Exhibit 9.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the August 15, 2007 sale of InfoSpherix. The unaudited pro forma condensed consolidated balance sheet and statements of operations filed with this report are presented for illustrative purposes only. The pro forma balance sheet as of June 30, 2007 has been prepared to reflect the sale of InfoSpherix as if such sale had taken place on such date, and is not necessarily indicative of the financial position of Spherix had the sale occurred on that date. The pro forma results of operations for the six months ended June 30, 2007 and 2006, and the year ended December 31, 2006, have been prepared assuming that the transaction occurred as of the beginning of each of these periods and are not necessarily indicative of the results of operations for future periods or the results that actually would have been realized had we sold InfoSpherix as of those dates. The unaudited pro forma financial statements, including notes thereto, should be read in conjunction with the historical financial statements of Spherix included in our Form 10-K for the year ended December 31, 2006, the unaudited financial statements filed in our Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007, and the Proxy Statement for the August 15, 2007 Annual Meeting.
The unaudited pro forma statements of operations set forth below reflect the elimination of all of the revenues and certain of the expenses attributable to InfoSpherix. We have eliminated all direct costs and expenses attributable to InfoSpherix operations as well as some of the selling, general and administrative expenses that are specific to InfoSpherix, including accounting, marketing, legal and human resource expenses. Other general and administrative expenses typically allocated to InfoSpherix have not been eliminated in the pro forma statements because Active Network/InfoSpherix will not assume these costs as part of the proposed sale and we will continue to incur these costs. However, following the sale of InfoSpherix, management expects to reduce the amount of corporate expenses to a level estimated to support Spherix’ biotechnology strategy. As such, the unaudited pro forma financial statements do not reflect other costs savings that may occur as a result of Spherix’ focusing its effort on the biotechnology strategy.
1
Spherix Incorporated
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2007
|
| As Reported (a) |
| Adjustments |
| Pro Forma |
|
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ 7,103,936 |
| $ 15,000,000 | (c) | $ 22,103,936 |
|
Other receivables |
| 32 |
| — |
| 32 |
|
Prepaid expenses and other assets |
| 317,125 |
| — |
| 317,125 |
|
Assets of segment held for sale, current |
| 4,399,410 |
| (4,399,410 | )(d) | — |
|
Total current assets |
| 11,820,503 |
| 10,600,590 |
| 22,421,093 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
| 183,726 |
| — |
| 183,726 |
|
Patents, net of accumulated amortization of $147,738 and $134,963 |
| 93,858 |
| — |
| 93,858 |
|
Assets of segment held for sale, non-current |
| 4,094,897 |
| (4,094,897 | )(d) | — |
|
Total assets |
| $ 16,192,984 |
| $ 6,505,693 |
| $ 22,698,677 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ 573,012 |
| $ 1,210,000 | (e) | $ 1,783,012 |
|
Accrued salaries and benefits |
| 214,533 |
| — |
| 214,533 |
|
Capital lease obligations |
| 2,081 |
| — |
| 2,081 |
|
Liabilities of segment held for sale, current |
| 3,299,366 |
| (3,299,366 | )(d) | — |
|
Total current liabilities |
| 4,088,992 |
| (2,089,366 | ) | 1,999,626 |
|
|
|
|
|
|
|
|
|
Deferred compensation |
| 497,852 |
| — |
| 497,852 |
|
Deferred rent |
| 128,457 |
| — |
| 128,457 |
|
Liabilities of segment held for sale, non-current |
| 191,900 |
| (191,900 | )(d) | — |
|
Total liabilities |
| 4,907,201 |
| (2,281,266 | ) | 2,625,935 |
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued and outstanding |
| — |
| — |
| — |
|
Common stock, $0.005 par value, 50,000,000 shares authorized; 14,335,000 and 13,892,642 issued, and 14,254,562 and 13,812,204 shares outstanding at June 30, 2007 and December 31, 2006 |
| 71,496 |
| — |
| 71,496 |
|
Paid-in capital in excess of par value |
| 27,441,717 |
| — |
| 27,441,717 |
|
Treasury stock, 80,438 shares at cost |
| (464,786 | ) | — |
| (464,786 | ) |
Accumulated deficit |
| (15,762,644 | ) | 8,786,959 | (f) | (6,975,685 | ) |
Total stockholders’ equity |
| 11,285,783 |
| 8,786,959 |
| 20,072,742 |
|
Total liabilities and stockholders’ equity |
| $ 16,192,984 |
| $ 6,505,693 |
| $ 22,698,677 |
|
2
Spherix Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the six months ended June 30, 2007
|
| As Reported (a) |
| Adjustment |
| Pro Forma |
|
|
|
|
|
|
|
|
|
Revenue |
| $ 4,019 |
| $ — |
| $ 4,019 |
|
|
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
|
Selling, general and administrative expense |
| 1,637,072 |
| — |
| 1,637,072 |
|
Research and development expense |
| 2,385,540 |
| — |
| 2,385,540 |
|
|
|
|
|
|
|
|
|
Total operating expense |
| 4,022,612 |
| — |
| 4,022,612 |
|
|
|
|
|
|
|
|
|
Loss from operations |
| (4,018,593 | ) | — |
| (4,018,593 | ) |
|
|
|
|
|
|
|
|
Interest income |
| 57,724 |
| — |
| 57,724 |
|
Interest expense |
| 29 |
| — |
| 29 |
|
|
|
|
|
|
|
|
|
Loss from continuing operations before taxes |
| (3,960,898 | ) | — |
| (3,960,898 | ) |
|
|
|
|
|
|
|
|
Income tax benefit |
| (20,000 | ) | — |
| (20,000 | ) |
|
|
|
|
|
|
|
|
Loss from continuing operations |
| (3,940,898 | ) | — |
| (3,940,898 | ) |
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
Income from discontinued operations before taxes |
| 2,218 |
| (2,218 | )(g) | — |
|
Income tax expense |
| 97,500 |
| (97,500 | )(g) | — |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
| (95,282 | ) | 95,282 |
| — |
|
|
|
|
|
|
|
|
|
Net loss |
| $ (4,036,180 | ) | $ 95,282 |
| $ (3,940,898 | ) |
|
|
|
|
|
|
|
|
Net (loss) income per share, basic |
|
|
|
|
|
|
|
Continuing operations |
| $ (0.28 | ) |
|
| $ (0.28 | ) |
Discontinued operations |
| $ (0.01 | ) |
|
| $ — |
|
Net (loss) income per share, basic |
| $ (0.29 | ) |
|
| $ (0.28 | ) |
|
|
|
|
|
|
|
|
Net (loss) income per share, diluted |
|
|
|
|
|
|
|
Continuing operations |
| $ (0.28 | ) |
|
| $ (0.28 | ) |
Discontinued operations |
| $ (0.01 | ) |
|
| $ — |
|
Net loss per share, diluted |
| $ (0.29 | ) |
|
| $ (0.28 | ) |
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
| 14,125,660 |
|
|
| 14,125,660 |
|
Weighted average shares outstanding, diluted |
| 14,125,660 |
|
|
| 14,125,660 |
|
3
Spherix Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the six months ended June 30, 2006
|
| As Reported (a) |
| Adjustment |
| Pro Forma |
|
|
|
|
|
|
|
|
|
Revenue |
| $ 2,735 |
| $ — |
| $ 2,735 |
|
|
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
|
Selling, general and administrative expense |
| 1,142,656 |
| — |
| 1,142,656 |
|
Research and development expense |
| 281,739 |
| — |
| 281,739 |
|
|
|
|
|
|
|
|
|
Total operating expense |
| 1,424,395 |
| — |
| 1,424,395 |
|
|
|
|
|
|
|
|
|
Loss from operations |
| (1,421,660 | ) | — |
| (1,421,660 | ) |
|
|
|
|
|
|
|
|
Interest income |
| 87,539 |
| — |
| 87,539 |
|
Interest expense |
| 35,030 |
| — |
| 35,030 |
|
|
|
|
|
|
|
|
|
Loss from continuing operations before taxes |
| (1,369,151 | ) | — |
| (1,369,151 | ) |
|
|
|
|
|
|
|
|
Income tax expense |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
| (1,369,151 | ) | — |
| (1,369,151 | ) |
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before taxes |
| 1,094,723 |
| (1,094,723 | )(g) | — |
|
Income tax expense |
| 20,000 |
| (20,000 | )(g) | — |
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
| 1,074,723 |
| (1,074,723 | ) | — |
|
|
|
|
|
|
|
|
|
Net loss |
| $ (294,428 | ) | $ (1,074,723 | ) | $ (1,369,151 | ) |
|
|
|
|
|
|
|
|
Net (loss) income per share, basic |
|
|
|
|
|
|
|
Continuing operations |
| $ (0.10 | ) |
|
| $ (0.10 | ) |
Discontinued operations |
| $ 0.08 |
|
|
| $ — |
|
Net (loss) income per share, basic |
| $ (0.02 | ) |
|
| $ (0.10 | ) |
|
|
|
|
|
|
|
|
Net (loss) income per share, diluted |
|
|
|
|
|
|
|
Continuing operations |
| $ (0.10 | ) |
|
| $ (0.10 | ) |
Discontinued operations |
| $ 0.08 |
|
|
| $ — |
|
Net (loss) income per share, diluted |
| $ (0.02 | ) |
|
| $ (0.10 | ) |
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
| 13,353,574 |
|
|
| 13,353,574 |
|
Weighted average shares outstanding, diluted |
| 13,353,574 |
|
|
| 13,353,574 |
|
4
Spherix Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2006
|
| As Reported (b) |
| Adjustment |
| Pro Forma |
|
|
|
|
|
|
|
|
|
Revenue |
| $ 24,838,174 |
| $ (24,831,239 | )(g) | $ 6,935 |
|
|
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
|
Direct contract and operating costs |
| 20,794,538 |
| (20,794,538 | )(g) | — |
|
Selling, general and administrative expense |
| 5,639,847 |
| (2,138,613 | )(g) | 3,501,234 |
|
Research and development expense |
| 883,608 |
| — |
| 883,608 |
|
|
|
|
|
|
|
|
|
Total operating expense |
| 27,317,993 |
| (22,933,151 | ) | 4,384,842 |
|
|
|
|
|
|
|
|
|
Loss from operations |
| (2,479,819 | ) | (1,898,088 | ) | (4,377,907 | ) |
|
|
|
|
|
|
|
|
Interest income (expense), net |
| 97,750 |
| — | (g) | 97,750 |
|
Other income |
| 6,000,000 |
| (6,000,000 | )(g) | — |
|
|
|
|
|
|
|
|
|
Loss from continuing operations before taxes |
| 3,617,931 |
| (7,898,088 | ) | (4,280,157 | ) |
|
|
|
|
|
|
|
|
Income tax expense |
| 105,050 |
| (105,050 | )(g) | — |
|
|
|
|
|
|
|
|
|
Net income |
| $ 3,512,881 |
| $ (7,793,038 | ) | $ (4,280,157 | ) |
|
|
|
|
|
|
|
|
Net income per share, basic |
| $ 0.26 |
|
|
| $ (0.32 | ) |
Net income per share, diluted |
| $ 0.26 |
|
|
| $ (0.32 | ) |
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic |
| 13,578,363 |
|
|
| 13,578,363 |
|
Weighted average shares outstanding, diluted |
| 13,578,363 |
|
|
| 13,578,363 |
|
5
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(a) Reflects the historical Consolidated Balance Sheet and Consolidated Statements of Operations of Spherix Incorporated as reported for the respective periods in its June 30, 2007 10-Q.
(b) Reflects the historical Consolidated Statement of Operations of Spherix Incorporated as reported for the respective period in its December 31, 2006 10-K.
(c) Cash proceeds received at closing of $15 million (the $2 million held in escrow will be recognized when all conditions have been satisfied).
(d) Adjustment reflects the elimination of the assets and liabilities of the discontinued InfoSpherix Incorporated subsidiary as reported at June 30, 2007.
(e) Estimated liabilities related to the transactions, such as estimated income taxes, commissions, and stay bonuses realized at closing.
(f) Estimated gain on sale net of estimated income tax liability.
(g) Adjustment reflects the elimination of the revenues and costs associated with the discontinued InfoSpherix operations.
6