| Summary of Significant Accounting Policies | Note
3. Summary of Significant Accounting Policies Basis
of Presentation and Principles of Consolidation The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Nuta Technology
Corp. (“Nuta”), Spherix Portfolio Acquisition II, Inc. (“SPXII”), Guidance IP, LLC (“Guidance”),
Directional IP, LLC (“Directional”), Spherix Management Services, LLC (“SMS”) and NNPT, LLC (“NNPT”).
All significant intercompany balances and transactions have been eliminated in consolidation. Use
of 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, the valuation of derivative
liabilities, 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. Marketable
Securities Marketable
securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of corporate
bonds and highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. During
the three months ended June 30, 2017 and 2016, the Company incurred realized losses of approximately $36,000 and realized gains
of approximately $10,000, respectively, and unrealized gains of approximately $66,000 and $17,000, respectively, on its investments
in marketable securities, which are included in other income, net on the consolidated statements of operations. In addition, during
the three months ended June 30, 2017 and 2016, the Company earned dividend income of approximately $47,000 and $4,000, respectively,
which is included in other income, net on the consolidated statement of operations. During
the six months ended June 30, 2017 and 2016, the Company incurred realized losses of approximately $129,000 and $57,000, respectively,
and unrealized gains of approximately $138,000 and $29,000, respectively, on its investments in marketable securities, which are
included in other income, net on the consolidated statements of operations. In addition, during the six months ended June 30,
2017 and 2016, the Company earned dividend income of approximately $55,000 and $17,000, respectively, which is included in other
income, net on the consolidated statement of operations. The
Company reinvested such dividend income into its marketable securities during the six months ended June 30, 2017 and 2016. The
fair market values of marketable securities held as of June 30, 2017 and December 31, 2016 were $2.9 million and $6.0 million,
respectively. Investment The
Company elected the fair value option for its investment in Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”).
As of June 30, 2017, the fair value of this investment was $675,000 (see Note 4). The investment was classified as a Level 3 financial
instrument at June 30, 2017. While
the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate
of fair value at the reporting date. The
decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument by instrument basis
and applied to an entire instrument. The net gains or losses, if any, on an investment for which the fair value option has been
elected, are recognized as an unrealized gain on investment in the Consolidated Statements of Operations. 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). 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. The Company classifies these derivative warrant liabilities on the consolidated balance sheet as a current liability. The
Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such
instruments met the criteria for liability classification. Accordingly, the Company classified the warrants as a liability at
their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement
at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change
in the fair value of warrant liabilities” in the consolidated statements of operations. The fair value of the warrants has
been estimated using a Black-Scholes valuation model (see Note 6). Net
Loss per Share Basic
loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common
shares outstanding during the period. Net income (loss) attributable to common stockholders includes the effect of the deemed
capital contribution on extinguishment of preferred stock and the deemed dividend related to the immediate accretion of beneficial
conversion feature of convertible preferred stock. Diluted earnings per share is computed using the weighted average number of
common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the
incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of
the Company’s convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes
the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation
of net loss per share if their effect would be anti-dilutive. The
following table summarizes the earnings (loss) per share calculation (in thousands, except per share amount):
For
the Three Months Ended June 30, For
the Six Months Ended June 30,
2017 2016 2017 2016
Basic
earnings per share Numerator:
Net
Loss $ (1,860 ) $ (2,078 ) $ (2,779 ) $ (2,127 )
Deemed
capital contribution on extinguishment of preferred stock — 31,480 — 31,480
Net
income (loss) available to common stockholders $ (1,860 ) $ 29,402 $ (2,779 ) $ 29,353
Denominator:
Weighted
average number of common shares outstanding, 49,58,159 30,60,455 49,51,083 28,83,160
Earnings
per basic share:
Net
Loss (0.38 ) (0.68 ) (0.56 ) (0.74 )
Deemed
capital contribution on extinguishment of preferred stock — 10.29 — 10.92
Net
income (loss) available to common stockholders $ (0.38 ) $ 9.61 $ (0.56 ) $ 10.18
Dilutive
earnings per share Numerator:
Net
Loss $ (1,860 ) $ (2,078 ) $ (2,779 ) $ (2,127 )
Deemed
capital contribution on extinguishment of preferred stock — 31,480 — 31,480
Net
income (loss) available to common stockholders $ (1,860 ) $ 29,402 $ (2,779 ) $ 29,353
Denominator:
Weighted
average basic shares outstanding, Weighted average effect of dilutive securities 49,58,159 30,60,455 49,51,083 28,83,160
Employee
stock options — 1,646 — 684
Convertible
preferred stock — 1,23,482 — 2,59,601
Restricted
stock units — 7,644 — 3,577
Weighted
average diluted shares outstanding 49,58,159 31,93,227 49,51,083 31,47,022
Earnings
per diluted share:
Net
Loss $ (0.38 ) $ (0.65 ) $ (0.56 ) $ (0.68 )
Deemed
capital contribution on extinguishment of preferred stock — 9.86 — 10.00
Net
income (loss) available to common stockholders $ (0.38 ) $ 9.21 $ (0.56 ) $ 9.32 Securities
that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share
at June 30, 2017 and 2016 are as follows:
As
of June 30,
2017 2016
Convertible preferred
stock 2,926 2,926
Warrants to purchase
common stock 1,251,709 1,251,709
Non-vested restricted
stock units — 59,256
Options
to purchase common stock 328,716 289,380
Total 1,583,351 1,603,271 Recent
Accounting Pronouncements In
May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which
requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new
guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to
obtain or fulfill a contract. The FASB has subsequently issued ASU No. 2016-10, Revenue from Contracts with Customer (Topic 606)
Identifying Performance Obligations and Licensing to address issues arising from implementation of the new revenue recognition
standard. ASU 2014-09 and ASU 2016-10 are effective for interim and annual periods beginning January 1, 2018, and may be adopted
earlier, but not before Janaury 1, 2017. The revenue standards are required to be adopted by taking either a full retrospective
or a modified retrospective approach. The Company is currently evaluating the impact that ASU 2014-09 and 2016-10 will have on
the Company’s financial statements and determining the transition method, including the period of adoption, that it will
apply. In
January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic
840) In
March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial
Instruments In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments In
January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Goodwill Impairment In
May 2017, the Financial Accounting Standards Board (the FASB) issued ASU 2017-09, Compensation-Stock Compensation (Topic 718):
Scope of Modification Accounting In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480)
and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception Recently
Adopted Accounting Pronouncements In
March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based
Payment Accounting |
