i) 5,338,630 shares of common stock issuable up on conversion of 533,863 shares of Series D/D-1 Preferred Stock, (ii) one share common stock issuable upon conversion of one share of Series C Preferred Stock and (iii) 78,125 shares of common stock issuable upon conversion of 78,125 shares of Series F-1 Preferred Stock. The Series C Preferred Stock may not be converted and the holder may not receive shares of the Company’s common stock such that the number of shares of common stock held by them and their affiliates after such conversion exceeds 4.99% of the then issued and outstanding shares of common stock. The restriction described above may be waived, in whole or in part, upon sixty-one (61) days prior notice from the holder to the Company. The holder of Series D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock. The foregoing restriction may be waived, in whole or in part, upon sixty-one (61) days prior notice from the holder to the Company. The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion.
Hudson Bay Capital Management LP, the investment manager of Hudson Bay IP Opportunities Master Fund L.P. (“Hudson Bay”), has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Sander Gerber disclaims beneficial ownership over these securities.
(7)  Includes 76,302 shares of Common Stock such person has a right to acquire within 60 days pursuant to stock options.

(8)  Includes 62,500 shares of Common Stock such a person has a right to acquire within 60 days pursuant to stock options.

(9)  Includes 76,159 shares of common stock such person has a right to acquire within 60 days pursuant to stock options.

(10)  Includes 76,013 shares of common stock such person has a right to acquire within 60 days pursuant to stock options.

(11)  Includes options to purchase 188,513 shares of common stock exercisable within 60 days and 26,102 shares of restricted common stock owned indirectly by Paradox Capital Partners LLC ("Paradox"). Mr. Kesner is the sole manager and member of Paradox and in such capacity has voting and dispositive power over shares held by Paradox.
(12) Includes 1,214 shares of common stock such person has a right to acquire with 60 days pursuant to stock options.
With the exception of Cede & Co., the holdercommon stock, 24,385 options for purchase of recordcommon stock exercisable as of May 19, 2017, and 1,973 options for certain brokerage firmspurchase of common stock exercisable within 60 days of May 19, 2017.

(4) Includes 1,214 shares of common stock, 59,867 options for purchase of common stock exercisable as of May 19, 2017, 1,973 options for purchase of common stock exercisable within 60 days of May 19, 2017, and banks, except35,969 RSUs which have vested as disclosed above, no other person is known by us to own beneficially more than 5% of our outstandingMay 19, 2017, net of withholdings for tax obligations.

(5) Includes 5,921 options for purchase of common stock. 


stock exercisable as of May 19, 2017, and 1,973 options for purchase of common stock exercisable within 60 days of May 19, 2017. 

(6) Includes 1,974 options for purchase of common stock exercisable as of May 19, 2017, and 1,973 options for purchase of common stock exercisable within 60 days of May 19, 2017.

Effective January 24,1, 2013, the Company and Equity Stock Transfer, LLC as Rights Agent, entered into a Rights Agreement, which was subsequently assigned to Transfer Online Inc. as Rights Agent on June 20, 2016 and amended and restated on June 9, 2017. The Rights Agreement provides each stockholder of record a dividend distribution of one “right” for each outstanding share of common stock. Rights become exercisable at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of our common stock, or (2) the commencement of a tender offer which would result in an offeroroffer or beneficially owning 10% or more of our outstanding common stock.  All rights held by an acquirer or offeroroffer or expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2017,2020, subject to further extension. Each right entitles a stockholder to acquire, at a price of $7.46 per one one-hundredth of a preferred share, subject to adjustments, 1/100nineteen-hundredth of a share of our preferred stock,Series A Preferred Stock, subject to adjustments, which carries voting and dividend rights similar to one share of our common stock. Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of our common stock at a price per share equal to one-half of the average market price for a specified period.  In lieu of the stated purchase price, a right holder may elect to acquire one-half of the common stock available under the second option.  The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board of Directors and within a specified time period, we may redeem all of the rights at a price of $0.001 per right.  The Board may also amend any provisions of the Agreement prior to exercise.

56

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SELLING STOCKHOLDERS
   We have prepared this prospectus to allow the selling stockholders, to sell, from time to time, up to 2,302,615 shares of our common stock.  All of the common stock offered by this prospectus may be offered by the selling stockholders for their own account. We will receive no proceeds from any such sale of these shares by the selling stockholders.
The Rockstar Transaction

On July 24, 2013, we closed on the acquisition of a group of patents in the mobile communication sector (the “Purchased Patents”) from Rockstar.  In consideration for the Purchased Patents, we paid certain consideration to Rockstar, including 176,991 shares of our common stock which are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of (i) six months from issuance and (ii) the date that our common stock achieves a trading volume of at least 50,000 shares per day and a closing price of at least $13 per share for a period of five consecutive days.   Rockstar will also be entitled to receive a percentage of future profits after recovery of patent monetization costs and an initial priority return on investment to us.
The North South Transaction
In connection with our acquisition of North South on September 10, 2013, we issued 1,203,153 shares of our common stock and 1,379,685 shares of our Series D Convertible Preferred Stock, which is convertible into shares of common stock on a one-for-ten basis, to the former shareholders of North South. The Company anticipates the commencement of an exchange with holders of Series D Convertible Preferred Stock pursuant to which such holders could exchange such shares for shares of our Series D-1 Convertible Preferred Stock on a one-for-one basis. An aggregate of 725,063 shares of common stock issued to the former stockholders of North South and 1,400,560 shares of common stock underlying 140,056 shares of Series D Convertible Preferred Stock which will be exchanged for an equal number of shares of Series D-1 Convertible Preferred Stock are being registered pursuant to this prospectus. The rights of the Series D-1 Convertible Preferred Stock are substantially identical to the rights of the Series D Convertible Preferred Stock except for certain modifications relating to conversion limitations    

Selling Stockholders Table

The following table sets forth information with respect to our common stock known to us to be beneficially owned by the selling stockholders as of December 9, 2013. The selling stockholders, to our knowledge, have not had a material relationship with us during the three years immediately preceding the consummation of the acquisition.
    Common  
  Beneficial Ownership of Stock Beneficial Ownership
  Common Stock Prior Saleable of Common Stock
  
to the Offering (1)
 Pursuant 
After the Offering (1)
  Number of Percent of to This Number of Percent of
Name and Address of Selling Stockholder Shares 
Class (2)
 Prospectus Shares 
Class (2)
Hudson Bay IP Opportunities Master Fund, LP (3)
 
261,680 (3)
 
9.99% (3)
  
643,690 (4)
 
261,680
 
9.99% (3)
Iroquois Master Fund Ltd. (5)
 
272,033 (5)
 
9.99% (5)
  
416,000 (6)
 
272,033
 
9.99% (5)
GRQ Consultants, Inc. Roth 401K FBO Barry Honig (7)
 
278,060 (8)
 
9.99% (8)
  
333,508 (9)
 
278,060
 
9.99%
Barry Honig
 
278,060 (8)
 
9.99% (8)
  
333,497(10)
 
278,060
 
9.99% (8)
Rockstar Consortium US LP (11)
 
176,991
 
6.8%
  
176,991
 
0
 
0
Alpha Capital Anstalt (12)
 
275,826 (12)
 
9.99%
  
101,326
 
275,826
 
9.99%
Robert S. Colman Trust UDT 3/13/85 (13)
 
78,014
 
3.0%
  
78,014
 
0
 
0
Jonathan Honig
 
59,453
 
2.27%
  
59,453
 
0
 
0
Sandor Capital Master Fund (14)
 
199,507 (14)
 
7.18%
  
39,007
 
160,500
 
5.77%
Cranshire Capital Master Fund Ltd (15)
 
29,313
 
1.11%
  
29,313
 
0
 
0
Empery Asset Master, Ltd (16)
 
19,619
 
*
  
19,619
 
0
 
0
Stockwire Research Group (17)
 
19,389
 
*
  
19,339
 
0
 
0
JSL Kids Partners (18)
 
9,924
 
*
  
9,924
 
0
 
0
Nachum Stein (19)
 
19,388(19)
 
*
  
9,695
 
9,693
 
*
American European Insurance Company (19)
 
9,693
 
*
  
9,693
 
0
 
0
Kristin O’Conner
 
26,162
 
*
  
23,546
 
2,616
 
*
Total
      
2,302,615
    
* represents less than 1%
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(1)             Assumes that all of the shares held by the selling stockholder covered by this prospectus are sold and that the selling stockholder acquires no additional shares of common stock before the completion of this offering. However, as the selling stockholder can offer all, some, or none of its common stock, no definitive estimate can be given as to the number of shares that the selling stockholder will ultimately offer or sell under this prospectus.
(2)             Calculated based on 2,619,395 shares of common stock outstanding as of December 9, 2013 and takes into account the beneficial ownership limitations governing the Series D-1 Convertible Preferred Stock.
(3)             Represents 261,680 shares of common stock.  Excludes (i) 5,338,630 shares of common stock issuable up on conversion of 533,863 shares of Series D/D-1 Preferred Stock, (ii) one share common stock issuable upon conversion of one share of Series C Preferred Stock and (iii) 78,125 shares of common stock issuable upon conversion of 78,125 shares of Series F-1 Preferred Stock. The Series C Preferred Stock may not be converted and the holder may not receive shares of the Company’s common stock such that the number of shares of common stock held by them and their affiliates after such conversion exceeds 4.99% of the then issued and outstanding shares of common stock. The restriction described above may be waived, in whole or in part, upon sixty-one (61) days prior notice from the holder to the Company. The holder of Series D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock. The foregoing restriction may be waived, in whole or in part, upon sixty-one (61) days prior notice from the holder to the Company. The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion.
Hudson Bay Capital Management LP, the investment manager of Hudson Bay IP Opportunities Master Fund L.P. (“Hudson Bay”), has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Sander Gerber disclaims beneficial ownership over these securities.
(4)             The number of shares being offered by Hudson Bay includes 261,680 shares of common stock and 382,010 shares of common stock underlying 38,201 shares of Series D/D-1 Preferred Stock. 
(5)             Represents (i) 167,274 shares of common stock; (ii) 6,759 shares of common stock issuable upon exercise of warrants and (iii) 98,000 shares of common stock issuable upon conversion of 9,800 shares of Series D/D-1 Convertible Preferred Stock.  Excludes 1,966,610 shares of common stock issuable upon conversion of 196,661 shares of Series D/D-1 Convertible Preferred Stock. The holder of Series D/D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock.
Iroquois Capital Management LLC (“Iroquois Capital”) is the investment manager of Iroquois Master Fund Ltd. (“IMF”). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As managing members of Iroquois Capital, Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF. As a result of the foregoing, Mr. Silverman and Mr. Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange of 1934, as amended) of these securities held by IMF. Notwithstanding the foregoing, Mr. Silverman and Mr. Abbe disclaim such beneficial ownership.
(6)             The number of shares being offered by IMF includes 118,830 shares of common stock and 297,170 shares of common stock issuable upon conversion of 29,717 shares of Series D/D-1 Preferred Stock.
(7)             Barry Honig is the trustee of GRQ Consultants, Inc. Roth 401K FBO Barry Honig (“GRQ Roth 401K”) and in such positions is deemed to hold voting and dispositive power over securities of the Company held by such entities
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(8)            Represents (i) 44,127 shares of common stock owned by Barry Honig; (ii) 65,933 shares of common stock owned by GRQ Roth 401K; and (iii) 168,000 shares of common stock issuable upon exercise of 16,800 shares of Series D/D-1 Preferred Stock held by Barry Honig.  Excludes 3,567,530 shares of common stock issuable upon conversion of 356,753 shares of Series D/D-1 Convertible Preferred Stock held by Barry Honig; 364,970 shares of common stock issuable upon conversion of 36,497 shares of Series D/D-1 Convertible Preferred Stock held by GRO Roth 401K; 69,240 shares of common stock issuable upon conversion of 6,924 shares of Series D/D-1 Convertible Preferred Stock held by GRQ Consultants Inc. 401K over which Barry Honig holds voting and dispositive power; 69,240 shares of common stock issuable upon conversion of 6,924 shares of Series D/D-1 Convertible Preferred Stock held by GRQ Consultants Inc. Defined Benefit Plan, over which Barry Honig holds voting and dispositive power and 78,125 shares of common stock issuable upon conversion of 78,125 shares of Series F-1 Preferred Stock held by Barry Honig. The holder of Series D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock.  The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion.

 (9)             The number of shares being offered by GRQ Roth 401K includes 65,928 shares of common stock and 267,580 shares of common stock issuable upon conversion of 26,758 shares of Series D/D-1 Preferred Stock.
(10)             The number of shares being offered by Barry Honig includes 44,127 shares of common stock and 289,370 shares of common stock issuable upon conversion of 28,937 shares of Series D/D-1 Preferred Stock.
(11)           Rockstar Consortium LLC is the General Partner of Rockstar Consortium US LP. John Veschi is the Chief Executive Officer of Rockstar Consortium US LP and may be deemed to hold voting and dispositive power over securities of the Company held by Rockstar Consortium US LP. Mr. Veschi disclaims beneficial ownership over any securities of the Company held by Rockstar Consortium US LP.

(12)           Represents (i)133,326 shares of common stock and (ii) 142,500 shares of common stock issuable upon conversion of 14,250 shares of Series D/D-1 Convertible Preferred Stock.  Excludes 64,500 shares of common stock issuable upon conversion of 6,450 shares of Series D-1 Preferred Stock and 100,000 shares of common stock issuable upon conversion of 100,000 shares of Series F-1 Preferred Stock. The holder of Series D-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock. The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion. Konrad Ackermann may be deemed to hold voting and dispositive power over securities of the Company held by Alpha Capital Anstalt.

(13)           Robert S. Colman may be deemed to hold voting and dispositive power over securities of the Company held by Robert S. Colman Trust UDT 3/13/85.

(14)             Represents (1) 39,007 shares of common stock, (ii) 112,500 shares of common stock issuable upon conversion of 11,250 shares of Series D/D-1 Convertible Preferred Stock and (iii) 48,000 shares of common stock convertible from 48,000 shares of Series F-1 Preferred Stock. The holder of Series D/D-1 Convertible Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of the then issued and outstanding shares of common stock. The holder of Series F-1 Preferred Stock may not receive shares of the Company’s common stock such that the number of shares of common stock held by it and its affiliates after such conversion exceeds 9.99% of then issued and outstanding common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion. John S. Lemak may be deemed to hold voting and dispositive power over securities of the Company held by Sandor Capital Master Fund.

(15)             Represents 29,313 shares of common stock and 6,113 shares of common stock issuable upon exercise of warrants. Cranshire Capital Advisors, LLC (“CCA”) is the investment manager of Cranshire Capital Master Fund, Ltd. (“Cranshire Master Fund”) and has voting control and investment discretion over securities held by Cranshire Master Fund. Mitchell P. Kopin (“Mr. Kopin”), the president, the sole member and the sole member of the Board of Managers of CCA, has voting control over CCA. As a result, each of Mr. Kopin and CCA may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by Cranshire Master Fund.
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(16)             Empery Asset Management LP, the authorized agent of Empery Asset Master, Ltd (“EAM”), has discretionary authority to vote and dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by EAM. Empery Asset Management LP, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.

(17)     Adrian James is the President of Stockwire Research Group and in such capacity holds voting and dispositive power over securities of the Company held by such entity.

(18)     John Lemak is the manager of JSL Kids Partners and in such capacity holds voting and dispositive power over securities of the Company held by such entity.

(19)      Nachum Stein is the President of American European Insurance Company and in such capacity holds voting and dispositive power over securities of the Company held by such entity.  Mr. Nachum’s individual ownership includes 9,693 shares of common stock held by American European Insurance Company.

DESCRIPTION OF CAPITAL STOCK

General

The following description of common stock and preferred stock summarizes the material terms and provisions of the common stock and preferred stock and is not complete. For the complete terms of our common stock, and preferred stock, please refer to our certificateAmended and Restated Certificate of incorporation, as amended,Incorporation, which may be further amended from time to time, any certificates of designation for our preferred stock, and our amended and restated bylaws, as amended from time to time. The Delaware General Corporation Law (“DCGL) may also affect the terms of these securities.

                   Our

On April 24, 2014, we filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which was previously approved by our stockholders at our annual meeting held on February 6, 2014.

The Amended and Restated Certificate of Incorporation, among other things, increases our authorized capital stock consistsnumber of 50,000,000 shares of common stock $0.0001to 200,000,000 shares from 50,000,000 shares. The Amended and Restated Certificate of Incorporation also requires us to indemnify our directors, officer and agents and advance expenses to such persons to the fullest extent permitted by Delaware law.

Additionally, on April 23, 2014, we filed a Certificate of Elimination with the Secretary of State of the State of Delaware eliminating our Series B Convertible Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible Preferred Stock and returning them to authorized but undesignated shares of our preferred stock.

Amended and Restated Certificate of Incorporation

On March 4, 2016, the Company implemented a reverse stock split with a ratio of 1-for-19. The par value and 5,000,000 sharesother terms of preferredthe common stock $0.0001 par value. Thewere not affected by the reverse stock split. In addition, the amendment to the Company’s certificate of incorporation that effected the reverse stock split simultaneously reduced the number of authorized and unissued shares of common stock and the authorized and undesignated shares of preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. If the approval of our stockholders is not so required, our board of directors may determine notfrom 200,000,000 to seek stockholder approval.

100,000,000.

Common Stock


Subject to the rights of the preferred stock, holders of common stock are entitled to receive such dividends as are declared by our board of directors out of funds legally available for the payment of dividends. We presently intend to retain any earnings to fund the development of our business. Accordingly, we do not anticipate paying any dividends on our common stock for the foreseeable future. Any future determination as to declaration and payment of dividends will be made at the discretion of our board of directors.


In the event of the liquidation, dissolution, or winding up of the Company, each outstanding share of our common stock will be entitled to share equally in any of our assets remaining after payment of or provision for our debts and other liabilities.


Holders of common stock are entitled to one vote per share on matters to be voted upon by stockholders. There is no cumulative voting for the election of directors, which means that the holders of shares entitled to exercise more than fifty percent (50%) of the voting rights in the election of directors are able to elect all of the directors.

Holders of common stock have no preemptive rights to subscribe for or to purchase any additional shares of common stock or other obligations convertible into shares of common stock which we may issue after the date of this prospectus.

All of the outstanding shares of common stock are fully paid and non-assessable. Holders of our common stock are not liable for further calls or assessments.


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The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

57

Preferred Stock


Our certificateAmended and Restated Certificate of incorporationIncorporation authorizes 5,000,00050,000,000 shares of preferred stock. Our board of directors is authorized, without further stockholder action, to establish various series of such preferred stock from time to time and to determine the rights, preferences and privileges of any unissued series including, among other matters, any dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms, the number of shares constituting any such series, and the description thereof and to issue any such shares. Although there is no current intent to do so, our board of directors may, without stockholder approval, issue shares of an additional class or series of preferred stock with voting and conversion rights which could adversely affect the voting power of the holders of the common stock.


One of the effects of the preferred stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of the management.

The DGCL provides that the holders of preferred stock will have the right to vote separately as a class on any proposal involving certain fundamental changes in the rights of holders of that series of preferred stock. This right is in addition to any voting rights provided for in the applicable certificate of designation.

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our Company or make removal of management more difficult. Additionally, the issuance of preferred stock could have the effect of decreasing the market price of our common stock.

58

The Company had designated separate series of its capital stock as of March 31, 2017, December 31, 2016 and December 31, 2015 as summarized below:

  Number of Shares Issued
and Outstanding as of
      
  March
31, 2017
  

December 31,
2016

  

December 31,

2015

  Par Value  Conversion Ratio
Series "A"  -   -   -  $0.0001  N/A
Series "C"  -   -   -   0.0001  0.05:1
Series “D"  4,725   4,725   4,725   0.0001  0.53:1
Series “D-1"  834   834   834   0.0001  0.53:1
Series “F-1"  -   -   -   0.0001  0.05:1
Series “H"  -   -   381,967   0.0001  0.53:1
Series “I”  -   -   -   0.0001  1.05:1
Series “J”  -   -   -   0.0001  0.05:1
Series “K”  -   -   1,240   0.0001  263.16:1

On April 23, 2014, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware eliminating its Series B Convertible Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible Preferred Stock and returning them to authorized but undesignated shares of preferred stock. No shares of the foregoing series of preferred stock were outstanding.

Series A Preferred Stock


Our board of directors has designated 500,000 shares of our preferred stock as Series A Participating Preferred Stock (“Series A Preferred Stock”).


On January 1, 2013, and as amended and restated on June 9, 2017, we adopted a stockholder rights plan in which rights to purchase shares of Series A Preferred Stock were distributed as a dividend at the rate of one right for each share of common stock. The rights are designed to guard against partial tender offers and other abusive and coercive tactics that might be used in an attempt to gain control of Spherix or to deprive our stockholders of their interest in the long-term value of Spherix. These rights seek to achieve these goals by forcing a potential acquirer to negotiate with our board of directors (or go to court to try to force the Board of Directors to redeem the rights), because only the Board of Directors can redeem the rights and allow the potential acquirer to acquire our shares without suffering very significant dilution. However, these rights also could deter or prevent transactions that stockholders deem to be in their interests, and could reduce the price that investors or an acquirer might be willing to pay in the future for shares of our common stock.


Each right entitles the registered holder to purchase one one-hundredth of a share (a “Unit”) of our Series A Preferred Stock. Each Unit of Series A Preferred Stock will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock. In the event of liquidation, the holders of the Units of Series A Preferred Stock will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each Unit of Series A Preferred Stock will have 100 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each Unit of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. These rights are protected by customary anti-dilution provisions.


The rights will be exercisable only if a person or group acquires ten percent (10%) or more of our common stock (subject to certain exceptions stated in the plan) or announces a tender offer the consummation of which would result in ownership by a person or group of ten percent (10%) or more of our common stock. Our board of directors may redeem the rights at a price of $.001$0.001 per right. The rights will expire at the close of business on December 31, 20172020 unless the expiration date is extended or unless the rights are earlier redeemed or exchanged by the Company.

Series B Convertible Preferred Stock

In connection with an offering

As of securities, which we closed in October 2010, we created a Series B Convertible Preferred Stock.  AllMarch 31, 2017, December 2016, and December 2015, no shares of Series B ConvertibleA Preferred Stock were issued in the offering have been converted to common stock except for one (1) outstanding share of Series B Convertible Preferred Stock.and outstanding.

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The Series B Convertible Preferred Stock is convertible at the option of the holder at any time into shares of our common stock at a conversion ratio determined by dividing the stated value of the convertible preferred stock, or $1,000, by a conversion price of $250 per share.  The conversion price is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions.  The conversion price may also be subject to adjustment if we issue rights, options or warrants to all holders of our common stock entitling them to subscribe for or purchase shares of our common stock at a price per share less than the daily volume weighted average price of our common stock, if we distribute evidences of our indebtedness or assets or rights or warrants to subscribe for or purchase any security to all holders of our common stock, or if we consummate a fundamental corporate transaction such as a merger or consolidation, sale or other disposition of all or substantially all of our assets, or an exchange or tender offer accepted by the holders of 50% or more of our outstanding common stock.  Subject to limited exceptions, a holder of shares of Series B Convertible Preferred Stock will not have the right to convert any portion of its Series B Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to its conversion.

The Series B Convertible Preferred Stock is entitled to receive dividends (on an “as converted to common stock” basis) to and in the same form as dividends actually paid on shares of our common stock.

Except as required by law, holders of our Series B Convertible Preferred Stock are generally not entitled to voting rights.

Series C Convertible Preferred Stock


On March 6, 2013, the Company and certain investors that participated in the Company’s November 2012 private placement transaction entered into separate Warrant Exchange Agreements pursuant to which thethose investors exchanged common stock purchase warrants acquired in the private placement transaction for 229,337 shares of ourthe Company’s Series C Convertible Preferred Stock.Stock (“Series C Preferred Stock”).  Each share of Series C Convertible Preferred Stock is convertible into one (1)one-nineteenth of a share of common stock at the option of the holder.  The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock.

               The exchanged Warrants  Between May and September 2013, 229,336 shares of Series C Preferred Stock were issued in November 2012 forconverted into an aggregate of 483,657229,336 shares of common stock. The warrants were exercisable through November 7, 2017 at an exercise price of $6.53 per share.
               Pursuant toIn December 2015, the Warrant Exchange Agreements, the investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, each of which is convertible into one (1) share of common stock.  This is the same number of shares of common stock that would have been  issued upon a “cashless exercise” of the exchanged warrants, as permitted by the terms of the warrants, based on the one-day volume weighted average price of our common stock on February 28, 2013 of $12.6439 as reported by Bloomberg.  We have agreed to register the shares of common stock issuable upon conversion of the Series C Convertible Preferred Stock on the same basis as the shares of common stock issued in the November 2012 private placement transaction.  As of December 9, 2013, oneremaining share of Series C Convertible Preferred Stock was outstanding.

surrendered by the stockholder for cancellation. 

As of March 31, 2017,December 2016, and December 2015, no shares of Series of Series C Preferred Stock remained issued and outstanding, respectively.

Series D Convertible Preferred Stock

   On April 2, 2013, we entered into

In connection with the Merger Agreement with Nuta, North South and the shareholders of North South, as amended on August 30, 2013.  On September 10, 2013, we consummated the Merger. At the closing of the Merger, an aggregate of 500 issued and outstanding sharesacquisition of North South’s common stock were converted intopatent portfolio in September 2013, the right to receive an aggregate of 1,203,153 shares of common stock and 500 shares of North South’s Series A Preferred Stock and 128 shares of North South’s Series B Preferred StockCompany issued and outstanding were converted into the right to receive an aggregate of 1,379,685 shares of our newly designatedits Series D Convertible Preferred Stock.

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Stock (“Series D Preferred Stock”) to the stockholders of North South.  Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into ten (10) sharesten-nineteenths of a share of common stock.  Upon the liquidation, dissolution or winding up of ourthe Company’s business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the Stated Valuestated value or (ii) the amount the holder would receive as a holder of the Company’s common stock on an “as converted” basis.  Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to ourits stockholders and shall be entitled to such number of votes equal to the number of shares of common stock such shares of Series D Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the Conversion Limitconversion limitations described below.  At no time may shares of Series D Preferred Stock be converted if such conversion would cause the holder to hold in excess of 4.99% of our issued and outstanding common stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding common stock on 61 days’ written notice to us.the Company.  The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, splitscombination of shares and fundamentalsimilar recapitalization transactions.

Additionally, subject to the beneficial ownership limitations described above, holders

As of March 31, 2017, December 2016, and December 2015, 4,725 shares of Series D Preferred Stock may not convert such shares in excess of the “Conversion Limit”.  The “Conversion Limit” is defined as that number of shares of common stock as shall equal 15% (the “Volume Percentage”) of the greater of (i) the trading volume of our common stock on such conversion date or (ii) the average trading volume of our common stock for ten trading days immediately prior to such conversion date.  If our common stock trades at a price of at least $12.00 per share on the conversion date, then the Volume Percentage for purposes of the foregoing calculation shall equal 20%.  Notwithstanding the foregoing, holders of the Series D Preferred Stock may convert such shares without regard to the aforementioned conversion limit if our common stock trades at a minimum price of $15.00 per share on the conversion date.


remained issued and outstanding.

Series D-1 Convertible Preferred Stock

       Our

The Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into ten (10) sharesten- nineteenths of a share of common stock.  Upon the liquidation, dissolution or winding up of ourthe Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of the Company’s common stock on an “as converted” basis.  Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to ourthe Company’s stockholders and shall be entitled to such number of votes equal to the number of shares of common stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation.  At no time may shares of Series D-1 Preferred Stock be converted if such conversion would cause the holder to hold in excess of 9.99% of our issued and outstanding common stock. The conversion ratio of the Series DD-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, splitscombination of shares and fundamentalsimilar recapitalization transactions.  The Company anticipates commencingcommenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of ourthe Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of ourthe Company’s Series D-1 Preferred Stock on a one-for-one basis.

As of March 31, 2017, December 2016, and December 2015, 834 shares of Series D-1 Preferred Stock remained issued and outstanding. 

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Series EH Convertible Preferred Stock

Our

On December 31, 2013, the Company designated 459,043 shares of preferred stock as Series EH Preferred Stock. On December 31, 2013, the Company issued approximately $38.3 million of Series H Preferred Stock was established on June 25, 2013.(or 459,043 shares) to Rockstar. Each share of Series EH Preferred Stock is convertible at the optioninto ten-nineteenths of the holder at any time, into one (1)a share of common stock and has a stated value of $0.0001.  Such$83.50. The conversion ratio is subject to adjustment in the caseevent of stock splits, stock dividends, combination of shares and similar recapitalization transactions. We areThe Company is prohibited from effecting the conversion of the Series EH Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially ownowns more than 4.99% (or, if such limitation is waived by the holder(which may be increased to 9.99% and subsequently to 19.99%, each upon no less than 61 days prior notice, 9.99%)days’ written notice), in the aggregate, of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series EH Preferred Stock. AllHolders of the Series H Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to the number of votes equal to the number of shares of common stock into which the shares of Series H Preferred Stock are convertible, subject to applicable beneficial ownership limitations. The Series H Preferred Stock provides a liquidation preference of $83.50 per share. The shares of Series H Preferred Stock were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. On April 16, 2014, the Company obtained the required stockholder approval and, as a result, all outstanding shares of our Series EH Preferred Stock are convertible and possess voting rights in accordance with its terms. On May 28, 2014, 20,000 shares of Series H Preferred Stock were converted into 10,526 shares of common stock.

In January 2015, Rockstar transferred its remaining outstanding Series H Preferred Stock to RPX Clearinghouse LLC, an affiliate of RPX.

According to the RPX License Agreement, on November 23, 2015, RPX transferred to the Company for cancellation 57,076 shares of Series H Preferred Stock then held by North SouthRPX, having a total carrying amount of $4,765,846 at the time the stock was issued to Rockstar.

In connection with a second, separate, licensing agreement, on May 23, 2016, RPX transferred to the Company for cancellation of 100% of the remaining 381,967 shares of Series H Preferred Stock held by RPX, having a total carrying amount of $31,894,244 at the time the stock was issued to Rockstar.

As of March 31, 2017, December 2016, and retired in full on September 30, 2013.

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December 2015,none, none and 381,967 shares of Series FH Preferred Stock remained issued and outstanding, respectively.

Series I Redeemable Convertible Preferred Stock


Our

On December 31, 2013, the Company designated 119,760 shares of preferred stock as Series FI Preferred Stock.  On December 31, 2013, the Company issued approximately $20 million (or 119,760 shares) of Series I Preferred Stock was established on November 1, 2013.to Rockstar.  Each share of Series FI Preferred Stock iswas convertible at the optioninto twenty-nineteenths of the holder at any time, into one (1)a share of common stock and hashad a stated value of $0.0001.  Such$167.00.  The conversion ratio iswas subject to adjustment in the caseevent of stock splits, stock dividends, combination of shares and similar recapitalization transactions.  Each share of Series F Preferred Stock is entitled to one vote per share (subject to beneficial ownership limitation) and shall vote together with holders of our common stock.  We areThe holder was prohibited from effecting the conversion ofconverting the Series FI Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially ownowned 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, of the Company’s issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series FI Preferred Stock.  On November 6, 2013, we issued an aggregateHolders of 304,250the Series I Preferred Stock were entitled to vote on all matters submitted to its stockholders who were entitled to the number of votes equal to the number of shares of common stock into which the shares of Series FI Preferred Stock in a private placement.  In November 2013, we conducted an exchange of our outstandingwere convertible, subject to applicable beneficial ownership limitations.  The Series FI Preferred Stock provided for a liquidation preference of $167.00 per share.

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The shares of Series F-1I Preferred Stock (as described below).were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635.  On April 16, 2014, the Company obtained the required stockholder.

In January 2015, Rockstar transferred its remaining outstanding Series I Preferred Stock, as well as its other stock in the Company to RPX Clearinghouse LLC.

In June 2015, the Company redeemed 5,601 shares of Series I Preferred Stock. In accordance with this redemption, the Company paid RPX $0.9 million.

On November 23, 2015, as per RPX License Agreement, RPX transferred to the Company for cancellation all remaining 29,940 shares of Series I Preferred Stock, as to which a $5,000,000 mandatory redemption payment would have been due from the Company on or by December 31, 2015.

As of the date of this prospectus,March 31, 2017, December 2016, and December 2015,  no shares of Series FI Preferred Stock were outstanding.

remained issued and outstanding, respectively.

Series F-1J Convertible Preferred Stock


Our

On May 28, 2014, the Company designated 20,000,000 shares of preferred stock as Series F-1 ConvertibleJ Preferred Stock. On May 28, 2014, the Company entered into a placement agency agreement with Laidlaw & Company (UK) Ltd., as the placement agent, which provided for the issuance and sale in a registered direct public offering (the “Series J Offering”) by the Company of 10,000,000 shares of Series J Preferred Stock (“which were convertible into a total of 526,315 shares of common stock. The Series F-1J Preferred Stock”)Stock in the Series J Offering was established on November 22, 2013. On November 26, 2013,sold at a public offering price of $2.00 per share. The net offering proceeds to the Company from the sale of the shares were approximately $18.4 million, after deducting placement agent fees ($1.32 million), legal fees ($0.18 million) and escrow fee ($0.04 million). The sale of the Series J Preferred Stock was made pursuant to a subscription agreement between the Company and holders ofcertain investors in the Series F Preferred Stock entered into separate Amendment and Exchange Agreements pursuant to which the holders of Series F Preferred Stock exchangedJ Offering.

The shares of Series FJ Preferred Stock for sharescarry a liquidation preference equal to the greater of our(i) the stated value or (ii) the amount the holder would receive as a holder of common stock if such holder had converted the Series F-1J Preferred Stock immediately prior to such liquidation, dissolution or winding up. Each holder of Series J Preferred Stock is entitled to vote on all matters submitted to stockholders of the Company and is entitled to a one-for-one basis. On November 26, 2013, an aggregatevote of 304,25067.3% of the number of votes for each share of common stock into which the Series J Preferred Stock is convertible owned at the record date for the determination of stockholders entitled to vote on such matter. Subject to certain ownership limitations as described below, shares of Series F-1 were issued in exchange for 304,250 shares of Series F Preferred Stock. As of December 9, 2013, 304,250 shares of Series F-1J Preferred Stock were outstanding.


Each share of Series F-1 Preferred Stock isare convertible at any time at the option of the holder atinto shares of common stock in an amount equal to one-nineteenths of a share of common stock for each one share of Series J Preferred Stock surrendered.  Subject to limited exceptions, holders of shares of Series J Preferred Stock do not have the right to convert any time,portion of their Series J Preferred Stock that would result in the holder, together with its affiliates, beneficially owning in excess of 9.99% of the number of shares of common stock outstanding immediately after giving effect to its conversion; notwithstanding the foregoing, some Investors elected to have the 9.99% beneficial ownership limitation to initially be 4.99%.

On May 28, 2014 all shares of Series J Preferred Stock were converted into one (1)an aggregate of 526,315 shares of common stock. 

As of March 31, 2017, December 2016, and December 2015,no shares of Series J Preferred Stock are issued and outstanding.

Series K Convertible Preferred Stock

 On December 2, 2015, the Company designated 1,240 shares of preferred stock as Series K Preferred Stock.  On December 7, 2015, the Company issued 1,240 shares of Series K Preferred Stock in December 2015 Offering.  Each share of Series K Preferred Stock is convertible into five thousand-nineteenths of a share of common stock and has a stated value of $0.0001.  Such$1,000.  The conversion ratio is subject to adjustment in the caseevent of stock splits, stock dividends, combination of shares and similar recapitalization transactions. Each shareThe Series K Preferred do not generally have any voting rights but are convertible into shares of common stock. At no time may shares of Series F-1K Preferred Stock is entitled to 91% of one vote per share (subject to beneficial ownership limitation) and shall vote together with holders of our common Stock.  We are prohibited from effecting the conversion of the Series F-1 Preferred Stock to the extent that, as a result ofbe converted if such conversion would cause the holder will beneficially own more than 9.99%to hold in the aggregateexcess of 4.99% of the issued and outstanding common stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding common stock on 61 days’ written notice to the Company.  The conversion ratio of the Series K Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

Since January 1, 2016, stockholders have converted all 1,240 shares of our common stock calculated immediately after giving effect to the issuance ofSeries K Preferred Stock into 326,315 shares of common stock upon the conversion of the Series F-1 Preferred Stock.

Options

stock.

As of March 31, 2017, December 9, 2013, 2,006,714 options were2016, and December 2015, none, none and 1,240 shares, respectively, of Series K Preferred Stock are issued under our 2013 Equity Incentive Plan and 6,663 options were issued under our previously adopted 1997 Plan.outstanding.

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Warrants

A summary of warrant activity for the three months ended March 31, 2017 and the year ended December 31, 2016 is presented below:

  Warrants  Weighted Average
Exercise Price
  Total Intrinsic Value  Weighted Average
Remaining Contractual
Life
(in years)
 
Outstanding as of December 31, 2015  2,304,888  $7.98  $-   2.83 
Exercised  (200,000)  3.80         
Expired  (854,577)          - 
Outstanding as of December 31, 2016  1,250,311  $9.21       3.91 
Exercisable as of December 31, 2016  1,250,311  $9.21  $-   3.91 
Outstanding as of March 31, 2017  1,250,311   9.21       3.67 
Exercisable as of March 31, 2017  1,250,311   9.21       3.67 

Transfer Agent and Registrar


The transfer agent and registrar for our common stock is Equity Stock Transfer, with an address at 110 Greene Street, Suite 403, New York, NY 10012.


Listing


Our common stock is listed on the NASDAQ Capital Market under the symbol “SPEX”. We have not applied to list our common stock on any other exchange or quotation system.

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Limitations on Directors’ Liability


Our certificate of incorporation and bylaws contain provisions indemnifying our directors and officers to the fullest extent permitted by Delaware law.

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In addition, as permitted by Delaware law, our certificate of incorporation provides that no director will be liable to us or our stockholders for monetary damages for breach of the director’s fiduciary duty as a director. The effect of this provision is to restrict our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach of the director’s fiduciary duty as a director, except that a director will be personally liable for:


·any breach of his or her duty of loyalty to us or our stockholders;

·acts or omissions not in good faith which involve intentional misconduct or a knowing violation of law;

·the payment of dividends or the redemption or purchase of stock in violation of Delaware law; or

·any transaction from which the director derived an improper personal benefit.

This provision does not affect a director’s liability under the federal securities laws.


To the extent that our directors, officers and controlling persons are indemnified under the provisions contained in our certificate of incorporation or Delaware law against liabilities arising under the Securities Act of 1933, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.


Provisions of Ourour Certificate of Incorporation and Bylaws, our Shareholder Rights Plan, and Delaware Law that May Have an Anti-Takeover Effect


Certain provisions set forth in our certificateAmended and Restated Certificate of incorporationIncorporation and Amended and Restated Bylaws, our Amended and Restated Shareholder Rights Plan, and Delaware law which are summarized below, maycould have an anti-takeoverthe effect and may delay, deterof discouraging potential acquisition proposals or preventmaking a tender offer or takeover attempt thatdelaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

Certificate of Incorporation and Bylaws

In particular, our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, among other things:

authorize our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock;
provide that stockholders must provide advance notice to nominate persons for election to our board of directors or submit proposals for consideration at stockholder meetings;
specify that special meetings of our stockholders can be called only by our board of directors or by any officer instructed by the board of directors to a call a special meeting;
provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum, or by the sole remaining director; and
provide the board of directors with the ability to alter the bylaws without stockholder approval.

Shareholder Rights Plan

On January 1, 2013, and as amended and restated on June 9, 2017, we adopted a stockholder rights plan in which rights to purchase shares of Series A Preferred Stock were distributed as a dividend at the rate of one right for each share of common stock. The rights are designed to guard against partial tender offers and other abusive and coercive tactics that might be used in an attempt to gain control of Spherix or to deprive our stockholders of their interest in the long-term value of Spherix. These rights seek to achieve these goals by forcing a potential acquirer to negotiate with our board of directors (or go to court to try to force the Board of Directors to redeem the rights), because only the Board of Directors can redeem the rights and allow the potential acquirer to acquire our shares without suffering very significant dilution. However, these rights also could deter or prevent transactions that stockholders deem to be in their interests, and could reduce the stockholder’s best interests, including attemptsprice that investors or an acquirer might be willing to pay in the future for shares of our common stock.

64

Each right entitles the registered holder to purchase one nineteen-hundredth of a share (a “Unit”) of our Series A Preferred Stock. Each Unit of Series A Preferred Stock will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock. In the event of liquidation, the holders of the Units of Series A Preferred Stock will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each Unit of Series A Preferred Stock will have 100 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each Unit of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. These rights are protected by customary anti-dilution provisions.

The rights will be exercisable only if a person or group acquires ten percent (10%) or more of our common stock (subject to certain exceptions stated in the plan) or announces a tender offer the consummation of which would result in ownership by a premium being paid overperson or group of ten percent (10%) or more of our common stock. Our board of directors may redeem the marketrights at a price forof $0.001 per right. The stockholder rights plan provides that the shares heldrights will expire at the close of business on December 31, 2020 unless the expiration date is extended or unless the rights are earlier redeemed or exchanged by stockholders.


the Company.

Delaware Takeover Statute


Section 203 of the Delaware General Corporation Law (“DGCL”)DGCL prohibits a Delaware corporation that is a public company from engaging in any “business combination” (as defined below) with any “interested stockholder” (defined generally as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with such entity or person) for a personperiod of three years following the date that such stockholder became an interested stockholder, unless:


·before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
·upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
·on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 of the Delaware General Corporation LawDCGL defines “business combination” to include:


·any merger or consolidation involving the corporation and the interested stockholder;
·any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
·subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
·any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
·the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
·Disclosure of SEC Position on Indemnification for Securities Act Liabilities
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Disclosure of SEC Position on Indemnification for Securities Act Liabilities

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers and persons controlling us, we understand that it is the SEC’s opinion that such indemnification is against public policy as expressed in the Securities Act and may therefore be unenforceable.

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PLAN OF DISTRIBUTION

The selling stockholders may,

UNDERWRITING

Laidlaw & Company (UK) Ltd. is acting as the representative of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from time to time, sell, transfer, or otherwise disposeus, the number of any or all of its shares of common stock on any stock exchange, market, or trading facility on whichset forth opposite its name below.

UnderwritersNumber of Shares

Laidlaw & Company (UK) Ltd.

Total

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are tradedpurchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated. The underwriters are not obligated to purchase the shares of common stock covered by the underwriters' over-allotment option described below.

The underwriters are offering the shares subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in private transactions. These dispositions may be at fixed prices, at prevailing market prices atpart.

Commissions, Discounts and Expenses

We have agreed to pay the timeunderwriters an underwriting discount equal to 8.0% of sale, at prices relatedthe aggregate gross proceeds raised in this offering. The following table summarizes the underwriting discounts and commissions we will pay to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

The selling stockholders may use any one or moreunderwriters. These amounts are shown assuming both no exercise and full exercise of the following methods when disposing of shares or interests therein:

underwriters' option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the shares.

 ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;Total
 block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
   
 privately negotiated transactions;Per ShareWithout
Over-Allotment
With
Over-Allotment
Public offering price$$$
Underwriting discount$$$
Proceeds, before expenses, to us$$$

We have agreed to pay an accountable expense allowance to the representative of the underwriters up to a maximum of $25,000; however, an allowance shall not be paid in connection with the over-allotment option if the over-allotment option is exercised, and we have agreed to pay all fees and expenses of the representative, including, without limitation, its legal fees and expenses, all such fees not to exceed $70,000 in the aggregate, inclusive of background check expenses. We have also agreed to pay the expenses relating to the offering, including, but not limited to, (1) all actual filing fees incurred in connection with the review of this offering by the Financial Industry Regulatory Authority, Inc., or FINRA, (2) all fees and expenses relating to the listing of our shares of common stock on the Nasdaq Capital Market, (3) all actual fees, expenses and disbursements relating to the registration, qualification or exemption of the shares of common stock being offered by this prospectus under state securities laws, or "blue sky" laws, or under the securities laws of foreign jurisdictions designated by the representative, (4) all actual fees, expenses and disbursements relating to the registration, qualification or exemption of our shares of common stock under the securities laws of such foreign jurisdictions as the representative may reasonably designate, (5) all actual fees, expenses and disbursements relating to background checks of our officers and directors not to exceed $10,000, (6) the costs of all mailing and printing of the underwriting documents as the representative may reasonably deem necessary, and (7) the legal fees and expenses and fees and expenses of any other agents and representatives of the Company incurred as a result of the offering.

 66broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; or
a combination of any such methods of sale.

The aggregate proceedsexpenses of the offering, not including the underwriting discount, are estimated at approximately $_______ and are payable by us.

Option to Purchase Additional Shares

We have granted an option to the underwriters, exercisable for 45 days after the date of this prospectus, to purchase up to ___________ additional Shares at the public offering price, less the underwriting discount. If the underwriters exercise this option, each underwriter will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional Shares proportionate to that underwriter's initial amount reflected in the above table.

Lock-Up Agreements

Pursuant to certain "lock-up" agreements, for a period of ninety (90) days from the effective date of the offering, we and our named executive officers and directors have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriter.

The representative may, in its sole discretion and at any time or from time to time before the termination of the lock-up periods release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our stockholders from anywho will execute a lock-up agreement, providing consent to the sale of shares prior to the common stock offeredexpiration of the lock-up period.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stabilization, Short Positions and Penalty Bids

In connection with the offering, the underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by it will beshort sales, and penalty bids or purchases for the purchasepurpose of pegging, fixing or maintaining the price of the common stock, less discountsin accordance with Regulation M under the Exchange Act:

•Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or commissions, if any.a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The selling stockholders reservesunderwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the rightopen market. In determining the source of shares to accept and, together with its agents from timeclose out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to time,the price at which they may purchase shares through their option to reject, in whole or in part, any proposed purchase of common stockadditional shares. A naked short position is more likely to be made directly or through agents. We would not receive any ofcreated if the proceeds from any such sale.


The selling stockholders also may resell all or a portionunderwriters are concerned that there could be downward pressure on the price of the shares in the open market transactions in reliance upon Rule 144 promulgated under the Securities Act, providedafter pricing that it meets the criteria and conform to the requirements of that rule.

The selling stockholders and any broker-dealers or agents that participatecould adversely affect investors who purchase in the saleoffering.

67

•Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

•Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be deemedhigher than the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq Capital Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representative will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Listing and Transfer Agent

Our Common Stock is listed on The NASDAQ Capital Market and trades under the symbol “SPEX.” The transfer agent of our Common Stock is Vstock Transfer, LLC, with an address at 18 Lafayette Place, Woodmere, NY 11598.

Electronic Distribution

A prospectus in electronic format may be made available on the websites maintained by one or more underwriters or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares of common stock to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representative to underwriters and selling group members that may make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters' websites and any information contained in any other website maintained by the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part.

Other Relationships

From time to time, certain of the underwriters and their affiliates have provided, and may provide in the future, various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they have received and may continue to receive customary fees and commissions. However, except as disclosed in this prospectus, we have no present arrangements with any of the underwriters for any further services.

Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

68

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or the Relevant Member States, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, or the Relevant Implementation Date, our securities will not be offered to the public in that Relevant Member State prior to the publication of a prospectus in relation to the securities that has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of securities may be made to the public in that Relevant Member State at any time:

to any legal entity that is a qualified investor as defined in the Prospectus Directive;

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the manager for any such offer; or

in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3(2) of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of common shares to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the common shares to be “underwriters”offered so as to enable an investor to decide to purchase or subscribe the common shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

We have not authorized, and do not authorize the making of, any offer of shares through any financial intermediary on our behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated by this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the shares on our or the underwriters' behalf.

United Kingdom

Our securities may not be offered or sold and will not be offered or sold to any persons in the United Kingdom other than persons whose ordinary activities involve acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses and in compliance with all applicable provisions of the Financial Services and Markets Act 2000, or FSMA, with respect to anything done in relation to our securities in, from or otherwise involving the United Kingdom.

In addition, each underwriter:

has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to us; and

has complied with, and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

69

Australia

No prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth) of Australia, or the Corporations Act) in relation to the securities has been or will be lodged with the Australian Securities & Investments Commission, or the ASIC. This document has not been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:

(1)   you confirm and warrant that you are either:

(a)   a "sophisticated investor" under section 708(8)(a) or (b) of the Corporations Act;

(b)   a "sophisticated investor" under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant's certificate to us which complies with the requirements

of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

(c)   a person associated with us under section 708(12) of the Corporations Act; or

(d)   a "professional investor" within the meaning of Section 2(11)section 708(11)(a) or (b) of the Corporations Act, and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act, any offer made to you under this document is void and incapable of acceptance; and

(2)   you warrant and agree that you will not offer any of the securities for resale in Australia within 12 months of those securities being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

Hong Kong

The securities may not be offered or sold in Hong Kong by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (2) to "professional investors" within the meaning of the Securities Act.and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (3) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Japan

The securities offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (2) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

70

Where the securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

where no consideration is or will be given for the transfer; or

where the transfer is by operation of law.

Switzerland

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, us, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.

Canada

Resale Restrictions

The distribution of our securities in Canada is being made only in the provinces of Ontario, Quebec, Alberta, British Columbia and Manitoba on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any discounts, commissions, concessionsresale of the common stock in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or profit they earn onunder a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the shares may be underwriting discountscommon stock.

71

Representations of Purchasers

By purchasing securities in Canada and commissionsaccepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:

the purchaser is entitled under applicable provincial securities laws to purchase the securities without the benefit of a prospectus qualified under those securities laws as it is an "accredited investor" as defined under National Instrument 45-106—Prospectus and Registration Exemptions;

the purchaser is a "Canadian permitted client" as defined in National Instrument 31-103—Registration Requirements and Exemptions, or as otherwise interpreted and applied by the Canadian Securities Act. The selling stockholders are subjectAdministrators;

where required by law, the purchaser is purchasing as principal and not as agent;

the purchaser has reviewed the text above under "—Resale Restrictions"; and

the purchaser acknowledges and consents to the prospectus delivery requirementsprovision of specified information concerning the purchase of the securities to the regulatory authority that by law is entitled to collect the information, including certain personal information. For purchasers in Ontario, questions about such indirect collection of personal information should be directed to Administrative Support Clerk, Ontario Securities Act.Commission, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8 or on (416) 593-3684.

Rights of Action—Ontario Purchasers

Under Ontario securities legislation, certain purchasers who purchase any securities offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the securities, for rescission against us in the event that this prospectus contain a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the securities. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the securities. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the securities were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the common stock as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

72

LEGAL MATTERS

    The

Ellenoff Grossman & Schole LLP, New York, New York, will pass upon the validity of the issuanceshares of the securitiesour common stock offered herebyhereby. Certain legal matters in connection with this offer will be passed upon for usthe underwriters by Baxter, Baker, Sidle, ConnSheppard, Mullin, Richter & Jones, P.A.

Hampton LLP.

EXPERTS

    The

Marcum LLP, an independent registered public accounting firm, has audited our consolidated financial statements as of andincluded in our Annual Report on Form 10-K for the yearsyear ended December 31, 2012 and 2011, included2016, as set forth in their report dated March 31, 2017, which is incorporated by reference in this prospectus and elsewhere in the registration statement have been so includedstatement. Our consolidated financial statements are incorporated by reference in reliance upon theon Marcum LLP’s report, of Grant Thornton LLP, independent registered public accounting firm, upongiven on the authority of saidsuch firm as experts in accounting and auditing in giving said report.auditing.

73

    The audited financial statements of North South Holdings, Inc. as of December 31, 2012 and for the period from November 9, 2012 (inception) through December 31, 2012 included in this prospectus and elsewhere in the registration statement have been so included in reliance upon the report of Marcum LLP, an independent registered public accounting firm, upon the authority of said firm as experts in accounting and auditing in giving said report.
-41-

WHERE YOU CAN FIND MORE INFORMATION

INORMATION AND INCORPORATION BY REFERENCE

We have filed with the SEC a registration statement on Form S-1 together with any amendments and related exhibits, under the Securities Act with respect to ourthe shares of common stock offered by this prospectus. Thehereby. This prospectus, which constitutes a part of the registration statement, contains additionaldoes not contain all of the information set forth in the registration statement or the exhibits filed with the registration statement. For further information about us and our shares ofthe common stock thatand warrants offered hereby, we refer you to the selling stockholders are offeringregistration statement and the exhibits filed with the registration statement. Statements contained in this prospectus.


prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the filed exhibits may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

We are subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, are required to file annual, quarterly and currentperiodic reports, proxy statements and other information with the SEC. You may read, without charge,These periodic reports, proxy statements and copy the documents we fileother information are available for inspection and copying at the SEC’s public reference rooms in Washington, D.C. at 100 F Street, NE, Room 1580, Washington, DC 20549,facilities and the website of the SEC referenced above. We make available free of charge, on or in New York, New Yorkthrough the investor relations section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and Chicago, Illinois. You can request copiesamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of these documents by writingthe Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information found on our website, other than as specifically incorporated by reference in this prospectus, is not part of this prospectus.

The SEC and paying a fee forallows us to incorporate by reference the copying cost. Please callinformation we file with it, which means that we can disclose important information to you by referring you to another document that we have filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference that we filed with the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also availableprior to the public at no cost from the SEC’s website at http://www.sec.gov.

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Index to Financial Statements Page
Audited Financial Statements for the Years ended December 31, 2012 and 2011
Page
Report of Independent Registered Public Accounting FirmF-2
Consolidated Statements of Operations for the years ended December 31, 2012 and 2011F-3
Consolidated Balance Sheets for the years ended December 31, 2012 and 2011F-4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2012 and 2011F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011F-6
Notes to Consolidated Financial StatementsF-7
Unaudited Condensed Consolidated Financial Statements for the Three and Nine months ended September 30, 2013 and 2012
Page
Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012F-24
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012F-25
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012F-26
Notes to Condensed Consolidated Financial StatementsF-27
North South Holdings Inc. and Subsidiary Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting FirmF-45
Consolidated Balance SheetsF-46
Consolidated Statements of OperationsF-47
Consolidated Statement of Changes in Stockholders' EquityF-48
Consolidated Statements of Cash FlowsF-49
Notes to Consolidated Financial StatementsF-50

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Spherix Incorporated


We have audited the accompanying consolidated balance sheets of Spherix Incorporated (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Spherix Incorporated and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ Grant Thornton LLP

McLean, VA
March 20, 2013
F-2

Spherix Incorporated
Consolidated Statements of Operations
For the Years Ended December 31, 2012 and 2011
  2012  2011 
       
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 
The accompanying notes to financial statements are an integral part of these financial statements.
F-3


Spherix Incorporated
Consolidated Balance Sheets
As of December 31, 2012 and 2011

ASSETS 2012  2011 
Current assets      
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 
The accompanying notes to financial statements are an integral part of these financial statements.

F-4


Spherix Incorporated
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 2012 and 2011
  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  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  -   -   47,969   5   1,144,527   -   -   -   1,144,532 
Stock-based compensation  -   -   -   -   35,534   -   -   -   35,534 
Net income  -   -   -   -   -   -   -   19,585   19,585 
                                     
Balance, December 31, 2011  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 

The accompanying notes to financial statements are an integral part of these financial statements.
F-5

Spherix Incorporated
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012 and 2011
  2012  2011 
Cash flows from operating activities      
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 
The accompanying notes to financial statements are an integral part of these financial statements.
F-6

Spherix Incorporated
Notes to Consolidated Financial Statements

1.        Summary of Significant Accounting Policies

           Nature of Business and Basis of Presentation

           The Company previously operated via two principal segments, Biospherics, our biotechnology research and development business, and Health Sciences, a technical and regulatory consulting business.  The Health Sciences business provided technical and regulatory consulting services to biotechnology and pharmaceutical companies, as well as providing technical support for the Company’s own R&D activities.  The Company generally provided its consulting services on either a fixed price basis or on a “time and expenses” basis, charging hourly rates for each staff member involved in a project, based on his or her skills and experience. 
During the years covered by this report, the Company had two wholly-owned subsidiaries, Biospherics Incorporated and Spherix Consulting, Inc., for its two operating segments.  The Company’s Health Sciences contracts are in the name of Spherix Consulting, Inc. and the Company’s patents are in the name of Biospherics Incorporated.  Spherix Incorporated provides management, strategic guidance, business development, marketing and other services to its subsidiaries.  The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale of the subsidiary.  Certain assets of Spherix Consulting, Inc. were retained by the Company but are presented as assets held for sale in the consolidated balance sheet at December 31, 2012 as they relate to the discounted operations.

On May 6, 2011, the Company effected a one-for-ten reverse split of its common stock.  The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on November 17, 2009.  The reverse stock split reduced the number of outstanding shares of Common Stock from 25,624,872 shares to 2,562,488 shares at that time.
On September 21, 2012, the Company effected a one-for-twenty reverse split of its common stock.  The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on August 14, 2012.  The reverse stock split reduced the number of outstanding shares of Common Stock from 4,159,777 shares to 207,806 shares.  All per share amounts and outstanding shares, including all Common Stock equivalents, stock options, equity compensation plans, and warrants, have been retroactively adjusted in the Financial Statements and in the Notes to the Financial Statements for all periods presented to reflect the reverse stock split.
           The consolidated financial statements include the accounts of Spherix Incorporated and Biospherics Incorporated.  All intercompany balances and transactions have been eliminated in consolidation.

           Use of Estimates and Assumptions

           The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).  This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements,this prospectus. We incorporate by reference into this prospectus and the reported amountsregistration statement of revenue and expenses duringwhich this prospectus is a part the period.  Significant estimates include the fair value of warrants, the valuation allowance on deferred tax assets, stock compensation expense, amortization and depreciation.  Accordingly, actual results could differ from those estimates and assumptions.

           Cash and Cash Equivalents

           The Company considers all highly liquid investments with original maturities of three monthsinformation or less when purchased to be cash and cash equivalents.  The Company maintains cash balances at several banks.  Interest bearing accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.  At December 31, 2012, the Company’s interest bearing deposits in excess of the FDIC limits was $4.5 million.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

F-7

    Property and Equipment and Depreciation

           Property and equipment are stated at cost and consist of office furniture and equipment, computer hardware and software, and leasehold improvements.  The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets:
    Office furniture and equipment             3 to 10 years
    Computer hardware and software                    3 to 5 years

           Leasehold improvements are depreciated or amortized over the shorter of the term of the related lease or the estimated useful lives of the assets (generally 5 to 10 years).  Major additions, improvements and renewals are capitalized at cost and ordinary repairs, maintenance, and renewals are expensed in the year incurred.  Gains or losses from the sale or retirement of property and equipment result from the difference between sales proceeds (if any) and the assets’ net book value, and are recorded in the consolidated Statements of Operations.

Impairment of Long-Lived Assets
Whenever events or changes in circumstances indicatedocuments listed below that the carrying amount of long-lived assets, including patents and property and equipment, may not be fully recoverable, the Company evaluates the probability that the future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets.  If any impairment is indicated as a result of this review, the Company would recognize a loss based on the amount by which the carrying amount exceeds the estimated fair value, determined based on the discounted future cash flows.  In 2012 and 2011, no such impairment was noted.

Treasury Stock

The Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders’ equity.

Common Stock Purchase Warrants
The Company accounts for the issuance of Common Stock purchase warrants issued in connectionwe have filed with the equity offerings in accordance with the provisionsSEC (Commission File No. 000-05576), excluding any portions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contractsCurrent Report on Form 8-K that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own 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 choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

See Note 2 relatedare not deemed “filed” pursuant to the restatement for the accounting for stock purchase warrants.

Preferred Stock

Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Accordingly the Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the controlGeneral Instructions of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares as a component of stockholders’ equity.
Form 8-K:


The Company’s Series B Convertible Preferred Stock does not feature any redemption rights within the holders’ control or conditional redemption features not solely within the Company’s control as of December 31, 2012.  Accordingly, the Series B Convertible Preferred Stock is presented as a component of stockholders’ equity.

F-8


    Revenue Recognition

           Revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the contract price is fixed or determinable and collectability is reasonably assured.  On time and expense contracts revenue is recognized at contractually agreed-upon rates based upon direct labor hours expended and other direct costs incurred.  Revenue for fixed-price contracts is recognized under the proportional performance method based upon labor charged in relation to total expected labor charges.  Losses, if any,our Annual Report on contracts are recorded during the period when first determined.

           Research and Development Costs
    Research and development costs are charged to operations as incurred.
    Selling, General and Administrative Expense

           The Company’s selling, general and administrative expenses consist primarily of executive management salaries and fringe benefits, sales and marketing costs, finance and accounting, human resources, as well as general corporate costs and costs related to being a public company.

Other Income from Change in Fair Value of Warrants
The fair value of warrants is measured each quarter and the change in fair value between periods is recognized as other income or expense in the respective periods.

Loss on Issuance of Warrants
The loss on issuance of warrants reflects the difference in the fair market value of the warrants as determined using the Black-Scholes option valuation method and the proceeds received.  The proceeds received from Warrants issued with other instruments (such as common stock or preferred stock) are determined based upon the fair value of liability classified warrants with the residual allocated to the other instruments.

Other Income
Other income consists of two grants from the U.S. Government awarded in October 2010 in support of the Company’s diabetes and triglyceride research.  As a result, in 2011 the Company recognized $51,000 in other income and a related tax expense of $14,000.  No grant awards were recognized in 2012.

Income Taxes
       Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  A valuation allowance is established based upon periodic assessments made by management to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the current tax provision for the period and the change during the period in deferred tax assets and liabilities.
The Company’s policy is to recognize interest and penalties on tax liabilities as interest expense.  At December 31, 2012 and 2011, the Company had no unrecognized income tax benefits and recognized no interest or penalties on income tax liabilities.

Discontinued operations
  The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale.  The Spherix Consulting segment generated nearly all of the Company’s revenue and provided technical support for the Company’s Biospherics segment.

F-9

  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 Information

           We group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from available pricing sources for market transactions involving identical assets or liabilities.

Level 2Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The estimated fair value of the Company’s warrants was determined by the use of unobservable Level 3 inputs.  The warrants are measured at estimated fair value using the Black-Scholes valuation model, which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of issuance, and at each subsequent reporting period, based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our historical rate. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates. However these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different.

At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively (see note 9 – Warrant Liability).  The Company’s other financial instruments, which consist only of cash and cash equivalents approximate their carrying value given their short maturities.  
 The following table summarizes the activity of Level 3 inputs measured on a recurring basisForm 10-K for the year ended December 31, 2012:
  
Fair Value Measurements of Warrants Using Significant Unobservable Inputs
(Level 3)
 
Balance at December 31, 2011 $3,125,000 
     
Change in fair value of Warrant Liability  (2,208,000)
     
Balance at December 31, 2012 $917,000 
F-10

    Accounting for Stock-Based Compensation

           The Company applies2016 filed with the fair value method, which requires that the fair value measurement of all employee share-based payments to employees, including grants of employee stock options, be expensed over their requisite service period basedSEC on their value at the grant date using their fair value, determined using a prescribed option-pricing model.  The Company uses a Black-Scholes option valuation method to value stock options.  For the years ended DecemberMarch 31, 2012 and 2011, the Company recognized $56,000 and $36,000, respectively, in stock based compensation expense relating to the issuance of 2,250 stock options awarded in November 2011, the issuance of 1,333 stock options awarded in April 2010 and the issuance of 2,950 stock options awarded in February 2006 (see Note 10, “Stockholders’ Equity”).2017;


           Net (Loss) Income Per Share

           Basic net (loss) income per common share has been computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the year.  Diluted net income per common share has been computed by dividing net income by the weighted-average number of common shares outstanding plus an assumed increase in common shares outstanding for common stock equivalents.  At December 31, 2012, the exercise price of 1,151 of the Company’s 7,163 outstanding options and 483,657 of the Company’s 550,664 warrants was below the average market price of the Company’s common stockOur Quarterly Report on Form 10-Q for the period however these were excluded fromended March 31, 2017 filed with the dilutive calculation as their inclusion would have been anti-dilutive.  At December 31, 2011,SEC on May 12, 2017; and

our Current Reports on Form 8-K filed with the exercise price of 293sharesSEC on February 9, 2017, March 15, 2017, June 12, 2017, June 20, 2017 and July 3, 2017.

Any information in any of the Company’s 2,425 outstanding options and 27,427 shares of the Company’s 55,391 warrants was below the average market price of the Company’s common stock for the period.

 Diluted earnings per share Calculation December 31, 2012  December 31, 2011 
       
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)
New Accounting Pronouncements
    In June 2011, the FASB issued a new accounting standard on the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive incomeforegoing documents will automatically be deemed to be modified or in two separate but consecutive statements. The new standard was effective for fiscal years beginning after December 15, 2011 with retrospective application.  The adoption of the new standard had no impact on the Company’s financial statements as the Company has no items which would be included in comprehensive income other than net income (loss).  The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented.  In December 2011, the FASB deferred the effective date for amendmentssuperseded to the presentation of reclassifications of items out of accumulated other comprehensive income, while still requiring entities to adopt the other requirements.  We adopted the new standard on January 1, 2012.  The adoption ofextent that information in this standard had no impact on our consolidated financial statements.  In February of 2013, the FASB issued a new accounting standard to improve the transparency of reporting reclassifications out of accumulated other comprehensive income by requiring entities to present in one place information about significant amounts reclassified and, in some cases, to provide cross-references to related footnotes.  We are required to adopt this standard as of the beginning of 2013. We do not expect this adoption to have a material impact on our financial statements.
In May 2011, the FASB issued a new accounting standard  which was an  amendment to achieve common fair value measurement and disclosure requirements in GAAP and international financial reporting standards (“IFRS”).  The amendments explain how to measure fair value and will improve the comparability of fair value measurement presented and disclosed in financial statements prepared in accordance with GAAP and IFRS.  The standard requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as transfers between Level 1 and Level 2 of the fair value hierarchy.  This authoritative guidance is to be applied prospectively. The standard was effective and adopted by the Company during 2012.
F-11

2.           Liquidity

We continue to incur ongoing administrative and other expenses, including public company expenses, without any corresponding revenue.  If we re-commence our pharmaceutical development efforts, we will begin to incur substantial development costs and will not likely receive any revenue for the foreseeable future.

Untilprospectus modifies or replaces such time as we earn revenue from our pharmaceutical development business or from a new business venture, we intend to finance our activities through:

information.

·the remaining proceeds of our equity offerings; and
·additional funds we will seek to raise through the sale of additional securities in the future.

Working capital was $4.0 million and $4.6 million at December 31, 2012 and December 31, 2011, and cash on hand was $4.5 million and $4.9 million, respectively.  Management believes that this cash on hand will be sufficient to sustain operations for the next twelve months.

In early December 2012, we sold the stock of our subsidiary Spherix Consulting, Inc. for nominal consideration.  This sale allows the Company to minimize its administrative and other costs pending completion of the Company’s review of its strategic alternatives.
In November 2012, the Company obtained net proceeds of approximately $2.3 million in a private placement of common stock and warrants.   The Company sold an aggregate of 483,657 shares of common stock at a price of $5.324 per share along with warrants to purchase an additional 483,657 shares of common stock at an exercise price of $6.53 per share.  The warrants are exercisable for a period of five years.  The Company has agreed to register the common stock sold in the offering and the common stock issuable upon exercise of the warrants.  Failure on the part of the Company to satisfy certain registration deadlines may subject the Company to payment of certain monetary penalties.  The investors have agreed to temporarily waive their right to cause the Company to register these shares.  The investors have the right to participate for 100% of any future debt or equity offerings of the Company during the two years following the Closing.

In early 2013, nearly all of the warrants issued in November 2012 were exchanged for shares of Series C Convertible Preferred Stock.
In February 2012, the Company obtained net proceeds of approximately $1.1 million in a registered direct offering of common stock and warrants.   Both the common stock issued in the offering and the underlying common stock for the warrants issued in the offering were previously registered under a Form S-3 shelf registration statement declared effective by the SEC in October 2009.
We believe our current capital is inadequate to pursue business opportunities, which we may desire to pursue in the future and as a result we anticipate we will need to raise additional funds from time to time, which could take the form of debt, equity, convertible securities or a combination of the above.  We may be required to raise capital at prices that are below our current market capitalization value.

The Company cannot be assured that it will be able to attract an investor in our securities or raise the additional funds it will likely require in the future; that the Company will be able to obtain any required stockholder approval; or that the Company will be able to successfully complete additional offerings or sales of its securities.  If we reach a point where we are unable to raise needed additional funds to continue our business activities, we will be forced to cease our business activities in which case the Company could also be required to terminate its operations and dissolve.  However, we believe that the Company presently has sufficient cash balances to continue as a going concern for the next 12 months based upon its reduced requirements for salaries and other expenses following the disposition of the consulting segment and the reduced activity of its research and development program.
F-12

3.           Accounts Receivable

Credit is extended to customers based on an evaluation of a customer’s financial condition and, in general, collateral is not required.  Management regularly reviews accounts receivable for uncollectible and potentially uncollectible accounts, and when necessary establishes an allowance for doubtful accounts.  Balances that are outstanding after management has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts and a credit to accounts receivable.

At December 31, 2012 and 2011, the allowance for doubtful accounts was $0 and $8,000, respectively.

Balance, January 1, 2011$-
Provision for doubtful accounts8,000
Balance December 31, 20118,000
Bad debt recovery(8,000)
Balance December 31, 2012$-74 

 

Shares of Common Stock

PRELIMINARY PROSPECTUS

Laidlaw & Company (UK) Ltd.

, 2017

75
4.           Property and Equipment


              The components of property and equipment 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 

              The Company’s depreciation expense for the years ended December 31, 2012 and 2011 was $64,000 and $66,000, respectively.

5.           Patents and Intangible Assets

              The Company’s amortization expense for the years ended December 31, 2012 and 2011 was $0 and $2,000 on patents with an original value of $53,000, of which $2,000 and $51,000 expired in 2012 and 2011, respectively.

6.           Accounts Payable and Accrued Expenses

              Accounts payable and accrued

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

We estimate that expenses consisted of the following at December 31:


  2012  2011 
       
Accounts payable $210,000  $106,000 
Accrued expenses  218,000   164,000 
  $428,000  $270,000 

7.           Accrued Salaries and Benefits
      Accrued salaries and benefits consisted of the following at December 31:

  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 
F-13

8.           Warrant Liability
At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively, and recognized $1.2 million and $3.7 million in other income from changes in fair value of warrants, respectively.
  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)
The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of warrants at December 31, 2011 and 2012 (as retroactively adjusted for the 2012 and 2011 reverse stock splits).
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%        

F-14

9.           Stockholders’ Equity

Equity Offerings

On November 7, 2012, the Company obtained net proceeds of approximately $2.3 million in a private placement of common stock and warrants.  The Company sold an aggregate of 483,657 shares of common stock at a price of $5.324 per share along with warrants to purchase an additional 483,657 shares of common stock at an exercise price of $6.53 per share.  Subject to certain ownership limitations, the warrants are exercisable for a period of five years.  The common stock and warrants were issued in a private placement of securities exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder.  The warrants are classified as a liability and the common stock is classified as permanent equity.  The investors shall have the right to participate for 100% of any future debt or equity offerings of the Company during the two years following the Closing.  Certain of these warrants were exchanged for shares of Series C Convertible Preferred Stock in early 2013.

On February 2, 2012, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 53,241 shares of its common stock and warrants to purchase up to an additional 10,648 shares of its common stock to such investors for gross proceeds of approximately $1.15 million.  The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.2 of a share of common stock.  The purchase price per unit was $21.60.  Subject to certain ownership limitations, the warrants are exercisable at any time commencing six (6) months after the initial issue date and on or prior to August 7, 2017, but not thereafter, at an exercise price of $28.00 per share.  The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $1.1 million.  The common stock issued in the February 2012 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009.  The warrants are classified as a liability and the common stock is classified as permanent equity.
In connection with the closing of our February 2012 offering,distribution described in this registration statement (other than brokerage commissions, discounts or other expenses relating to the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants to purchase up to 1,597 shares of our common stock at an exercise price of $27.00 per share.  The estimated fair valuesale of the warrants at the date of grant was $19,000.  The warrants are exercisable at the optionshares in this offering) will be as set forth below. We will pay all of the holder at any time beginning six (6) months after the closing through and including February 6, 2014.  These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.  These warrants are classified as a liability.
In October 2011, the Company entered into a securities purchase agreementexpenses with certain investors to sell an aggregate of 26,628 shares of its common stock and warrants to purchase up to an additional 26,628 shares of its common stock to such investors for gross proceeds of approximately $1.25 million.  The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock.  The purchase price per unit was $47.40.  Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $44.80 per share.  The net proceedsrespect to the Company fromdistribution, and such amounts, with the offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exerciseexception of the warrants issued in the offering, were approximately $1.1 million.  The common stock issued in the October 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants were registered with the Securities and Exchange Commission pursuant to a(“SEC”) registration statement on Form S-3 (File No. 333-177748), which became effective on November 21, 2011.  The warrantsfee and FINRA fee, are classified as a liability and the common stock is classified as permanent equity.
In connection with the closing of the October 2011 offering, the Company issued to Rodman & Renshaw, LLC warrants with a term of two years to purchase 799 shares of our common stock (at an exercise price of $59.00 per share).  The estimated fair value of the warrants at the date of grant was $25,000.  These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.  These warrants are classified as a liability.

F-15

On January 19, 2011, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 21,345 shares of its common stock and warrants to purchase up to an additional 10,673 shares of its common stock to such investors for gross proceeds of approximately $2.77 million.  The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock.  The purchase price per unit was $130.00.  Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $160.00 per share.  The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $2.6 million.  The common stock issued in the January 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009.  The warrants are classified as a liability and the common stock is classified as permanent equity.
In connection with the closing of our January 2011 offering, the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants with a term of two years to purchase up to 640 shares of our common stock at an exercise price of $163 per share.  The estimated fair value of the warrants at the date of grant was $42,000. These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.  These warrants are classified as a liability.

               Restricted Stock

On December 28, 2012, the Company issued 120,000 shares of restricted stock under the Company’s 2012 Equity Compensation Plan.  The total fair value of the issuances of the stock was approximately $816,000, which will be recognized as performance targets are obtained.  On December 31, 2012, the Company issued 2,250 shares of restricted stock under the Company’s 2012 Equity Compensation Plan.  The total fair value of the issuances of the stock was approximately $15,000, which will be recognized as expense over an eighteen month vesting period.  No expense was recognized in 2012.  The fair value of the stock awards was based on the closing market price of the Company's common stock on the date of the grant.

               Stock Option Plan

In late 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) which permits issuance of incentive stock options, non-qualified stock options and restricted stock.  The Plan replaced a prior incentive stock plan.  During 2012 and 2011, the Company granted 5,487 and 2,250 options to the Company’s Board of Directors and officers under the previous plan.  Options issued to employees typically vest over a four-year period and options issued to non-employee directors vested immediately upon being granted.  At December 31, 2012, there were 6,789 options under the previous plan that were fully vested.  The total unrecognized stock compensation expense at December 31, 2012 is approximately $12,000, which will be recognized over 2.9 years.

The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of stock-based compensation in accordance with ASC 718 for stock options granted in 2012 and 2011.

   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%

F-16

    Activity for the two years ended December 31, 2012, for all option grants is shown below:
  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     
           The following table summarizes information with respect to stock options outstanding at December 31, 2012:
   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     
10.     Gain on Settlement of Obligations
 On January 14, 2011, Biospherics Incorporated, a wholly-owned subsidiary of the Company, filed a Complaint For Injunction Relief And Damages in The United States District Court For The District Of Maryland against Inalco S.p.A. (the “Complaint”).  The Complaint alleged that Inalco had breached the 2009 Manufacturing Support and Supply Agreement as Inalco (i) refused to supply D-tagatose previously paid for by Biospherics, (ii) refused to provide a promised bank guarantee, and (iii) shut-down its D-tagatose production facilities.  On March 16, 2011, both parties signed a settlement agreement whereby Inalco agreed to supply Spherix with 8.5 metric tons of D-tagatose, which has been received by Spherix, and both parties have agreed to release each other from any other obligations under the previous agreement.  As a result, the Company recognized a gain of $600,000 in March 2011 on the release from its purchase obligation.
 In January 2011, the Company entered into a Letter Agreement with Gilbert V. Levin and M. Karen Levin pursuant to which the Company agreed to make a one-time lump sum payment of $450,000 to the Levins in full satisfaction of the Company’s obligation to make a series of continuing payments to the Levins relating to their prior employment by the Company.  Per the terms of the agreement, Gilbert V. Levin resigned as a member of the Board of Directors of the Company on January 13, 2011.  The Company’s estimated liability to the Levins at December 31, 2010, and prior to the above agreement was approximately $695,000.  The $450,000 lump sum payment was made on January 31, 2011, and the Company recognized the $245,000 difference as a gain on settlement of obligations in January 2011.

F-17

11.          Income Taxes

Income tax from continuing operations for 2012 and 2011 was as follows:
  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)
       The deferred tax assets as of December 31, 2011 have been restated to reflect the deferred tax assets for continuing operations only.  The tax effects of significant temporary differences representing deferred tax assets as of December 31, 2012 and 2011 are as follows:
  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 $-  $- 
At December 31, 2012 and 2011, the Company had gross operating loss carryforwards for U.S. federal income tax purposes of approximately $41.4 million and $37.9 million, respectively, which will begin to expire in 2019.  At December 31, 2012 and 2011, the Company had gross operating loss carryforwards for state income tax purposes of approximately $51.6 million and $48.6 million, respectively, which will begin to expire in 2018.  Based on the Company’s historical losses and its accumulated deficit, the Company has provided a full valuation allowance against the net deferred tax assets.

F-18

Utilization of the net operating loss carryforwards and credit could be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.  The Company has not performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code occurred.  The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change and could result in a reduction in the total net operating losses and research credits available.

           Reconciliation between actual tax benefits and taxes computed at the statutory Federal rate of 34 percent for 2012 and 2011 are as follows:
  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)
During 2010, the Company’s subsidiary, Biospherics Incorporated, received notice from the IRS that it had been awarded two grants under IRC Section 48D of the Internal Revenue Code’s “Qualifying Therapeutic Discovery Project.”  The amount received pursuant to the QTDP Grant was $0.3 million of which $0.1 million related to the income tax benefit associated with the realization or “monetization” of prior-period tax attributes for which the Company had previously established a valuation allowance.

Tax Uncertainties

The Company recognizes a tax benefit associated with an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority.  For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that it judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.  The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation.  The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company has not recognized any such adjustments.  At December 31, 2012 and 2011, the Company had no material unrecognized income tax benefits and recognized no interest or penalties on income tax liabilities.

The Company is subject to U.S. federal income tax and state and local income tax in multiple jurisdictions.  The statute of limitations for the consolidated U.S. federal income tax return is closed for all tax years up to and including 2008, except for pre-2008 tax returns that generated net operating loss carry forwards that could be adjusted on audit.  Currently, no federal or state and local income tax returns are under examination by the respective taxing authorities.

F-19

12.         Commitments and Contingencies

               Purchase Commitments
During 2009, the Company entered into a purchase commitment with a supplier of the Company’s D-tagatose product.  The agreement committed the Company to purchase 25 metric tons of D-Tagatose.  The Company utilized the D-tagatose as a part of the Phase 2 and Phase 3 trials.  This phase was necessary for the Company to be able to commercialize the product and as the products were not going to be available for sale, the Company wrote off the entire product value into Research and Development Costs.  The amounts written off in 2009 from the agreement were $1.1 million.  Of this amount $500,000 was paid in 2009 and the remaining balance of $600,000 was included in the Company’s accounts payable and accrued expenses at December 31, 2010.  On March 16, 2011, both parties signed an agreement whereby Inalco agreed to supply Spherix with 8.5 metric tons of D-tagatose for amounts previously paid for and both parties agreed to release each other from any other obligations under the previous agreement.  As a result, Spherix recognized a gain of $600,000 in 2011 on the release from its purchase obligation.

Leases

              The Company has commitments under an operating lease through 2018 relating to its administrative office in Bethesda, Maryland.  In March 2012, the Company entered into an amendment to its office building lease, which extends the term of the lease five years.  The lease as amended will expire on March 31, 2018.  Commencing on April 1, 2012, the base annual rent shall be $152,500, with an increase of 3% annually.  In addition, the Company subsequently entered into a new lease agreement in February 2013 for office space in Tysons Corner, Virginia (see subsequent event footnote 16).

              Future minimum rental payments required as of December 31, 2012, under the non-cancelable lease are as follows:

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 
       The Company’s building lease contains step rent provisions, capital improvement funding, or other tenant allowances.  Minimum rental payments including allowances on this lease are recognized on a straight-line basis over the term of the lease.  The Company incurred net operating lease rental expenses of approximately $155,000 and $129,000 for the years 2012 and 2011, respectively.
       Related Party Transactions

              At the end of December, 2012, the Company entered into a Consulting Agreement with an entity wholly-owned by Mr. Kesner, a director and interim Chief Executive Officer of the Company, pursuant to which the entity was issued 120,000 shares of common stock in exchange for its services.  The shares will vest if prior to December 31, 2017, the Company:  (i) closes an acquisition either approved by the stockholders or in excess of $25 million;  (ii) closes a private or public financing of at least $7.5 million;  (iii) sells all or substantially all of its assets;  or (iv) otherwise suffers a change in control.  In such an event, the affiliate shall also be entitled to a one-time payment of $250,000.

F-20


Mr. Kesner’s law firm has provided legal services to the company in late 2012 and  invoiced the Company approximately $40,000 for these services and is included in accrued expenses at December 31, 2012.

On November 30, 2012, but effective as of December 3, 2013, Dr. Claire L. Kruger resigned as the Chief Executive Officer/Chief Operating Officer of the Company.  In connection with Dr. Kruger’s departure, the Company paid Dr. Kruger her 2012 bonus of $143,000 and a severance of $286,000, both of which were paid during 2012.  For the other departing employees the Company agreed to pay a total of $82,000 in 2012 bonuses and approximately $211,000 in severances, which were also paid during 2012.
On December 12, 2012 the Company entered into a Retention Agreement with Mr. Clayton which provides that (i) Mr. Clayton will remain as CFO of the Company through March 31, 2013 and (ii) the Company will pay Mr. Clayton a severance of $212,180 as required by the terms of his prior employment agreement.

Under employment agreements with Dr. Gilbert V. Levin and Mrs. M. Karen Levin, the Company’s founders, the Company agreed to provide Dr. and Mrs. Levin each with lifetime payments of $12,500 each quarter and to fund long-term lifetime healthcare and health insurance policies following their retirements from the Company on August 14, 2008 and January 4, 2006, respectively.  At January 1, 2011, the Company’s liability for both Dr. and Mrs. Levin was estimated to be $450,000 for the lifetime payments and $245,000 for funding the long-term lifetime healthcare and health insurance policies based on actuarially determined amounts.  The non-current portion of these amounts was reported on the accompanying balance sheet as deferred compensation at January 1, 2011.  During 2011, the Company paid Dr. and Mrs. Levin a combined total of $24,000 in post-retirement benefits under the above agreements.
In January 2011, the Company entered into a Letter Agreement with Gilbert V. Levin and M. Karen Levin pursuant to which the Company agreed to make a one-time lump sum payment of $450,000 to the Levins in full satisfaction of the Company’s obligation to make a series of continuing payments to the Levins relating to their prior employment by the Company.  The Company’s estimated liability to the Levins at January 1, 2011, and prior to the above agreement, was approximately $695,000.  The $450,000 lump sum payment was made on January 31, 2011, and the Company recognized a gain of $245,000 in 2011.  Per the terms of the agreement, Gilbert V. Levin resigned as a member of the Board of Directors of the Company on January 13, 2011.

13.           Employee Benefit Plans

               The Spherix Incorporated 401(k) Retirement Plan (the “Plan”) is a discretionary defined contribution plan and covers substantially all employees who have attained the age of 21, have completed one year of service, and have worked a minimum of 1,000 hours in the past Plan or anniversary year.

               Under provisions of the Plan, the Company, for any plan year, has contributed an amount equal to 50% of the participant’s contribution or 2.5 of the participant’s eligible compensation, whichever is less.  The Company may, at its own discretion, make additional matching contributions to participants.  Company contributions, net of forfeitures, amounted to $31,000 and $23,000 in each of the years 2012 and 2011, respectively.

The Plan was terminated in December 2012.

14.           Information by Business Segment

               As a result of the sale of the Spherix Consulting subsidiary, the Company now has only one operating segment, Biospherics.

F-21

15.           Subsequent Events

The Company evaluated all events or transactions after December 31, 2012 through the date the financial statements were issued.

Appointment of Interim Chief Executive Officer

On February 27, 2013, Harvey J. Kesner, age 55, was appointed interim Chief Executive Officer of Spherix Incorporated (the “Company”).  Mr. Kesner currently serves as a member of the Board of Directors of the Company.
Nuta Technology Corp.

In early 2013 the Company created a new wholly-owned subsidiary, Nuta Technology Corp. (“Nuta”), organized under the laws of the state of Virginia with its principal offices in Tysons Corner, Virginia.

Office Lease Agreement

In February 2013, the Company entered into a Lease Agreement to lease 837 square feet of office space in Tysons Corner, Virginia.  The lease runs from March 1, 2013 through August 31, 2014.

Letter of Intent

On February 15, 2013, our wholly-owned subsidiary Nuta, entered into a Letter of Intent (the “LOI”) with North South Holdings, Inc. (“North South”), the owner of patents and licenses covering various aspects of wireless communications.  Pursuant to the LOI, at closing, Nuta would acquire 100% of the issued and outstanding capital stock of North South in consideration for the issuance of capital stock of the Company equal to 12,000,000 shares of the Company’s common stock.  Pursuant to the LOI, Nuta will be capitalized with a minimum of $2,000,000 cash at closing and will have engaged management familiar with commercialization of intellectual property assets.

The LOI has certain binding and non-binding obligations, including the acquisition consideration which is not subject to adjustment. However, the transaction is subject to various conditions to closing, including satisfactory completion of due diligence, approval of the Company’s shareholders and definitive documentation.  Upon completion Nuta may seek to engage in commercialization activities related to the inventions that are the subject of the patents acquired, although there can be no assurance that such efforts would be successful.
There can be no assurance that the transactions contemplated by the LOI will be consummated.
Warrant Exchange Agreement

On March 6, 2013, the Company, and certain investors that participated in the November 2012 private placement transaction (“Investors”), entered into separate Warrant Exchange Agreements pursuant to which the Investors exchanged common stock purchase warrants acquired in the private placement transaction for shares of the Company’s Series C Convertible Preferred Stock.  Each share of Series C Convertible Preferred Stock is convertible into one (1) share of Common Stock at the option of the holder, subject to certain limitations on conversions that would result in the Investors acquiring more than 4.99%/9.99% of the outstanding voting stock of the Company.  The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (“Certificate of Designation”).

Warrants were issued in November 2012 and were convertible for an aggregate of 483,657 shares of Common Stock.  The Warrants were exercisable through November 7, 2017 at an exercise price of $6.53 per share.

F-22

Pursuant to the Warrant Exchange Agreements, the Investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, convertible into one share of Common Stock for each share of Series C Convertible Preferred Stock.  The 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” 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.  The Company has agreed to register the shares of Common Stock issuable upon conversion of the Series C Convertible Preferred Stock on the same basis as the shares of Common Stock issued in the November 2012 private placement transaction.  Currently the Company is not obligated to file any registration statement for the Common Stock, or shares of Common Stock underlying the Warrants, until requested by a majority of the Investors.
Rights Agreement
Effective January 1, 2013, the Company and Equity Stock Transfer, LLC, as Rights Agent, entered into a Rights Agreement which continues through December 31, 2017.  The Rights Agreement provides each Stockholder of record a dividend distribution of one “right” for each outstanding share of Common Stock.  Rights become exercisable at the earlier of ten days following:  (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of our Common Stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning 10% or more of our outstanding Common Stock.  All rights held by an acquirer or offeror expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2017, subject to further extension.  Each right entitles a Stockholder to acquire, at a stated purchase price, 1/100 of a share of our preferred stock, which carries voting and dividend rights similar to one share of our Common Stock.  Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of our Common Stock at a price per share equal to one-half of the average market price for a specified period.  In lieu of the stated purchase price, a right holder may elect to acquire one-half of the Common Stock available under the second option.  The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement.  At the discretion of a majority of the Board and within a specified time period, we may redeem all of the rights at a price of $0.001 per right.  The Board may also amend any provisions of the Agreement prior to exercise.
Retention Agreement
In January 2013, the Company entered into a Retention Agreement with Mr. Lodder which provides that (i) Mr. Lodder will remain with the Company as an executive officer through June 30, 2013 and receive compensation at the rate previously provided to him and (ii) the Company will pay Mr. Lodder a severance of $233,398 as had been provided under the terms of his Employment Agreement, which was terminated under the terms of his Retention Agreement.
F-23

SPHERIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
  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 
See accompanying notes to condensed consolidated financial statements
F-24

SPHERIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
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 expenses            
 Amortization of patents 133,785  -  133,785  - 
 Compensation and compensation related expenses (including stock based compensation)6,392,503  89,959  7,129,025  
 
492,456
 
 Research and development expenses9,648  107,817  9,648  617,469 
 Professional fees 2,139,977  316,671  2,867,945  848,498 
 Rent 60,433  42,905  132,475  121,630 
 Depreciation expense 2,519  16,993  24,009  50,936 
 Other selling, general and administrative expenses 579,740  76,010  884,858  252,201 
               
  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) 
               
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 
See accompanying notes to condensed consolidated financial statements
F-25

SPHERIX INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
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  $- 
See accompanying notes to condensed consolidated financial statements
F-26


Notes to the Condensed Consolidated Financial Statements
(Unaudited)

1. Business, Merger and Basis of Presentation

Business and Merger

Until the sale of Spherix Consulting, Inc. in December 2012, the Company’s principal segments of Spherix Incorporated (the “Company”) have been Biospherics, the biotechnology research and development business, and Spherix Consulting, the technical and regulatory consulting business. On December 3, 2012, the Company sold all of the stock of Spherix Consulting, Inc. Accordingly, the operations of Spherix Consulting, Inc. are reported in the accompanying condensed consolidated financial statements as discontinued operations. We were formed in 1967 as a scientific research company and for much of our history pursued drug development including through Phase III clinical studies which were discontinued in 2012. The Company has shifted its focus during 2013 and is now an intellectual property company that owns patented and unpatented intellectual property.

On December 27, 2012, the Company formed a new wholly-owned subsidiary, Nuta Technology Corp., (“Nuta”), which is incorporated in the state of Virginia. On April 2, 2013, the Company entered into an Agreement and Plan of Merger, as amended (the "Merger Agreement") with its wholly owned subsidiary, Nuta, North South Holdings, Inc., a Delaware corporation ("North South"), the owner or assignee of certain patents, licenses and applications (the “North South Intellectual Property”), and the shareholders of North South (the "North South Shareholders"). On September 10, 2013 the transaction contemplated under the Merger Agreement was completed (the “Merger”). At closing, North South merged with and into Nuta with Nuta as the surviving corporation. Nuta will continue its operations in the State of Virginia as the record owner of the North South’s intellectual property. Pursuant to the terms and conditions of the Merger, at the closing of the Merger, all of North South’s 5,213 issued and outstanding shares of common stock were converted into an aggregate of 1,203,153 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and all of North South’s 491 issued and outstanding shares of Series A Preferred Stock and 107 issued and outstanding shares of Series B Preferred Stock were converted into an aggregate of 1,379,685 shares of the Company's Series D Convertible Preferred Stock, par value $0.0001 per share, which is convertible into shares of the Company’s common stock on a one-for-ten basis (collectively with the 1,203,153 common shares of the Company, the “Merger Consideration”).

The closing of the Merger was subject to customary closing conditions, including the receipt of a fairness opinion that the Merger Consideration is fair to stockholders and the Company from a financial point of view, based on, among other things, the North South Intellectual Property assets, and the approval of the Company’s shareholders holding a majority of the outstanding voting capital stock of the Company as of the record date (July 10, 2013) to issue the Merger Consideration pursuant to NASDAQ listing standards.

On July 24, 2013, the Company purchased a group of patents in the mobile communication sector (the “Purchased Patents”) from Rockstar Consortium US LP, a Delaware limited partnership (“Rockstar”) at a contractual price of $4,000,000. In consideration for the Purchased Patents, the Company paid an aggregate $3,000,000 in consideration to Rockstar, which consisted of a $2,000,000 cash payment and 176,991 shares of common stock accepted by the seller in settlement of the $1,000,000 remaining balance of the Company’s common stock (176,991 shares at $5.65 per share). The Shares are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of (i) six months from the issuance of the shares or (ii) the date that the Company’s Common Stock achieves a trading volume of at least 50,000 shares per day and a closing price of at least $15 per share for a period of five consecutive days. The Company has filed a registration statement covering the resale of the shares issued to Rockstar with the Securities and Exchange Commission (the “SEC”) on September 5, 2013. On the anniversary of one year and one day after the Company files its first complaint against a defendant with any one or more of the patents acquired in this transaction, the Company shall deliver $1,000,000 to Rockstar. The initial complaint was filed on August 30, 2013, and at that time the additional $1,000,000 was accrued and included in patent portfolio on the condensed consolidated balance sheet.

Rockstar will also be entitled to receive a percentage of future profits after recovery of patent monetization costs and an initial priority return on investment to the Company.

F-27

Basis of Presentation and Principles of Consolidation
    The accompanying condensed consolidated financial statements of the Company are unaudited and do not include all of the information and disclosures generally required for annual financial statements. In the opinion of management, the statements contain all material adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s consolidated financial position as of September 30, 2013, the consolidated results of its operations for the three-and nine-month periods ended September 30, 2013 and 2012, and the consolidated results of its cash flows for the nine-month periods ended September 30, 2013 and 2012. This report should be read in conjunction with the Company’s Annual Report on Form 10-K, which does contain the complete information and disclosure, for the year ended December 31, 2012.

The accompanying condensed consolidated financial statements include the accounts of Spherix Incorporated and its wholly-owned subsidiaries, Biospherics Incorporated and Nuta Technology Corp. Prior to the Merger with Nuta, North South formed two Delaware limited liability corporations on July 26, 2013, Guidance IP, LLC (“Guidance”) and Directional IP, LLC. (“Directional”). All significant intercompany balances and transactions have been eliminated in consolidation.

2. Liquidity and Capital Resources

The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding revenue.

The Company intends to finance its activities through:

estimates.

·managing current cash and cash equivalents on hand from our past equity offerings,
·seeking additional funds raised through the sale of additional securities in the future,
·increasing revenue from the monetization of its patent portfolios, licenseLegal fees and new business ventures.

The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer term business plan. The Company’s working capital amounted to $1,055,625 and $3,975,324 at September 30, 2013 and December 31, 2012, respectively and, cash on hand amounted to $2,541,743 and $4,498,237, respectively. Upon closing of the Merger on September 10, 2013, the North South cash balance (approximately $2,684,363) became available for the operations of the Company.

    The Company in November of 2013 sold an aggregate of 304,250 shares of its newly designated Series F Preferred Stock and 48,438 shares of common stock to five accredited investors for gross proceeds to the Company of $2,235,000 pursuant to subscription agreements. The effective purchase price per share of Common Stock and 156,250 of the Series F Preferred Stock was $6.40 for $1,310,000 of such investment and 148,000 shares of Series F Convertible Preferred Stock will be used to further the operations of the Company (Series F Convertile Preferred Stock - see Note 8, Subsequent Events).
Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. The Company may be forced to litigate against others to enforce or defend its intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims or initiate inter parties reviews in an effort to avoid or limit liability and damages for patent infringement or cause the Company to incur additional costs as a strategy. If such efforts are successful, they may have an impact on the value of the patents and preclude the Company from deriving revenue from the patents. The patents could be declared invalid by a court or the US Patent and Trademark Office, in whole or in part, or the costs of the Company can increase.

As a result, a negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact the Company’s business. Additionally, the Company anticipates that legal fees which are not included in contingency fee arrangements, experts and other expenses will be material and could have an adverse effect on its financial condition and results of operations if its efforts to monetize these patents are unsuccessful.

F-28

    In addition, the costs of enforcing the Company’s patent rights may exceed its recoveries from such enforcement activities. Accordingly, in order for the Company to generate a profit from its patent enforcement and monetization activities, the revenues from such enforcement and monetization activities must be high enough to offset both the cash outlays and the contingent fees payable from such revenues, including any profit sharing arrangements with inventors or prior owners of the patents. The Company’s failure to monetize its patent assets or the occurrence of unforeseen circumstances that could have a negative impact on the Company’s liquidity could significantly harm its business.

Should the Company be unsuccessful in its efforts to execute its business plan, it could become necessary for the Company to reduce expenses, curtail its operation or explore various alternative business opportunities or possibly suspend or discontinue its business activities.

3. Summary of Significant Accounting Policies

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, valuation of warrants, the valuation of assets acquired and common and preferred stock issued in the acquisition of North South and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

Concentration of Cash

The Company maintains cash balances at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2013, the Company’s cash and cash equivalents in excess of the FDIC limits were $1,932,739. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks.

Accounts Receivable

Credit is extended to customers based on an evaluation of a customer’s financial condition and, in general, collateral is not required. Management regularly reviews accounts receivable for uncollectible and potentially uncollectible accounts, and when necessary establishes an allowance for doubtful accounts. Balances that are outstanding after management has used reasonable collection efforts are written-off through a reduction in the allowance for doubtful accounts and a credit to accounts receivable.

Fair Value of Financial Instruments

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The Company uses three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
F-29

Revenue Recognition

The Company currently derives its revenues from past production payments. Past production payment revenues are royalty payments for the use of the Company’s intellectual property and where payments are made as part of a settlement of a patent infringement dispute. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability is reasonably assured. Based on the criteria enumerated in Accounting Standards Codification (“ASC”) 605, the Company records its revenues and costs associated with its patent enforcement activities gross on the consolidated statement of operations.

Cost of Revenues

Cost of revenues include the costs and expenses incurred in connection with the Company’s patent enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.

Inventor Royalties and Contingent Legal Expenses

Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense.

Contingent legal fees are expensed in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred.

Intangible Assets – Patent Portfolios

Intangible assets include the Company’s patent portfolios with original estimated useful lives ranging from 6 months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. As disclosed in Note 1, the Company acquired certain patent portfolios in the third quarter of 2013. The weighted average remaining amortization period of the Company’s patents is approximately 8.5 years. Future amortization of all patents is as follows:

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 

* Represents three months remaining for 2013
    Amortization of the intangible assets for the three and nine months ended September 30, 2013 was $133,785. There was no amortization prior to July 24, 2013 as the first assets were placed into service on July 24, 2013.
F-30


Impairment of Long-lived Assets

The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The Company has not identified any such impairment losses.

Reclassifications

The Company has reclassified certain amounts from its previously reported consolidated financial statements for comparative purposes to conform to the fiscal 2013 presentation. These reclassifications had no impact on the Company’s previously reported consolidated operations or cash flows.

Goodwill
    Under ASC No. 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise.
    Goodwill impairment is tested at least annually or when factors indicate potential impairment using a two-step process that begins with an estimation of the fair value of each reporting unit. Step 1 is a screen for potential impairment pursuant to which the estimated fair value of each reporting unit is compared to its carrying value.
    The Company estimates the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and margins multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a Step 2 test is required.
Income Taxes

The Company adopted the provisions of ASC 740-10, which prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of September 30, 2013. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations.

Net Loss Per Share

Basic earnings and loss per share are computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would be antidilutive.
F-31

    Securities that could potentially dilute earnings per share in the future that were not included in the computation of diluted loss per share at September 30, 2013 and 2012 are as follows:
  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 

Stock-based Compensation

The Company accounts for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a four- to ten-year period.

The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant. The expected volatility assumption is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns.
The Company’s model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Company’s model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions.

The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company’s estimate of pre-vesting forfeitures is primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the options vest.

Segment Reporting

The Company follows the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. As of September 30, 2013 and for the nine months ended September 30, 2013, the Company operates in two segments. The segments are as follows: biotechnology and patent monetization. The Company’s biotechnology segment is minimal in 2013 and represented 100% of the Company in 2012. Since the acquisition of the Rockstar patent portfolio and merger with North South, the Company is primarily a patent monetization company and a majority of the Company’s operations and assets are in the patent monetization segment.

The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company’s chief operating decision-maker is considered to be the Company’s chief executive officer.
F-32

Recently Issued Accounting Pronouncements
    The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit , or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.

For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations.
4. Acquisition of North South
    As disclosed in Note 1, on September 10, 2013, the Company completed its acquisition of North South. The Company acquired North South to expand its patent portfolio and continue its business plan of the monetization of its intellectual property. The Company accounted for its acquisition of North South using the acquisition method of accounting. Accordingly, the results of operations for the three and nine months ended September 30, 2013, include operations of the acquired business since September 10, 2013.
    The fair value of the purchase consideration issued to the sellers of North South was allocated to fair value of the net tangible assets acquired, with the resulting excess allocated to separately identifiable intangibles, and the remainder recorded as goodwill. Goodwill recognized from the transactions mainly represented the expected operational synergies upon acquisition of the subsidiary and intangibles not qualifying for separate recognition. Goodwill is nondeductible for income tax purposes in the tax jurisdiction of the acquired business.
The purchase price was allocated as follows:
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 
  $- 
    The purchase price allocation was based, in part, on management’s knowledge of North South’s business and the results of a third party appraisal commissioned by management.

F-33

    The following table presents the unaudited pro-forma financial results, as if the acquisition of North South had been completed as of January 1, 2012.
  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)
    The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2012 or to project potential operating results as of any future date or for any future periods.
    On August 6, 2013, the Company sold a promissory note in the principal amount of $500,000 to North South Holdings, Inc. pursuant to the terms of a Note Purchase Agreement with gross proceeds to the Company of $500,000. The Note accrues interest at the rate of 0.25% per annum and is due and payable twenty-four months from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part without penalty or premium. The note has been eliminated in consolidation.

5. Stockholders’ Equity
Preferred Stock
    The Company has authorized the issuance of 5,000,000 shares of convertible preferred stock and has certificates of designation of five separate series as summarized below as of September 30, 2013.

 
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 

(1)See Rights Agreement below.

(2)1 share was issued October 12, 2010 and remains issued and outstanding. Liquidation preference is $1,000 per share.

(3)See Warrant Exchange Agreement below.

(4)The Company on September 10, 2013, issued 1,379,685 shares of Series D convertible preferred stock in exchange for all the Series A and Series B Preferred shares of North South. See Note 1.

(5)There were 100,000 shares were issued on June 25, 2013 in consideration for $500,000 to North South pursuant to a private placement. See Series E Convertible Preferred Stock below. The shares were retired on September 30, 2013.
F-34

Warrant Exchange Agreement

On March 6, 2013, the Company, and certain investors that participated in the November 2012 private placement transaction (“Investors”), entered into separate Warrant Exchange Agreements pursuant to which certain of the Investors exchanged common stock purchase warrants acquired in the private placement for shares of the Company’s newly designated Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock is convertible into one (1) share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at the option of the holder, subject to certain limitations on conversions that would result in the Investors acquiring more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) of the outstanding voting stock of the Company. The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (“Certificate of Designation”). The liquidation preference of the Series C Convertible Preferred Stock is $0.0001 per share.

Pursuant to the Warrant Exchange Agreements, certain Investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, each convertible into one share of Common Stock. The 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” 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.
The Company agreed to register the shares of Common Stock issuable upon conversion of the Series C Convertible Preferred Stock on the same basis as the shares of Common Stock issued in the November 2012 private placement transaction which registration obligation was subsequently waived by a majority of the Investors. As of September 30, 2013, investors converted 229,336 shares of the Series C Convertible Preferred Stock into 229,336 shares of common stock.

Rights Agreement

On January 24, 2013, effective as of January 1, 2013, the Company and Equity Stock Transfer, LLC, as Rights Agent, entered into a Rights Agreement which continues through December 31, 2017. The Rights Agreement provides each Stockholder of record a dividend distribution of one “right” for each outstanding share of Common Stock. Rights become exercisable at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of our Common Stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning 10% or more of our outstanding Common Stock.

All rights held by an acquirer or offeror expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2017, subject to further extension. Each right entitles a Stockholder to acquire, for a price of $7.46, 1/100 of a share of our Convertible Series A Preferred Stock, which carries voting and dividend rights similar to one share of our Common Stock. Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of our Common Stock at a price per share equal to one-half of the average market price for a specified period. In lieu of the stated purchase price, a right holder may elect to acquire one-half of the Common Stock available under the second option.

The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board and within a specified time period, we may redeem all of the rights at a price of $0.001 per right. The Board may also amend any provisions of the Agreement prior to exercise.

Series E Convertible Preferred Stock
    On June 25, 2013, the Company sold 100,000 shares of its newly designated Series E Convertible Preferred Stock (the “Series E Preferred Stock”) to North South for a purchase price of $5.00 per share with gross proceeds to the Company of $500,000 pursuant to a subscription agreement. These securities were sold pursuant to an exemption from registration under Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of the securities laws. Each share of Series E Preferred Stock is convertible, at the option of the holder at any time, into one (1) share of the Company’s Common Stock and has a stated value of $0.0001. Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions.
    North South is prohibited from effecting the conversion of the Series E Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) in the aggregate of the issued and outstanding shares of the Company’s Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series E Preferred Stock. These 100,000 shares of Series E Convertible Preferred Stock were acquired by the Company in connection with the North South Merger, and thereafter retired and were not outstanding as of September 30, 2013.
F-35


Common Stock

The Company has 50,000,000 shares authorized as of September 30, 2013 with a par value of $0.0001 per share.

During the nine months ended September 30, 2013, the Company issued the following shares of common stock:

·229,336 shares of common stock issued upon conversion of 229,336 shares of Series C Convertible Preferred Stock originally issued in connection with the warrant exchange agreement described above;

·176,991 shares of common stock issued in connection with the acquisition of intellectual property in the Rockstar patent portfolio acquisition (see Note 1);

·6,711 shares of common stock issued upon the cashless exercise of 9,391 warrants; and

·1,203,153 shares of common stock issued in connection with the acquisition of North South. These shares were issued in exchange for the 5,213 shares of common stock of North South.

The Company’s additional paid in capital increased $20,608,869 in the nine months ended September 30, 2013. Included in this increase is stock based compensation of $7,402,485, increase for the acquisition of North South of $5,510,491, an increase due to the issuance of common shares in the Rockstar patent purchase of $999,982 and an increase due to the conversion of warrants to Series C Convertible Preferred Stock of $5,695,512.
Stock Options

2013 Plan

In April 2013, the Company’s board of directors adopted the Spherix Incorporated 2013 Equity Incentive Plan (the “2013 Plan”), an omnibus equity incentive plan pursuant to which the Company may grant equity and cash and equity-linked awards to certain management, directors, consultants and others. The plan was approved by the Company’s shareholders in August 2013.

The 2013 Plan authorized approximately 15% of our fully-diluted Common Stock at the time approved (not to exceed 2,800,000 shares) be reserved for issuance under the Plan, after giving effect to the shares of our capital stock issuable under the Merger. On April 4, 2013, the Company issued 2,005,500 option shares to executives of the Company and certain outside consultants under the 2013 Plan. The total fair value of the options on the date of grant was approximately $15,865,270 under the Black-Scholes and other lattice models of valuing options.

On April 4, 2013, the Company, with the approval of the board of directors, granted the following stock options to various employees, directors and consultants at a contractual price of $7.08 per share, which was equal to the fair market value of the Company’s common stock on the date that the terms of those awards were agreed to by the Company and optionees.

Awards with service conditions only were granted as follows:

750,000 stock options to our former interim Chief Executive Officer which vest in four equal installments of 187,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only;
250,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013, which vest in four equal installments of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only;
An aggregate of 225,000 options to three directors that fully vested on October 4, 2013, subject to each of these directors’ continued service to the Company through that date; and
An aggregate of 30,500 options to two consultants and one employee that fully vested on August 16, 2013 upon shareholder approval of the plan.
F-36

    Awards with combined market and service conditions were granted as follows:

250,000 stock options to our former interim Chief Executive Officer for which (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) the continued employment/directorship of the interim Chief Executive Officer over a period of time that permits vesting at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; and
500,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013 for which (i) (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) achieving performance conditions as follows:
o100,000 options subject to the delivery of a business plan acceptable to the board of directors of the Company by no later than June 30, 2013;
o70,000 options subject to the closing of a financing transaction as set forth in the business plan;
o70,000 options for two successful patent monetizations;
o70,000 options upon the completion of an additional purchase of a patent portfolio;
o70,000 options upon the initiation of litigation upon at least four defendants in infringement cases;
o70,000 options upon the presentation of at least two additional monetization opportunities acceptable to the board of directors; and
o50,000 options for attending at least 20 investor relations meetings.

The 2013 stock option plan was approved by the Company’s stockholders on August 16, 2013, which resulted in the ratification of the awards approved by the Company’s board of directors on April 4, 2013.

The fair value of the stock options issued with service conditions only was calculated on the date that the final approval by the stockholders was obtained using the Black-Scholes option pricing model with the following assumptions: contractual exercise price $7.08 per share; fair value of the Company’s common stock of $12.80 per share; risk free interest rates ranging from 0.36% to 2.84%; dividend yield of 0%; expected terms ranging from 2 to 10 years; and a volatility rate of 78.9%. The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the dividend yield is 0%. The expected term was calculated using the plain vanilla method, which is approximately to the term that Management believes represents a good approximation of the period of time that each class of optionee would likely hold these awards until exercising them. The Company obtained the risk free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison of average volatility rates of similar companies.

Compensation expense recognized for the above noted awards amounted to $4,716,070 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for these awards amounted to $7,474,200 and will be amortized over a remaining contractual term of 2 years.

The fair value of the stock options issued with combined market and service conditions only was calculated on the date that the final approval by the stockholders was obtained using the same assumptions as the awards that contain service conditions only; however, the fair value was adjusted for the risk associated with attaining the volume weighted average pricing target that must be met in order for the award to become exercisable. The Company determined that the unit fair value of each award amounted to $4.90 based on a 70% probability of attaining the aforementioned price target, which was determined using a Monte Carlo Simulation of the probability of attaining the target.

The aggregate fair value of the 250,000 stock options that features the combined market and service condition amounted to $1,225,000 on the date of grant. The fair value of these awards is being amortized over an explicit service period in which the award vests at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015 as noted above. Compensation expense recognized for this award amounted to $306,250 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for this award amounts to $918,750 and will be amortized over the remaining explicit service of 2 years.

The aggregate fair value of the 500,000 stock options that features the combined market and performance condition amounted to $2,450,000 on the date of grant. The recipient of these awards attained the required conditions with respect to 240,000 of these options as of the date stockholder approval was obtained. Accordingly, the Company recorded compensation cost in the amount of $1,176,000 for the three and nine month periods ended September 30, 2013. Company Management believes that it is highly probable that the recipient of this grant will attain the conditions necessary to vest 190,000 of the stock options over a derived service period that will end no later than December 31, 2013, and the remaining 70,000 stock options over a derived service period that will end no later than March 31, 2014. Compensation expense relating to these components of the awards amounted to $379,535 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for these awards amounts to $894,465 and will be amortized over the remaining explicit service of 2 years.
F-37

    A summary of option activity under the Company’s employee stock option plan for the nine months ended September 30, 2013, is presented below:
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 
    The Company established the 2014 Equity Incentive Plan on September 27, 2013. This has been submitted for shareholder approval authorizing the issuance of up to 1,400,000 shares of Common Stock as incentive compensation. The Company’s Annual Meeting of Shareholders is presently scheduled for December 10, 2013 at which time the shareholders will be asked to approve this plan.

Restricted Stock Awards

A restricted stock award entitles the recipient to receive shares of unrestricted common stock upon vesting of the award and expiration of the restrictions. The fair value of each restricted stock award is determined upon granting of the shares and the related compensation expense is recognized ratably over the vesting period and charged to the operations as non-cash compensation expense. Shares contained in the unvested portion of restricted stock awards are forfeited upon termination of employment, unless otherwise agreed. The fair value of restricted stock issued under the Plan is determined based on the closing price of the Company’s common stock on the grant date.
A summary of the restricted stock award activity for the nine months ended September 30, 2013 is as follows:

  
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
    The Company incurred $822,485 and $0 in compensation expense during the nine months ended September 30, 2013 and 2012, respectively, related to the restricted stock awards previously granted.
    At September 30, 2013, unrecognized compensation expense associated with the restricted stock awards was $683, which will be amortized over approximately one-half of a year.

At the end of December 2012, the Company entered into a Consulting Agreement with an entity wholly-owned by Mr. Harvey Kesner, a member of the board of directors and our former Interim Chief Executive Officer, pursuant to which the entity was issued 120,000 shares of common stock in exchange for its services with a grant date value of $816,000.

The shares will vest if prior to December 31, 2017, the Company; (i) closes a Qualified Transaction (as defined within the agreement); (ii) closes a private or public financing of at least $7.5 million; or (iii) otherwise undergoes a change in control. In such an event, the affiliate shall also be entitled to a one-time payment of $250,000. Expense is recognized upon satisfaction of the above contingencies. The consummation of the Merger qualified as a Qualified Transaction and was approved by the shareholders, thereby causing the shares to vest on September 10, 2013.

F-38

The following table provides a summary of stock based compensation expense for all awards during the periods presented:
  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   - 
Restricted stock  816,000   -   822,486   - 
                 
  $7,393,855  $-  $7,402,485  $40,000 
6. Fair Value Measurement

Fair Value of Financial Assets and Liabilities

Financial liabilities measured at fair value on a recurring basis are summarized below:

  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 
    Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Principal Accounting Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Principal Accounting Officer.

F-39

Level 3 Valuation Techniques

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

The Company uses the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility.

A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in “Fair value adjustments for warrant liabilities” in the Company’s condensed consolidated statements of operations.

As of September 30, 2013, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

Liabilities resulting from the Warrants issued in connection with the Company’s financing were valued using the Black-Scholes option valuation model and the following assumptions on the following:
  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
 
The risk-free interest rate was based on rates established by the Federal Reserve. The expected volatility in the Black-Scholes model is based on the standard deviation of the Company’s underlying stock price's daily logarithmic returns. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact that the Company has not historically paid dividends on its common stock, and does not expect to pay dividends on its common stock in the future.

The fair value of these warrant liabilities was $3,125,393 at December 31, 2012. The net change in fair value during the nine months ended September 30, 2013 was $3,085,470, of which $2,610,465 is reported in our condensed consolidated statement of operations as fair value adjustments for warrant liabilities and $5,695,935 as a reclassification of the fair value of the warrant liabilities to stockholders’ equity in connection with the March 2013 exchange of 475,211 Series B Warrants for 229,337 shares of Series C Convertible Preferred Stock (see note 5 “Stockholders’ Equity”). The fair value of the warrant liabilities is re-measured at the end of every reporting period and upon the exercise and/or modification of warrants. The change in fair value is reported in the condensed consolidated statement of operations as fair value adjustments for warrant liabilities.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the nine months ended September 30:

  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 

F-40

7. Commitments and Contingencies

Leases

    The Company has commitments under an operating lease through March 31, 2018 relating to its administrative office in Bethesda, Maryland. In addition, the Company entered into a lease agreement in February 2013 to lease 837 square feet of office space in Tysons Corner, Virginia. The Virginia lease runs from March 1, 2013 through August 31, 2014.
    Future minimum rental payments required as of September 30, 2013, remaining under the non-cancelable leases are as follows:

  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 

The Bethesda, Maryland office lease contains step rent provisions, capital improvement funding, or other tenant allowances. The Tysons Corner, Virginia office lease contains step rent provision. Minimum rental payments including allowances on the leases are recognized on a straight-line basis over the term of the leases. The Company incurred net operating lease rental expenses of approximately $132,475 and $121,630 for the nine months ended September 30, 2013 and 2012, respectively. The Company has commenced a lawsuit against the landlord of the Bethesda, Maryland office claiming that the assignment of the lease to the purchaser of the Spherix Consulting business was permitted under the lease and seeking termination of the lease as a result of the landlord’s failure to consent to such assignment. The Bethesda, Maryland office is currently being offered for sublease at current market rents that are significantly lower than the fixed lease cost of such facility.

Employment Agreement

The Company entered into an employment agreement (“Employment Agreement”) with Anthony Hayes on September 10, 2013, for a period of two years. The Employment Agreement shall automatically be extended for additional one-year terms unless either party gives written notice of non-renewal to the other party no later than six months prior to the expiration of the term.

Pursuant to the Employment Agreement, the Company is obligated to pay a base salary of $350,000 per annum, with bonus potential of 100% of the base salary. In addition, the Company paid a $100,000 signing bonus upon the execution of the Employment Agreement.

Litigation

During September 2013, the Company filed a lawsuit on its cordless handset patents acquired from Rockstar against Uniden Corporation (“Uniden”), for patent infringement in the Northern District of Texas. The patents at issue in the litigation were acquired in the Rockstar portfolio in July 2013, as successor to Nortel Networks (“Nortel”). The lawsuit asserts that from 2007 to present, Uniden’s cordless phones infringed one or more claims of one or more of the Company’s patents. Management is unable to predict an outcome in this matter at this time.
F-41

During September, 2013, the Company also filed a lawsuit against VTech Communications, Inc. (“VTech”) in the Northern District of Texas. The patents at issue in the litigation were acquired in the Rockstar portfolio in July 2013, as successor to Nortel. The lawsuit asserts that many cordless telephones manufactured by VTech, dating to 1993 infringed on one or more claims of the Company’s patents. Management is unable to predict an outcome in this matter at this time.

On August 1, 2013, the Company’s subsidiary Guidance filed a complaint against T-Mobile USA, Inc. ("T-Mobile") in the Middle District of Florida. The patents at issue in the litigation were acquired from North South and constitute patents, acquired from Harris Corporation. The lawsuit asserts T-Mobile infringes United States Patent No. 5,719,584 entitled “System and Method for Determining the Geolocation of a Transmitter” in the geolocation of cell phones on the T-Mobile cell phone network.

8. Subsequent Events

The Company evaluated all events or transactions after September 30, 2013 through the date the condensed consolidated financial statements were issued.

On October 7, 2013, the Company received notice of a complaint filed in the Circuit Court of Montgomery County, Maryland in the matter of LegalLink Inc. vs. Spherix Incorporated. LegalLink, Inc., a Merrill Communications Company alleges that the Company failed to honor their contract regarding services provided by LegalLink, Inc. LegalLink, Inc. alleges that the Company owes them $47,309 for services rendered to the Company, that have gone unpaid. The Company’s legal counsel is reviewing this lawsuit and is assessing the likelihood of an unfavorable outcome at this time. As of September 30, 2013, the past due balance of $47,409 has been included in accounts payable and accrued expenses on the condensed consolidated financial statements.

On October 11, 2013, the Company appointed Michael Pollack as its interim Chief Financial Officer. In connection with his appointment, the Company and Mr. Pollack entered into an Indemnification Agreement.

On October 15, 2013, the Board approved the Company’s Amended and Restated Bylaws in order to update the Company’s bylaws in various respects.

On October 15, 2013, the Board approved the amendment and restatement of the Company’s Certificate of Incorporation, as amended, to, among other things, increase the number of authorized shares from 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock to 200,000,000 shares and 50,000,000 shares respectively. The amendment and restatement of the Company’s Certificate of Incorporation is being submitted for stockholder approval at the Company’s 2013 Annual Stockholder meeting.

On October 28, 2013, the Board appointed Alexander Poltorak to the Company’s Board of Directors. In connection with his appointment, the Company and Mr. Poltorak entered into an Indemnification Agreement.

    On November 6, 2013, the Company sold an aggregate of 304,250 shares of its newly designated Series F Preferred Stock and 48,438 shares of common stock to five accredited investors for gross proceeds to the Company of $2,235,000 pursuant to subscription agreements. The purchase price per share of Common Stock was $6.40 for $1,310,000 of such investment and $6.25 for $925,000 of such investment. No broker was utilized in connection with the sale. In accordance with the requirement of NASDAQ, each share of Series F Preferred Stock shall be entitled to .91 times the vote attributable to the shares of common stock. The Company anticipates correcting the Certificate of Designation; Rights and Preferences of the Series F Preferred Stock shall be entitled to 91% of one vote, subject to the beneficial ownership limitation covering the shares. In connection with the foregoing private placement, the Company agreed to file a “resale” registration statement with the SEC covering all shares of Common Stock and shares of Common Stock underlying the Series F Preferred Stock within 91 days of the final closing date and to maintain the effectiveness of the registration statement until all securities have been sold or are otherwise able to be sold pursuant to Rule 144. The Company has agreed to use its reasonable best efforts to have the registration statement declared effective within 180 days of the final closing.
F-42

The Company is obligated to pay to investors a fee of one (1%) per month in cash for every thirty day period up to a maximum of six (6%) percent, (i) that the registration statement has not been filed after the required filing date, and (ii) following the required date of effectiveness that the registration statement has not been declared effective; provided, however, that the Company shall not be obligated to pay any such liquidated damages if the Company is unable to fulfill its registration obligations as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to “Rule 415”, provided the Company registers at such time the maximum number of shares of Common Stock permissible upon consultation with the staff of the SEC.

The Company also entered into a Lockup Agreement with certain investors which provides for restrictions on the resale of shares for a period of 180 days from the closing of the Private Placement held by certain investors through December 31, 2014, which in certain circumstances is subject to extension. The Lockup Agreement provides that additional 180 day restrictions shall commence without further action of the Company upon the sale of $15 million or greater gross proceeds of securities and upon a material acquisition.
9. Additional Events Occurring Subsequent to the Date the Condensed Consolidated Financial Statements were Available (Unaudited)

    On November 22, 2013, the Company established a series of preferred stock as Series D-1 Convertible Preferred Stock by the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock in the State of Delaware. Each share of Series D-1 Preferred Stock is convertible into ten (10) shares of the Company’s common stock. The Company is prohibited from effecting the conversion of the Series D-1 Convertible Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series D-1 Convertible Preferred Stock.

    On November 26, 2013, the Company entered into an Amendment and Exchange Agreements (each, a “Series F Exchange Agreement”) with the holders of the Company’s outstanding shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock” and each holder, a “Series F Holder”) pursuant to which the Series F Holders agreed to return their shares of Series F Preferred Stock to the Company for cancellation in consideration for which the Company issued such Series F Holder an equal number of shares of Series F-1 Convertible Preferred Stock, $0.0001 par value per share (the “Series F-1 Preferred Stock” and the transaction, the “Series F Exchange”). Each share of Series F-1 Preferred Stock is entitled to 91% of one vote per share (subject to beneficial ownership limitations described below) and shall vote together with holders of the Company’s common stock. Each share of Series F-1 Preferred Stock is convertible into one share of the Company’s common stock and has a stated value of $0.0001. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series F-1 Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series F-1 Preferred Stock. The shares of Series F-1 Preferred Stock are subject to the same registration rights as the Series F Preferred Stock. The Series F-1 Convertible Preferred Stock was established on November 22, 2013 by the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series F-1 Convertible Preferred Stock (“Series F-1 Certificate of Designation”) in the State of Delaware.
F-43










NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED FINANCIAL STATEMENTS


F-44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
of North South Holdings Inc.


We have audited the accompanying balance sheet of North South Holdings Inc. (a company in the development stage) (the “Company”) as of December 31, 2012, and the related statements of operations, changes in stockholders’ equity and cash flows for the period from November 9, 2012 (inception) through December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of North South Holdings, Inc. (a company in the development stage), as of December 31, 2012, and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America.


/s/ Marcum LLP

Marcum LLP
New York, NY
July 11, 2013
F-45

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE )
CONSOLIDATED BALANCE SHEETS
  June 30,    
ASSETS 2013  December 31, 
  (Unaudited)  2012 
Current assets:      
       
Cash $1,630,166  $549,047 
Accounts receivable  94,000   - 
Prepaid expenses  29,425   - 
         
Total current assets  1,753,591   549,047 
         
Other assets:        
         
Patent portfolio, net  792,370   415,000 
         
Investment in Spherix Corp.  500,000   - 
         
Total other assets  1,292,370   415,000 
         
Total assets $3,045,961  $964,047 
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
         
Accounts payable and accrued expenses $24,000  $- 
Patent settlement and inventor royalty payables  47,648   - 
         
Total current liabilities  71,648   - 
         
Commitments and Contingencies        
         
Stockholders' Equity:        
         
Preferred stock, par value $ 0.0001 per share; 1,000 shares authorized; Series A Convertible Preferred Stock; 500 shares, issued and outstanding at June 30, 2013 and December 31, 2012  -   - 
Series B Convertible Preferred Stock; 128 and no shares, issued and outstanding at June 30, 2013 and December 31, 2012  -   - 
         
Common Stock, par value $0.0001 per share; 75,000 shares authorized, 500 shares issued and outstanding at June 30, 2013 and December 31, 2012  -   - 
         
Additional paid in capital  3,234,880   1,000,000 
         
Deficit accumulated during the development stage  (260,567)  (35,953)
         
Total stockholders' equity  2,974,313   964,047 
         
Total liabilities and stockholders' equity $3,045,961  $964,047 
See the accompanying notes which are an integral part of these consolidated financial statements.
F-46

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE )
CONSOLIDATED STATEMENTS OF OPERATIONS
     For the  For the 
     Period from  
Period from
 
  
For the
Six Months
Ended
  
November 9, 2012
through
  
November 9,
2012
through
 
  June 30, 2013  December 31,  June 30, 2013 
  (Unaudited)  2012  (Unaudited) 
          
Revenue $94,000  $-  $94,000 
             
Operating cost and expenses            
    Cost of revenues            
        Legal settlement and maintenance fees  125,347   -   125,347 
        Inventor royalty fees  30,208   -   30,208 
        Amortization of patents  34,514   -   34,514 
Director's fees  35,460   5,100   40,560 
Legal fees  27,743   30,853   58,596 
Professional fees  55,480   -   55,480 
Other fees and expenses  9,862   -   9,862 
             
Total operating expenses  318,614   35,953   354,567 
             
             
Net loss $(224,614) $(35,953) $(260,567)
See the accompanying notes which are an integral part of these consolidated financial statements.

F-47

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
  Series A Convertible Preferred Stock  Series B Convertible Preferred Stock  Common Stock     Deficit Accumulated    
                    Additional Paid  During the Development    
  Shares  Amount  Shares  Amount  Shares  Amount  In Capital  Stage  Total 
                            
Balance at November 9, 2012  -  $-   -  $-   -  $-  $-  $-  $- 
                                     
Issuance of shares to founders in exchange for intial capital contributions (500 shares of common stock at $0.0001 per share and 500 shares of convertible preferred stock at $2,000 per share)  500   -   -   -   500   -   1,000,000   -   1,000,000 
                                     
Net loss  -   -   -   -   -   -   -   (35,953)  (35,953)
                                     
Balance at December 31, 2012  500   -   -   -   500   -   1,000,000   (35,953)  964,047 
                                     
Issuance of Series B convertible preferred stock (unaudited)  -   -   128   -   -   -   2,234,880   -   2,234,880 
                                     
Net loss (unaudited)  -   -   -   -   -   -   -   (224,614)  (224,614)
                                     
Balance at June 30, 2013 (Unaudited)  500  $-   128  $-   500  $-  $3,234,880  $(260,567) $2,974,313 
See the accompanying notes which are an integral part of these consolidated financial statements.
F-48

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE )
CONSOLIDATED STATEMENTS OF CASH FLOWS
     
For the
Period from
  
For the
Period from
 
  
For the
Six Months
Ended
  
November 9, 2012
through
  
November 9,
2012
through
 
  
June 30, 2013
(Unaudited)
  December 31, 2012  
June 30, 2013
(Unaudited)
 
Cash flows from operating activities:         
          
Net loss $(224,614) $(35,953) $(260,567)
             
Adjustments to reconcile net loss to net cash used in operating activities:            
   Amortization  34,514   -   34,514 
Changes in assets and liabilities which used cash:            
  Changes in accounts receivable  (94,000)  -   (94,000)
  Changes in prepaid expenses  (29,425)  -   (29,425)
  Changes in accrued expenses  71,648   -   71,648 
             
Net cash used in operating activities  (241,877)  (35,953)  (277,830)
             
Cash flows from investing activities:            
             
Purchase of patent portfolios  (411,884)  (415,000)  (826,884)
Investment in Spherix Corp.  (500,000)  -   (500,000)
             
Net cash used in investing activities  (911,884)  (415,000)  (1,326,884)
             
Cash flows from financing activities:            
             
Issuance of shares to founders in exchange for initial capital contributions  -   1,000,000   1,000,000 
Issuance of Series B convertible preferred stock  2,234,880   -   2,234,880 
             
Net cash provided by financing activities  2,234,880   1,000,000   3,234,880 
             
Net increase in cash  1,081,119   549,047   1,630,166 
             
Cash, beginning of period  549,047   -   - 
             
Cash, end of period $1,630,166  $549,047  $1,630,166 
             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:            
             
Cash paid during the year for:            
             
Interest $-  $-  $- 
             
Income taxes $-  $-  $- 
See the accompanying notes which are an integral part of these consolidated financial statements.
F-49

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)

(NOTE 1) ORGANIZATION:
North South Holdings Inc. and Subsidiary ("North South" or the “Company”) was incorporated on November 9, 2012 in the state of Delaware. North South was formed to seek business opportunities in which to acquire patents from various entities and monetize the disposal of them through sales, litigation or licensing. The Company issued 500 shares of preferred stock and 500 shares of common stock to its founders in exchange for initial capital contributions of $1,000,000 in cash.
The Company is a "development stage enterprise” as its primary activities since inception have been the development of its business plan, negotiating strategic alliances and other agreements, and raising capital. To date, the Company has generated minimal revenues from its operations.  As a development stage enterprise, the Company is subject to all of the risks and uncertainties typically faced by a newly formed business.

The Company’s consolidated financial statements as of June 30, 2013 and for the six months then ended, and for the period from November 9, 2012 (inception) through June 30, 2013 are unaudited and should be read in conjunction with the audited financial statements as of and for the period ended December 31, 2012.  In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial statements of the Company for such periods.

In April 2013 the Company, its shareholders, Spherix Incorporated, a Delaware corporation ("Spherix"), and Spherix's wholly owned subsidiary, Nuta Technology Corp., a Virginia corporation (“Nuta”) entered into an Agreement and Plan of Merger (the "Amended Merger Agreement") with the Company (the “Merger”). On September 10, 2013 the transaction contemplated under the Amended Merger Agreement was completed. Upon closing of the transaction the Company merged with and into Nuta with Nuta as the surviving corporation.  Nuta will continue its operations in the State of Virginia as the record owner of the Company’s intellectual property.  
Pursuant to the terms and conditions of the Merger, at the closing of the Merger, all of the Company’s 5,213 issued and outstanding shares of common stock (including the 3,024 shares of common stock that were issued due to the  conversion of Series A and Series B Preferred Stock in August 2013) were converted into an aggregate of 1,203,153 shares of  Spherix's common stock, par value $0.0001 per share (the “Spherix Common Stock”), and all of the Company’s 491 issued and outstanding shares of Series A Preferred Stock  and all of the Company’s 107 issued and outstanding shares of Series B Preferred Stock  were converted into an aggregate of 1,379,685 shares of Spherix's Series D Convertible Preferred Stock, par value $0.0001 per share, which is convertible into shares of Spherix Common Stock on a one-for-ten basis (collectively with the 1,203,153 shares of Spherix Common Stock, the “Merger Consideration”).

F-50

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 2) LIQUIDITY AND MANAGEMENT’S BUSINESS PLANS:

The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer term business plan. The Company had cash and working capital of $1,630,166 and $1,681,943, respectively at June 30, 2013 and a net loss for the six months ended June 30, 2013 of $224,614 and a net loss for the period from November 9, 2012 (inception) through December 31, 2012 of $35,953.

The Company believes that it has sufficient liquidity to sustain operations as a stand-alone business through at least July 1, 2014.  The Company’s cash and working capital amounts were derived from the proceeds of an initial financing transaction in which it raised aggregate proceeds of $1 million through the issuance of Series A Preferred and common stock to its founding stockholders.  During the six months ended June 30, 2013, the Company raised an additional approximate $2.2 million through the issuance of Series B Preferred Stock.  Subsequent to June 30, 2013, the Company raised an additional approximate $1.8 million through the issuance of common stock (See Note 10).

As disclosed in Note 4, the Company acquired a portfolio of patents from Harris Corporation in December 2012 and an additional portfolio of patents in April of 2013 effectuated as a transfer of the membership interests of Compufill LLC.  In order to license or otherwise monetize the patent assets acquired, the Company may commence legal proceedings against certain parties asserting that such parties infringe on one or more of the Company’s patents.  The Company’s viability is highly dependent on the outcome of its business plan and there is a risk that the Company may be unable to achieve the results it desires from any potential litigation or licensing agreement, which failure would harm the Company’s business to a great degree.

Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical.  The Company may be forced to litigate against others to enforce or defend its intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims in an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may have an impact on the value of the patents and preclude the Company from deriving revenue from the patents.

As a result, a negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact the Company’s business. Additionally, the Company anticipates that its legal fees and other expenses will be material and could have an adverse effect on its financial condition and results of operations if its efforts to monetize these patents are unsuccessful.  In addition, the costs of enforcing the Company’s patent rights may exceed its recoveries from such enforcement activities. Accordingly, in order for the Company to generate a profit from its patent enforcement and monetization activities, the revenues from such enforcement and monetization activities must be high enough to offset both the cash outlays and the contingent fees payable from such revenues. The Company’s failure to monetize its patent assets or the occurrence of unforeseen circumstances that could have a negative impact on the Company’s liquidity could significantly harm its business.

F-51

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 2) LIQUIDITY AND MANAGEMENT’S BUSINESS PLANS (continued):

Should the Company be unsuccessful in its efforts to execute its business plan, it could become necessary for the Company to reduce expenses, curtail its operation or possibly suspend or discontinue its business activities.

(NOTE 3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(A)  Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

(B)  Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary CompuFill LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.

(C)  Intangible Assets – Patent Portfolios

Intangible assets are comprised of patents with original estimated useful lives between 8 and 9 years (20 year life of underlying patent, less the approximate 11 to 12 years elapsed since original patent application). The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis.  Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent.

        (D)       Impairment of Long-lived Assets

The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount.  The Company has not identified any such impairment losses.

F-52

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

        (E)       Cash

The Company places its cash with high quality financial institutions. At times, cash balances maybe in excess of the amounts insured by the Federal Deposit Insurance Corporation.

        (F)       Income Taxes

The Company adopted the provisions of Accounting Standards Codification (“ASC”) Topic 740-10, which prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of December 31, 2012. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations.

        (G)       Revenue Recognition

The Company currently derives all its revenues from past production payments. Past production payment revenues are royalty payments for the use of the Company’s intellectual property and when payments are made as part of a settlement of a patent infringement dispute.

Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability is reasonably assured. Based on the criteria enumerated in ASC 605, the Company records its revenues and costs associated with its patent enforcement activities gross on the consolidated statement of operations.

        (H)       Cost of Revenues

Cost of revenues include the costs and expenses incurred in connection with the Company’s patent enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs.

F-53

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

        (I)       Inventor Royalties and Contingent Legal Expenses

Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense. Any unamortized patent acquisition costs recovered from net revenues are expensed in the period recovered.

Contingent legal fees are expensed in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred.

        (J)       Concentrations of Market, Interest Rate and Credit Risk

Concentrations of market, interest rate and credit risk may exist with respect to the Company’s investments in patent portfolios and its other assets and liabilities. Market risk is a potential loss the Company may incur as a result of changes in the fair value of its investment in patent portfolios. Interest rate risk includes the risk associated with changes in prevailing interest rates. Credit risk includes the possibility that a loss may occur from the failure of counterparties to make payments according to the terms of a contract.
        (K)       Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

Generally accepted accounting principles defined a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to develop assumptions.

The carrying amounts reported for cash, approximate fair value.

F-54

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 4) INTANGIBLE ASSETS:

       (A)Harris Corporation Patent Purchase
On December 20, 2012, the Company purchased two hundred twenty two (222) patents from Harris Corporation (“Harris”) of Melbourne, Florida.  North South paid $320,000 to Harris plus $80,000 of commissions and $15,000 of legal fees.  North South also agreed to pay to Harris 5% of the gross amount of any judgment or settlement proceeds received by North South in any action for infringement claims pursued by North South, provided that Harris has complied with all reasonable requests for assistance in connection with such action.  Currently, no litigation is pending on these patents.  The technology covered by the portfolio includes: Solar, cellular, microwave communications, satellite communication, antenna technology, wifi and radio communication.

(B)  CompuFill Purchase

On April 15, 2013, the Company completed a purchase of two patents for $350,000 that was effectuated through a transfer of the membership interests of CompuFill LLC (“CompuFill”).
CompuFill was organized as a California limited liability company on January 5, 2011.  CompuFill’s activities through the date of this purchase were limited to (i) a purchase of two specific patents from an unrelated party in exchange for a contractually defined share of any future revenues realized upon the monetization of such patents; (ii) the filing of one patent infringement litigation case against six (6) companies to monetize the two patents; (iii) settlement of that litigation case, and (iv) the filing of four (4) additional separate infringement claims in February 2013 that are being pursued by the Company subsequent of this transaction.

Richard Reichert, as the inventor of the patented technology, is entitled to receive 40% of all net profits generated from the Company’s licensing program.  Net profits are defined as gross profits, minus attorney’s fees and litigation cost and expenses.  In addition, CompuFill had previously retained the law firm of Stevens Love PLLC to handle the patent licensing program.  Stevens Love PLLC is compensated on a contingency fee basis that is paid on sliding scale that ranges from 15% to 30% of all revenue generated from the licensing program.  Upon acquiring CompuFill, the Company agreed to have Stevens Love continue representing CompuFill at the contingency fee structure already in place.

In May and June 2013, the Company settled two of the four cases outstanding at the date these patents were purchased for gross proceeds of $94,000. Expenses of $30,208 to the inventor (40% of the gross settlement amount less legal expenses) and $17,440 for legal fees in connection with the settlement were incurred by the Company to arrive at a net settlement amount of $46,352.
F-55

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 4) INTANGIBLE ASSETS (continued):

The weighted-average remaining amortization period of the Company’s patents is approximately 8.5 years.  Future amortization of all Patents is as follows:

For the Years Ending
December 31
  
Harris
Patent Portfolio
  
CompuFill
Patent Portfolio
  
 
Other Costs
  
Total
Amortization
 
 2013*  23,529   20,588   4,523   48,640 
 2014   47,059   41,176   9,045   97,280 
 2015   47,059   41,176   9,045   97,280 
 2016   47,059   41,176   9,045   97,280 
 2017   47,059   41,176   9,045   97,280 
Thereafter   164,706   156,130   33,774   354,610 
Total   376,471   341,422   74,477   792,370 
*   Represents six months remaining for 2013

Amortization of the intangible assets for the six months ended June 30, 2013 was $34,514. There was no amortization prior to January 1, 2013 as the assets were placed into service on January 1, 2013.
(NOTE 5) INVESTMENT IN SPHERIX INCORPORATED:

On June 25, 2013, the Company purchased 100,000 shares of Series E Convertible Preferred Stock of Spherix Incorporated for a per share price of $5.00, or an aggregate of $500,000, pursuant to a subscription agreement in a private placement. On September 10, 2013, the Company was acquired by Spherix Incorporated (See Note 1).

These securities were sold to pursuant to an exemption from registration under Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of the securities laws. Each share of Series E Preferred Stock is convertible, at the option of the holder at any time, into one (1) share of Spherix Incorporated common stock and has a stated value of $0.0001. Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series E Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 4.99%(or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) in the aggregate of the issued and outstanding shares of Spherix Incorporated’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series E Preferred Stock.

F-56

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 6) STOCKHOLDERS’ EQUITY:

The Company is authorized to issue 76,000 shares of capital stock, consisting of 75,000 shares of common stock, par value $0.0001 per share, and 1,000 shares of preferred stock, par value $0.0001 per share.  Of the 1,000 shares of preferred stock, 500 shares have been designated by the Company as Series A Convertible Preferred Stock and 128 shares have been designated as Series B Convertible Preferred Stock.

In December 2012 the Company issued 500 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”).  In connection with the formation of the Company each share of Series A Preferred Stock is convertible into 100 shares of common stock, provided however, that no holder shall have the right to convert any shares of Series A Preferred Stock to the extent that after giving effect to such conversion, the owner of such shares would have acquired beneficial ownership of 9.99% of the company's outstanding common stock immediately after giving effect to such conversion.  The beneficial ownership limitations and conversion limits are fully set forth in the Certificate of Designation.  The Series B Preferred Stock ranks pari passu with the Series A Preferred Stock and ranks prior and superior to all of the common stock with respect to preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.  The rights of the shares of Series B Preferred Stock are pari passu with the preferences and relative rights of the Series A Preferred Stock.  The rights of the shares of common stock are subject to the preferences and relative rights of the Series B Preferred Stock.  The holders of the Company’s Series A Preferred Stock are not entitled to vote, except as otherwise required by applicable law, and in such case the holder is entitled to the same number of votes per share of common stock that the holder of these Series A Preferred Stock may convert into at the time of the vote.  In the event of a liquidation, dissolution or winding up of the business of the Company, the holder of the Series A Preferred Stock would have pari passu payment and distribution rights over the holders of the Series B Preferred Stock and preferential payment and distribution rights over holders of common stock.  The Series A Preferred Stock has an aggregate liquidation preference of the higher of its “stated value” ($2,000) or distributions to common shareholders at December 31, 2012.

In April and May 2013 the Company issued 128 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) for $2,234,880. Each share of Series B Preferred Stock is convertible into 100 shares of common stock, provided however, that no holder shall have the right to convert any shares of Series B Preferred Stock to the extent that after giving effect to such conversion, the owner of such shares would have acquired beneficial ownership of 9.99% of the company's outstanding common stock immediately after giving effect to such conversion.  The beneficial ownership limitations and conversion limits are fully set forth in the Certificate of Designation. The Series B Preferred Stock ranks pari passu with the Series A Preferred Stock and ranks prior and superior to all of the common stock with respect to preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.  The rights of the shares of Series B Preferred Stock are pari passu with the preferences and relative rights of the Series A Preferred Stock.  The rights of the shares of common stock are subject to the preferences and relative rights of the Series B Preferred Stock. 

F-57

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 6) STOCKHOLDERS’ EQUITY (continued):

The holders of the Company’s Series B Preferred Stock are not entitled to vote, except as otherwise required by applicable law, and in such case the holder is entitled to the same number of votes per share of common stock that the holder of these Series B Preferred Stock may convert into at the time of the vote. In the event of a liquidation, dissolution or winding up of the business of the Company, the holder of the Series B Preferred Stock would have pari passu payment and distribution rights over holders the Series A Preferred Stock and preferential payment and distribution rights over holders of common stock.  The Series B Preferred Stock has an aggregate liquidation preference of the higher of its “stated value” ($2,000) or distributions to common shareholders.

(NOTE 7)  INCOME TAXES:

Through December 31, 2012, the Company generated U.S. federal and state net operating loss carryovers for tax purposes of approximately $5,600.  The net operating loss carryover may be used to reduce taxable income through the year 2032. Section 382 of the Internal Revenue Code imposes certain limitations on the utilization of net operating loss carryovers and other tax attributes after a change in control. If the Company has a change in ownership, such change could significantly limit the possible utilization of such carryovers.

The income tax provision (benefit) consists of the following:

Current December 31, 2012 
Federal$
State
DeferredPrinting and engraving expenses    
FederalAccounting fees and expenses(12,224)
State(1,798)
(14,022)
Change in valuation allowance14,022
Total income tax provision$
F-58

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 7) INCOME TAXES (continued):
A reconciliation of the effective income tax rate and the statutory federal income tax rate for all periods is as follows:
    
U.S. federal statutory rateSEC expenses  (34)% 
State income tax rate, net of federal benefitFINRA expenses  (5) 
Less: valuation allowanceTravel and road show  39 
Provision for income taxesDirectors and officers insurance  – %
NASDAQ listing and filing fees
Miscellaneous expenses
Total offering expenses (other than underwriting commissions)

*To be completed by amendment.

76 

The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established.

Based upon the Company’s history of losses since inception, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized and as a result, as of June 30, 2013, a full valuation allowance has been established. The tax effects of temporary differences that give rise to deferred tax assets are presented below:

Deferred tax assets:   
Net operating loss carryforward $2,200 
Deferred start-up and organizational expenses  11,822 
Valuation allowance  (14,022) 
Net deferred tax asset $ 

(NOTE 8) COMMITMENTS

ITEM 14. INDEMNIFICATION OF DIRECTORS AND CONTINGENCIES:


In November 2012, the Company entered into a letter agreement with the Chairman of the Board, President, Secretary and Treasurer (the “employee”).  The employment was “at will” in nature and provided a base salary of $3,000 per month.  The employee resigned from the Company subsequent to December 31, 2012 and on May 3, 2013, the Company entered into a letter agreement with its former director to pay a cash bonus of $17,460 on May 3, 2013.

On March 22, 2013, the Company entered into an employment agreement with Anthony Hayes to be the Company’s Chief Executive Officer.  This agreement provides for a base salary at an annual rate of $150,000 and shall be automatically renewed for successive six-month periods unless the Company or Anthony Hayes provides the other party thirty-days’ notice.  This employment agreement was amended on May 1, 2013, to set the annual rate of base compensation at $1 for the first six months.

On May 1, 2013, the Company entered into a letter agreement with its sole director of the Board of Directors.  This agreement provides for a base salary at a monthly rate of $3,000.  The Director’s employment shall be “at will”. From time to time this director may perform legal services on behalf of the Company for an agreed upon fee.

(NOTE 9) RELATED PARTY TRANSACTIONS:

A shareholder of the Company, through a separate unrelated entity, provides overhead and occupancy for North South at minimal cost.

F-59

NORTH SOUTH HOLDINGS INC. AND SUBSIDIARY
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND
INFORMATION FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 2013 (Unaudited)
(NOTE 10) SUBSEQUENT EVENTS:
(A)  On August 6, 2013, North South purchased a promissory note (the “Note”) in the principal amount of $500,000 from Spherix Incorporation pursuant to the terms of a Note Purchase Agreement.  The Note accrues interest due North South at the rate of 0.25% per annum and is due and payable twenty four months from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part without penalty or premium.
(B)  In August 2013 the Company issued 1,689 shares of common stock for proceeds net of 10% in commissions of $1,801,060 (at a value of $1,185 per share) to strategic investors in the intellectual property monetization space. This cash will be used to continue the monetization of patents currently owned by North South, as well as seek additional opportunities for growth.
(C)  On July 26, 2013, the Company formed Guidance IP LLC, (“Guidance”) and Directional IP LLC. (“Directional”) Delaware limited liability corporations. The Company is the sole member of these limited liability corporations.
(D)  On August 1, 2013, Guidance filed a complaint against T-Mobile USA, Inc. for patent infringement. The complaint was filed in the U.S. District Court for the Middle District of Florida, the residential jurisdiction for the corporate headquarters of Harris Corporation, the original patent owner. The lawsuit claims infringement by T-Mobile of United States Patent No. 5,719,584 entitled “System and Method for Determining the Geolocation of a Transmitter” (“584 Patent”). The technology relates to the geolocation of cell phones on the T-Mobile cell phone network. The 584 Patent was acquired along with over 200 patents by the Company from Harris in December 2012.
(E) On August 29, 2013, 9.2579 shares of Series A Preferred Stock and 20.9793 shares of Series B Preferred Stock were converted into 3,024 shares of common stock.
(F)Management has evaluated events that have occurred after the balance sheet date but before the date which the consolidated financial statements are issued.
End of Notes to Financial Statements

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.  Other Expenses of Issuance and Distribution
The following table sets forth an estimate of the fees and expenses relating to the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions, all of which shall be borne by Spherix, Inc.  All of such fees and expenses, except for the SEC Registration Fee, are estimated:

SEC registration fee $2,559.45 
Transfer agent’s fees and expenses
 
$
2,000
*
Legal fees and expenses
 
$
15,000
*
Printing fees and expenses
 
$
2,500
*
Accounting fees and expenses
 
$
100,000
*
Miscellaneous fees and expenses
 
$
1,000
*
    
Total
 
$
123,059.45
*
* Estimated

Item 14.   Indemnification of Directors and Officers.
OFFICERS.

Section 145 of the General Corporation Law of the State of DelawareDCGL provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably entitled to indemnity for such expenses.

Our amended and restated certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the General Corporation Law of the State of Delaware,DCGL, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.

We have entered into indemnification agreements with all of our executive officers and directors. These agreements provide, subject to limited exceptions and among other things, for the indemnification to the fullest extent permitted or required by Delaware law, provided however, that no director or officer shall be entitled to indemnification in connection with (i) any “claim” (as such term is defined in the agreement) initiated by him or her against the Company or the Company’s directors or officers unless the Company joins or consent to the initiation of such claim, or (ii) the purchase and sale of securities by him or her in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended. Our indemnification agreements also provide for the advancement of expenses (including attorneys’ fees) incurred by the indemnitee in connection with any action, suit, or proceeding (subject to the terms and conditions set forth therein). The indemnification agreements contain certain exclusions, including proceedings initiated by the indemnitee unless the Company has joined in or consented to the initiation of such claim.

We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General Corporation LawDCGL would permit indemnification.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In the three years preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities Act:  

On June 15, 2015, the Company entered into a consulting agreement with a third party for three months of investor relations services. The Company agreed to pay the consultant a monthly fee of $5,000 for three months commencing on June 15, 2015, and granted 45,000 shares of restricted stock valued at $27,000 in the aggregate. The restricted stock awards vest monthly for each of the State of Delaware would permit indemnification.


-43-

Item 15.   Recent Sales of Unregistered Securities.

Fiscal Year Ending December 31, 2013

three months following the grant date.  

On November 26, 2013, weJune 10, 2015, the Company entered into separate Amendment and Exchange Agreementsa consulting agreement with the holdersa third party for three months of our outstanding shares of Series F Preferred Stock pursuant to which such holdersinvestor relations services. The Company has agreed to return their sharespay the consultant a monthly fee of Series F Preferred Stock to us for cancellation$10,000, payable in consideration for which we issued such holder an equal number of shares of Series F-1 Preferred Stock.  Each share of Series F-1 Preferred Stock is entitled to 91% of one vote per share (subject to beneficial ownership limitations described below) and shall vote together with holders of our common stock. Each share of Series F-1 Preferred Stock is convertible into one share of our common stock and has a stated value of $0.0001.  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 F-1 Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversionfor each month of the Series F-1 Preferred Stock.  


term. The securities referencedCompany issued 15,625 and 25,641 shares of common stock to this service provider on June 10, 2015 and July 10, 2015, respectively. 

Each of the above were sold and issued to “accredited investors,” as such term is definedissuances was made in reliance on exemptions under Section 4(a)(2) under the Securities Act of 1933, as amended, and the Company received no proceeds from these issuances.

77

On March 26, 2014, Spherix Incorporated (the "Company") sold an aggregate of $4,446,081 of its securities in a private offering made solely to accredited investors (the “Investors”) (the “Offering”) pursuant to Subscription Agreements, dated as of March 26, 2014 (the “Subscription Agreement”).  Pursuant to the Offering, Investors purchased (i)  1,185,614shares (the “Shares”) of common stock, par value $0.0001 per share, of the Company (“Common Stock”) and (ii) five year warrants to purchase an aggregate of 592,794  shares of common stock of the Company, at an exercise price of $6.15 per share (the “Warrants”).  The Warrants are exercisable on the six month anniversary of the date of issuance by payment to the Company of the exercise price of $6.15 per share, or if a registration statement covering the common stock underlying the Warrants is not then in effect, on a cashless basis.  Each Warrant may be callable at $0.01 per Warrant upon the consummation of a Company financing with a per share offering price of at least $8.00 and net proceeds to the Company from such offering of at least $15 million. 

The Shares and Warrants described were offered and sold solely to “accredited investors” in reliance on the exemption from registration afforded by Rule 506 of Regulation D and Section 4(a)(2) and Regulation D (Rule 506) underof the Securities ActAct.  In connection with the sale of 1933,the securities, the Company relied on the Investors' written representations as amended,to its status as an "accredited investor" as defined in Rule 501(a) of Regulation D.  In addition, neither the Company nor anyone acting on its behalf has offered or sold these securities by any form of general solicitation or general advertising. 

On April 17, 2014, the Company filed a registration statement with the SEC to register the resale of all shares and corresponding provisions of state securities laws.


On November 6, 2013, we sold an aggregate of 304,250 shares of Series F Preferred Stock and 48,438the shares of common stock underlying the Warrants issued in the Offering (including the placement agent warrant described below), which registration statement was declared effective on May 16, 2014. The Investors have also been granted certain “piggy back” registration rights.   The Company is subject to five accredited investors for gross proceedscertain penalties in the event that it fails to maintain the effectiveness of $2,235,000.  The purchase price per share of common stock was $6.40 for $1,310,000any registration statement covering the resale of such investment and $6.25 for $925,000 of such investment.   Noshares. 

Laidlaw & Company (UK) Ltd., a FINRA registered broker was utilizeddealer, acted as placement agent in connection with the sale. Each shareOffering on a best-efforts basis and received a cash fee of Series F Preferred Stock is entitled to one vote per share (subject to beneficial ownership limitation)$444,608, plus a non-accountable expense allowance of $88,922, and shall vote together with holders of our common stock.  We are prohibited from effecting the conversion of the Series F Preferred Stock to the extent that, aswas issued a result of such conversion, the holder will beneficially own more than 9.99% in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series F Preferred Stock.

The securities referenced above were sold and issued to “accredited investors,” as such term is defined in the Securities Act and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws.

On July 24, 2013, we closed on the acquisition of a group of patents in the mobile communication sector from Rockstar.  In consideration for the patents, we paid certain consideration to Rockstar, including 176,991 shares of the Company’s common stock.  The Shares are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of (i) six months from the issuance of the shares and (ii) the date that our common stock achieves a trading volume of at least 50,000 shares per day and a closing price of at least $13 per share for a period of five consecutive days.

The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended by virtue of Section 4(2) thereof, as a transaction by an issuer not involving a public offering.

On June 25, 2013, we sold an aggregate of 100,000 shares of Series E Convertible Preferred Stock to an accredited investor for a per share price of $5.00 with gross proceeds to the Company of $500,000.      Each share of Series E Convertible Preferred Stock is convertible, at the option of the holder at any time, into one (1) share of our common stock and has a stated value of $0.0001.  Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions.   We are prohibited from effecting the conversion of the Series E Convertible Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series E Preferred Stock. 

-44-

The securities referenced above were sold and issued to “accredited investors,” as such term is defined in the Securities Act and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws.

On March 6, 2013, we entered into separate Warrant Exchange Agreements with certain investors that participated in the November 2012 private placement transaction pursuant to which such investors exchanged common stock purchase warrants acquired in the private placement transaction for shares of our Series C Convertible Preferred Stock.  Each share of Series C Convertible Preferred Stock is convertible into one share of common stock at the option of the holder.  Each share of Series C Preferred Stock has a stated value of $0.0001 per share and upon the liquidation, dissolution or winding up of the business of the Company, each holder of Series C Preferred Stock shall be entitled to receive, for each share held, a preferential amount in cash equal to the Stated Value.  The holder of Series C Preferred Stock may not convert such shares to the extent such conversion would cause the holder to hold in excess of 4.99% of our issued and outstanding common stock, subject to an increase in such limitation to 9.99% upon the written notice by the holder to the Company.

Warrants were issued in November 2012 for an aggregate of 483,657 shares of common stock.  The Warrants were exercisable through November 7, 2017 at an exercise price of $6.53 per share.

Pursuant to the Warrant Exchange Agreements, the investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, convertible into one (1) share of common stock.  This is the same number of shares of common stock that would have been  issued upon a “cashless exercise” of the exchanged warrants, as permitted by the terms of the warrants, based on the one-day volume weighted average price of the Company’s common stock on February 28, 2013 of $12.6439 as reported by Bloomberg.

The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended by virtue of Section 4(2) thereof, as a transaction by an issuer not involving a public offering.

Fiscal Year Ended December 31, 2012

On November 7, 2012, we sold an aggregate of 483,657 shares of common stock at a price of $5.324 per share along with warrantsfive- year warrant to purchase an additional 483,657 118,561shares of common stock at an exercise price of $6.53 per share.  Subject to certain ownership limitations, the warrants are exercisable for a period of five years.  

The securities referenced above were sold and issued to “accredited investors,” as such term is defined in the Securities Act and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act of 1933, as amended, and corresponding provisions of state securities laws.
On February 2, 2012, we sold an aggregate of 53,240 shares of its common stock and warrants to purchase up to an additional 10,648 shares of its common stock to certain accredited investors for gross proceeds of approximately $1.15 million.  The common stock and warrants were sold in units, with each unit consisting of one$4.67per share of common stock and a warrant to purchase 0.2(the “Placement Agent Warrant”). The Placement Agent Warrant is exercisable beginning on the six month anniversary of a share of common stock.  The purchase price per unit was $21.60.  Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $28.00 per share.  The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $1.1 million.  The common stock issued in the February 2012 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009.
In connection with the closing of our February 2012 offering, the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants with a term of two years to purchase up to 1,597 shares of our common stock at an exercise price of $27.00 per share.  The estimated fair value of the warrants at the date of grant was $19,000.  These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.

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Fiscal Year Ended December 31, 2011
In October 2011, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 26,628 shares of its common stock and warrants to purchase up to an additional 26,628 shares of its common stock to such investors for gross proceeds of approximately $1.25 million.  The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock.  The purchase price per unit was $47.40.  Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $44.80 per share.  The net proceeds to the Company from the offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $1.1 million.  The common stock issued in the October 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants were registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-177748), which became effective on November 21, 2011.  The warrants are classified as a liability and the common stock is classified as permanent equity.
In connection with the closing of the October 2011 offering, the Company issued to Rodman & Renshaw, LLC warrants with a term of two years to purchase 799 shares of our common stock (at an exercise price of $59.125 per share).  The estimated fair value of the warrants at the date of grant was $25,000.  These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.

On January 19, 2011, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 21,345 shares of its common stock and warrants to purchase up to an additional 10,672 shares of its common stock to such investors for gross proceeds of approximately $2.77 million.  The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock.  The purchase price per unit was $130.00.  Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $160.00 per share.  The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $2.6 million.  The common stock issued in the January 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009.  The warrants are classified as a liability and the common stock is classified as permanent equity.
In connection with the closing of our January 2011 offering, the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants with a term of two years to purchase up to 640 shares of our common stock at an exercise price of $162.50 per share.  The estimated fair value of the warrants at the date of grant was $42,000.  These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering.  These warrants have now expired.
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Item 16.  Exhibits and Financial Statement Schedules
 a)  Exhibits
issuance.

Exhibit No.
 Description
3.1
Certificate of Incorporation and Bylaws of the Company (incorporated by reference to the Company’s Annual Proxy Statement for meeting held on May 15, 1992, as filed with the SEC)
 78 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

3.2
Certificates of Amendment of(a)
Exhibits.The exhibits to the Company (incorporatedregistration statement are listed in the Exhibit Index attached hereto and incorporated by reference to the Company’s Proxy Statement for its May 1996, May 2000, May 2001, November 2011, and August 2012 annual meetings, as wellherein.

(b)Financial Statements.Financial statement schedules have been omitted, as the Company’s Information Statement filed November 26, 2012 andinformation required to be set forth therein is included in the Company Current Report on Form 8-K filed December 17, 2012, all as filed withConsolidated Financial Statements or Notes thereto appearing in the SEC)prospectus made part of this registration statement.

 
3.3
Certificate of Amendment filed November 28, 2011 (incorporated by reference to Form 8-K filed December 15, 2011)
79 
3.4
Certificate of Amendment filed September 21, 2012 (incorporated by reference to Form 8-K filed September 21, 2012)
3.5
Certificate of Amendment filed December 17, 2012 (incorporated by reference to Form 8-K filed December 17, 2012)
3.6
Amended and Restated Bylaws of Spherix Incorporated (incorporated by reference to Form 8-K filed October 15, 2013)
4.1
Rights Agreement dated as of February 16, 2001, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed March 6, 2001)
4.2
First Amendment to Rights Agreement dated as of December 20, 2010, between Spherix Incorporated and American Stock Transfer and Trust Company (incorporated by reference to Form 8-K filed December 20, 2010)
4.3
Rights Agreement dated as of January 24, 2013, between Spherix Incorporated and Equity Stock Transfer, LLC (incorporated by reference to Form 8-K filed January 30, 2013)
4.4
Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Form 8-K filed October 8, 2010)
4.5
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (incorporated by reference to Form 8-K filed on March 7, 2013)
4.6
Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (incorporated by reference to Form 8-K filed on April 4, 2013)
4.7
Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (incorporated by reference to Form 8-K filed on June 26, 2013)
4.8
Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock (incorporated by reference to Form 8-K filed on November 7, 2013)
4.9
Certificate of Designation of Preferences, Rights and Limitations of Series F-1 Convertible Preferred Stock (incorporated by reference to Form 8-K filed on November 26, 2013)
4.10
Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock (incorporated by reference to Form 8-K filed on November 29, 2013)
5.1Opinion of Baxter, Baker, Sidle, Conn & Jones, P.A.**
10.1Summary of Annual Compensation of Members of the Board of Directors of Spherix Incorporated (incorporated by reference to Form 8-K filed May 28, 2010)

10.2Employment Agreement dated as of August 15, 2007, by and between Claire L. Kruger and the Company (incorporated by reference to Form 10-Q dated September 30, 2007)

10.3Amendment To Employment Agreement dated as of May 25, 2010, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed May 28, 2010)

10.4Termination of Employment and General Release Agreement dated as of December 3, 2012, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed December 17, 2012)

10.5Benefits Agreement dated as of December 3, 2012, by and between Claire L. Kruger and the Company (incorporated by reference to Form 8-K filed December 17, 2012)

10.6Employment Agreement dated as of August 16, 2007, by and between Robert A. Lodder and the Company (incorporated by reference to Form 10-Q dated September 30, 2007)

10.7Amendment To Employment Agreement dated as of May 25, 2010, by and between Robert A. Lodder and the Company (incorporated by reference to Form 8-K filed May 28, 2010)

10.8Retention Agreement with Robert A. Lodder and the Company (incorporated by reference to Form 8-K filed February 7, 2013)

10.9Employment Agreement dated as of May 25, 2010, by and between Robert L. Clayton and the Company (incorporated by reference to Form 8-K filed May 28, 2010)

10.10Retention Agreement dated as of December 12, 2012, by and between Robert L. Clayton and the Company (incorporated by reference to Form 8-K filed December 17, 2012)

10.11Employment Agreement dated as of May 25, 2010, by and between Katherine M. Brailer and the Company (incorporated by reference to Form 8-K filed May 28, 2010)

10.12Termination of Employment and General Release Agreement dated as of December 3, 2012, by and between Katherine M. Brailer and the Company (incorporated by reference to the Form 10-K filed on March 20, 2013)

10.13Benefits Agreement dated as of December 3, 2012, by and between Katherine M. Brailer and the Company (incorporated by reference to the Form 10-K filed on March 20, 2013)

10.14Letter Agreement dated as of January 13, 2011, by and between Gilbert V. Levin, M. Karen Levin and the Company (incorporated by reference to Form 10-K dated March 30, 2011)

10.151997 Stock Option Plan (incorporated by reference from the Company’s Proxy Statements for its May 1998, May 2001, May 2005, November 2011 and August 2012 annual meetings, as filed with the Commission)

10.162012 Equity Incentive Plan (incorporated by reference from the Company’s Information Statement on Form DEF 14c filed November 26, 2012)

10.17Lease Agreement dated October 4, 2007, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 10-Q dated September 30, 2007)

10.18Amendment to Office Building Lease, between Elizabethean Court Associates III Limited Partnership and the Company (incorporated by reference to Form 8-K filed March 23, 2012)

10.19Settlement Agreement dated March 16, 2011, between the Biospherics Incorporated (a wholly-owned subsidiary of the Company) and Inalco S.p.A (incorporated by reference to Form 8-K filed on March 21, 2011)

10.20Securities Purchase Agreement dated November 16, 2009, between the Company and certain investors (incorporated by reference to Form 8-K filed November 18, 2009)

10.21Securities Purchase Agreement dated October 7, 2010, between the Company and certain investors (incorporated by reference to Form 8-K filed October 8, 2010)

10.22Securities Purchase Agreement dated January 19, 2011, between the Company and certain investors (incorporated by reference to Form 8-K filed January 20, 2011)

10.23Securities Purchase Agreement dated October 25, 2011, between the Company and certain investors (incorporated by reference to Form 8-K filed October 27, 2011)

10.24Securities Purchase Agreement dated February 2, 2012, between the Company and certain investors (incorporated by reference to Form 8-K filed February 3, 2012)

10.25Securities Purchase Agreement dated November 7, 2012, between the Company and certain investors (incorporated by reference to Form 8-K filed November 8, 2012)

10.26License Agreement dated June 22, 2010 between the University of Kentucky Research Foundation and Biospherics Incorporated (incorporated by reference to Form 10-K filed March 29, 2012)

10.27Stock Purchase Agreement, dated December 3, 2012, between the Company and ChromaDex, Inc. (incorporated by reference to Form 8-K dated December 6, 2012)

10.28Consulting Agreement dated December 28, 2012, between the Company and Paradox Capital Partners, LLC. (incorporated by reference to the Form 10-K filed on March 20, 2013)

10.29Warrant Exchange Agreement dated March 1, 2013 between the Company and certain investors (incorporated by reference to Form 8-K filed March 7, 2013)

10.30Letter of Intent, dated February 15, 2013, between Nuta Technology Corp. and North South Holdings, Inc. (incorporated by reference to Form 8-K filed February 22, 2013)
10.31
Waiver of Registration Rights Required (incorporated by reference to the Form 8-K filed on December 21, 2012)
10.32
Extension Letter dated as of March 29, 2013 between Spherix Incorporated and Robert L. Clayton (incorporated by reference to the Form 8-K filed on April 2, 2013)
10.33
Agreement and Plan of Merger dated April 2, 2013 (incorporated by reference to the Form 8-K filed on April 4, 2013)
10.34
Spherix Incorporated 2013 Equity Incentive Plan (incorporated by reference to the Form 8-K filed on April 4, 2013)
10.35
Form of Subscription Agreement (incorporated by reference to the Form 8-K filed on June 26, 2013)
10.36
Form of Note Purchase Agreement (incorporated by reference to the Form 8-K filed on August 6, 2013)
10.37
Form of Note (incorporated by reference to the Form 8-K filed on August 6, 2013)
10.38
First Amendment to Agreement and Plan of Merger dated August 30, 2013 (incorporated by reference to the Form 8-K filed on September 4, 2013)
10.39
Form of Indemnification Agreement (incorporated by reference to the Form 8-K filed on September 10, 2013)
10.40
Employment Agreement between Spherix Incorporated and Anthony Hayes (incorporated by reference to the Form 8-K filed on September 13, 2013)
10.41
Indemnification Agreement between Spherix Incorporated and Michael Pollack (incorporated by reference to the Form 8-K filed on October 15, 2013)
10.42
Indemnification Agreement between Spherix Incorporated and Alexander Poltorak (incorporated by reference to the Form 8-K filed on October 29, 2013)
10.43
Form of Subscription Agreement (incorporated by reference to the Form 8-K filed on November 7, 2013)
10.44
Form of Registration Rights Agreement (incorporated by reference to the Form 8-K filed on November 7, 2013)
10.45
Form of Lockup Agreement (incorporated by reference to the Form 8-K filed on November 7, 2013)
10.46
Patent Purchase Agreement between Spherix Incorporated and Rockstar Consortium US LP (redacted) (incorporated by reference to the Form 8-K/A filed on November 19, 2013)
10.47
Form of Series F Exchange Agreement (incorporated by reference to the Form 8-K filed on November 26, 2013)
23.1
Consent of Grant Thornton LLP*
23.2
Consent of Baxter, Baker, Sidle, Conn & Jones, P.A. (included in Exhibit 5.1)**
23.3
Consent of Marcum LLP*
24.1
Power of Attorney (included on signature page of this Form S-1)*
101.INS
XBRL Instance Document *
101.SCH
XBRL Taxonomy Extension Schema Document *
101.CAL
XBRL Taxonomy Extension Calculation Linkbase *
101.DEF
XBRL Taxonomy Extension Definition Linkbase *
101.LAB
XBRL Taxonomy Extension Labels Linkbase *
101.PRE
XBRL Taxonomy Extension Presentation Linkbase *
*Filed herewith.
**To be filed by amendment.

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Item

ITEM 17. Undertakings

UNDERTAKINGS.

The undersigned registrant hereby undertakes:

                (1) To file, during any periodundertakes to provide to the underwriter at the closing specified in which offers or sales are being made, a post-effective amendmentthe underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to this registration statement:
permit prompt delivery to each purchaser.

(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i)To include any prospectus required by Section 10(a)(3) of the Securities Act;Act.

��
(ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.statement;
                (2)

provided, however, that paragraphs (1)(i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2)That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof;

(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

(4)That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of thesuch securities at that time shall be deemed to be the initial bona fide offering thereof.

                (3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
                (4) That, for the purpose of determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the securities:
                The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);
(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

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In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

80

SIGNATURES

                For the purpose of determining liability under the Securities ActPursuant to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

-49-

SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and authorizedduly caused this registration statementRegistration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tysons Corner,New York, State of Virginia,New York, on December 9, 2013.
the 3rdday of July, 2017.

 SPHERIX INCORPORATED
   
 By:/s/ Anthony Hayes
  Anthony Hayes
  
Director and Chief Executive Officer,
( Director, Principal Executive Officer)
By:/s/ Michael Pollack 
Michael Pollack
Interim ChiefAccounting Officer and Principal Financial Officer
(Interim Principal Financial and Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Anthony Hayes his true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for him/her and in his/her name, place and stead, in any and all capacities to sign any or all amendments (including, without limitation, post-effective amendments) to this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933 and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorney-in-fact and agent, or any substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates stated.

indicated.

/s/ Anthony HayesName Chief Executive Officer and DirectorPosition  December 9, 2013
Anthony Hayes(Principal Executive Officer )Date
     
/s/ Michael PollackAnthony Hayes Interim Chief Executive Officer, Director, Principal Accounting Officer and Principal Financial Officer December 9, 2013July 3, 2017
Michael Pollack (Interim Principal Financial and Accounting Officer)  
/s/ Douglas T. BrownDirector December 9, 2013
Douglas T. BrownAnthony Hayes    
     
/s/ Edward M. Karr* Director and Chairman of the Board  December 9, 2013
Edward M. KarrJuly 3, 2017
     
/s/ Harvey J. KesnerDirectorDecember 9, 2013
Harvey J. Kesner
/s/ Robert J. Vander ZandenChairman of the Board December 9, 2013
Robert J. Vander Zanden    
     
/s/ Alexander Poltorak* Director  December 9, 2013July 3, 2017
Alexander Poltorak
Tim S. Ledwick
*DirectorJuly 3, 2017
Eric Weisblum    

*By:/s/ Anthony Hayes
Anthony Hayes
Attorney-in-Fact

81

INDEX TO EXHIBITS

Exhibit No.Description
1.1†Underwriting Agreement
1.2Placement Agency Agreement, dated July 15, 2015, between Spherix Incorporated and Chardan Capital Markets LLC (incorporated by reference to Form 8-K filed July 17, 2015)
3.1Amended and Restated Certificate of Incorporation of Spherix Incorporated, dated April 24, 2014 (incorporated by reference to Form 8-K filed April 25, 2014)
3.2Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Spherix Incorporated, dated March 2, 2016 (incorporated by reference to Form 8-K filed March 18, 2016)
3.2Amended and Restated Bylaws of Spherix Incorporated (incorporated by reference to Form 8-K filed October 15, 2013)
3.3Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Spherix Incorporated, effective March 4, 2016 (incorporated by reference to Form 10-K filed March 29, 2016)
4.1Specimen Certificate for common stock, par value $0.0001 per share, of Spherix Incorporated (incorporated by reference to Form S-3/A filed April 17, 2014)
4.2

Amended and Restated Rights Agreement, dated June 9, 2017, by and between Spherix Incorporated and Transfer Online Inc. (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on June 9, 2017)

4.3Certificate of Designation of Preferences, Rights and Limitations of Series J Convertible Preferred Stock (incorporated by reference to Form 8-K/A filed on June 2, 2014)
4.4Certificate of Designation of Preferences, Rights and Limitations of Series K Convertible Preferred Stock (incorporated by reference to Form 8-K filed on December 3, 2015)

82

4.5Form of Warrant (incorporated by reference to Form 8-K filed on March 26, 2014)
4.6Form of Placement Agent Warrant (incorporated by reference to Form 8-K filed on March 26, 2014)
4.7Form of Common Stock Purchase Warrant (incorporated by reference to Form 8-K filed July 17, 2015)
4.8Form of Warrant (incorporated by reference to Form 8-K filed December 3, 2015)
5.1†Opinion of EGS
10.12012 Equity Incentive Plan (incorporated by reference from the Company’s Information Statement on Form DEF 14c filed November 26, 2012)
10.2Warrant Exchange Agreement dated March 1, 2013 between the Company and certain investors (incorporated by reference to Form 8-K filed March 7, 2013)
10.3Agreement and Plan of Merger dated April 2, 2013 (incorporated by reference to the Form 8-K filed on April 4, 2013)
10.4First Amendment to Agreement and Plan of Merger dated August 30, 2013 (incorporated by reference to the Form 8-K filed on September 4, 2013)
10.5Spherix Incorporated 2013 Equity Incentive Plan (incorporated by reference to the Form 8-K filed on April 4, 2013)
10.6Spherix Incorporated 2014 Equity Incentive Plan (incorporated by reference from the Company’s Proxy Statement on Form DEF 14A filed December 20, 2013)
10.7Amendment to Spherix Incorporated 2014 Equity Incentive Plan (incorporated by reference from the Company’s Proxy Statement on Form DEF 14A filed March 28, 2014)

83

10.8Form of Indemnification Agreement (incorporated by reference to the Form 8-K filed on September 10, 2013)
10.9Employment Agreement between Spherix Incorporated and Anthony Hayes (incorporated by reference to the Form 8-K filed on September 13, 2013)
10.10Indemnification Agreement between Spherix Incorporated and Alexander Poltorak (incorporated by reference to the Form 8-K filed on October 29, 2013)
10.11Indemnification Agreement between Spherix Incorporated and Richard Cohen (incorporated by reference to the Form 8-K filed on January 9, 2014)
10.12Indemnification Agreement between Spherix Incorporated and Jeffrey Ballabon (incorporated by reference to the Form 8-K filed on June 13, 2014)
10.13**Patent Purchase Agreement between Spherix Incorporated and Rockstar Consortium US LP, including Amendment No. 1 thereto (incorporated by reference to the Form 8-K/A filed on November 19, 2013)
10.14Form of Series F Exchange Agreement (incorporated by reference to the Form 8-K filed on November 26, 2013)
10.15Form of Series D Exchange Agreement (incorporated by reference to the Form 8-K filed on December 30, 2013)
10.16Confidential Patent Purchase Agreement dated December 31, 2013 between Spherix Incorporated and Rockstar Consortium US LP (incorporated by reference to the Form S-1/A filed January 21, 2014)
10.17Form of Subscription Agreement (incorporated by reference to the Form 8-K filed March 26, 2014)

84

10.18Form of Registration Rights Agreement (incorporated by reference to the Form 8-K filed March 26, 2014)
10.19Form of Subscription Agreement (incorporated by reference to the Form 8-K filed on May 29, 2014)
10.20Letter of Agreement, dated January 6, 2014, between Spherix Incorporated and Chord Advisors, LLC (incorporated by reference to the Form 10-K filed on March 30, 2015)
10.21Letter of Agreement, dated April 11, 2014, between Spherix Incorporated and Chord Advisors, LLC (incorporated by reference to the Form 10-K filed on March 30, 2015)
10.22Securities Purchase Agreement, dated July 15, 2015, between Spherix Incorporated and the purchasers party thereto (incorporated by reference to Form 8-K filed July 17, 2015)
10.23Employment Agreement, dated as of March 14, 2014, between Spherix Incorporated and Frank Reiner (incorporated by reference to Form 10-K filed March 29, 2016)
10.24Amendment to Employment Agreement, dated as of June 30, 2015, between Spherix Incorporated and Frank Reiner (incorporated by reference to Form 10-K filed March 29, 2016)
10.25Consulting Services Agreement, dated as of August 10, 2015, between Spherix Incorporated and Howard E. Goldberg d/b/a Forward Vision Associates (incorporated by reference to Form 8-K filed August 19, 2015)
10.26Settlement and License Agreement, dated October 13, 2015, between Spherix Incorporated and Huawei Technologies Co., Ltd. (incorporated by reference to Form 10-K filed March 29, 2016)
10.27Patent License Agreement, dated as of November 23, 2015, between Spherix Incorporated and RPX Corporation (incorporated by reference to Form 8-K filed November 30, 2015
10.28Securities Purchase Agreement, dated as of December 2, 2015, between Spherix Incorporated and the investors party thereto (incorporated by reference to Form 8-K filed December 3, 2015)

85

10.29Engagement Agreement, dated September 16, 2015, as amended, between Spherix Incorporated and H.C. Wainwright & Co., LLC (incorporated by reference to Form 8-K filed December 3, 2015)
10.30Employment Agreement, effective as of April 1, 2016, between Spherix Incorporated and Anthony Hayes (incorporated by reference to Form 8-K filed May 26, 2016)
10.31Separation Agreement and Release, dated March 10, 2017, between Spherix Incorporated and Frank Reiner (incorporated by reference to Form 8-K filed March 15, 2017)
10.32Patent License Agreement, dated as of May 23, 2016, between Spherix Incorporated and RPX Corporation (incorporated by reference to Form 10-Q filed August 15, 2016)
10.33

Technology Monetization Agreement, dated as of March 11, 2016, and amended as of April 22, 2016, April 27, 2016 and May 22, 2016, between Spherix Incorporated and Equitable IP Corporation (incorporated by reference to Form 8-K filed August 2, 2016)

10.34

Underwriting Agreement, dated as of August 2, 2016, by and among Spherix Incorporated and the underwriters named on Schedule I thereto (incorporated by reference to Form 8-K filed August 3, 2016)

10.35Assignment and Assumption of Rights Agreement, dated as of June 16, 2016, by and between Spherix Incorporated and Transfer Online, Inc. (incorporated by reference to Form 8-K filed June 21, 2016)
10.36

Securities Purchase Agreement, dated as of June 30, 2017, by and between Spherix Incorporated and Hoth Therapeutics, Inc. (incorporated by reference to Form 8-K filed July 3, 2017)

10.37

Registration Rights Agreement, dated as of June 30, 2017, by and between Spherix Incorporated and Hoth Therapeutics, Inc. (incorporated by reference to Form 8-K filed July 3, 2017)

10.38Form of Shareholders Agreement, dated as of June 30, 2017(incorporated by reference to Form 8-K filed July 3, 2017)
21.1List of Subsidiaries (incorporated by reference to 10-K filed on March 31, 2017)
23.1*Consent of Marcum LLP, independent registered public accounting firm
23.4Power of Attorney (included on signature page) (Incorporated by reference to Registrant’s Registration Statement on Form S-1 filed with the Commission on May 24, 2017)

86

* Filed herewith.

** Pursuant to a Confidential Treatment Request under Rule 24b-2 filed with and approved by the SEC, portions of this exhibit have been omitted

†To be filed by amendment.

87