| 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, the valuation of investments and the valuation allowance related to the Company’s deferred tax assets. Certain
of the Company’s estimates, including the carrying amount of 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 in checking accounts and money market accounts. The Company
considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents.
As of June 30, 2018 and December 31, 2017, the Company had $0.2 million in cash and cash equivalents. The Company has not experienced
any losses in such accounts and believes it is not exposed to any significant credit risk on cash. 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, 2018 and 2017, the Company incurred realized losses of approximately $0.2 million and $36,000,
respectively, and unrealized gains of approximately $41,000 and $66,000, 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, 2018 and 2017, the Company earned dividend income of approximately $44,000 and $47,000, respectively, which is included
in other income, net on the consolidated statement of operations. During
the six months ended June 30, 2018 and 2017, the Company incurred realized losses of approximately $0.3 million and $0.1 million,
respectively, and unrealized losses of approximately $17,000 and unrealized gains of approximately $0.1 million, 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, 2018 and 2017, the Company earned dividend income of approximately $78,000 and
$55,000, respectively, which is included in other income, net on the consolidated statement of operations. The
realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and six
months ended June 30, 2018 and 2017 are as follows ($ in thousands):
For
the Three Months Ended June 30, For
the Six Months Ended June 30,
2018 2017 2018 2017
Realized
gain (loss) $ (177 ) $ (36 ) $ (275 ) $ (129 )
Unrealized gain (loss) 41 66 (17 ) 138
Dividend
income 44 47 78 55
$ (92 ) $ 77 $ (215 ) $ 64 The
Company reinvested such dividend income into its marketable securities during the six months ended June 30, 2018 and 2017. The
fair values of such marketable securities held as of June 30, 2018 and December 31, 2017 were $4.6 million and $4.0 million, respectively. The
marketable securities were classified as a Level 2 financial instrument at June 30, 2018 (see Note 7). Digital
Currencies Translations and Remeasurements The
Company accounts for digital currencies, which it considers to be an asset, at their initial cost and subsequently remeasures
the carrying amounts of digital currencies it owns at each reporting date based on their current fair value. The changes in the
fair value of digital currencies are included as a component of income or loss. The Company currently classifies digital currencies
as a current asset. The
Company obtains the equivalency rate of bitcoins to USD from various exchanges including, Bitstamp, Kraken and Coinbase. Equivalency
rate obtained from these sources represents a generally well recognized quoted price in an active market for bitcoins, which market
and related database are accessible to the Company on an ongoing basis. Investment The
Company elected the fair value option for its investment in Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”).
As of June 30, 2018, the fair value of this investment was $1,700,000. The Company also elected the fair value option for its
investment in TheBit Daily LLC, a Delaware limited liability company (“TheBit Daily”). As of June 30, 2018, the fair
value of this investment was $25,000. These investments were classified as a Level 3 financial instrument at June 30, 2018 (see
Note 4). 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 Condensed Consolidated Statements of Operations. 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. 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, 2018 and 2017 are as follows:
As
of June 30,
2018 2017
Convertible
preferred stock 2,926 2,926
Warrants
to purchase common stock 1,249,754 1,251,709
Options
to purchase common stock 528,490 328,716
Total 1,781,170 1,583,351 Revenue
Recognition The
Company recognizes revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned
when there is persuasive evidence of an arrangement when the services have been provided to the customer, the sales price is fixed
or determinable and collectability is probable. Our material revenue stream is related to revenue generated from its settlement
and licensing agreements. the appropriate recognition of revenue is determined as one performance obligation and revenue is recognized
upon delivery of the final performance obligations, including the license for past and future use and the release. The
Company recognizes revenue under ASC 606, Revenue from Contracts with Customers
● Step 1: Identify the contract with the customer
● Step 2: Identify the performance obligations
in the contract
● Step 3: Determine the transaction price
● Step 4: Allocate the transaction price to the
performance obligations in the contract
● Step 5: Recognize revenue when the company satisfies
a performance obligation In
order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services
in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition
of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
● The customer can
benefit from the good or service either on its own or together with other resources that are readily available to the customer
(i.e., the good or service is capable of being distinct).
● The entity’s
promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e.,
the promise to transfer the good or service is distinct within the context of the contract). If
a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods
or services is identified that is distinct. The
transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised
goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable
amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
● Variable consideration
● Constraining estimates of variable consideration
● The existence of a significant financing component
in the contract
● Noncash consideration
● Consideration payable to a customer Variable
consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount
of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved. The
transaction price is allocated to each performance obligation on a relative standalone selling price basis. The
transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point
in time or over time as appropriate. As
of June 30, 2018, there were no contract assets or liabilities associated with the Company’s settlement and licensing agreements.
During the six months ended June 30, 2018, the Company did not generate any revenue. Recently
Issued Accounting Pronouncements In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (Topic
840) 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 In
June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting Recently
Adopted Accounting Pronouncements In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified by ASU No. 2015-14, “Revenue
from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08, “Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU No. 2016-12, “Revenue
from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The revenue recognition
principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective
approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The Company
adopted the new standard effective January 1, 2018, using the modified retrospective approach. The Company has determined that
its licenses represent functional intellectual property under Topic 606. Therefore, revenue is recognized at the point in time
when the customer has the right to use the intellectual property rather than over the license period. Accordingly, the Company’s
deferred revenue related to its licenses was eliminated and accumulated deficit as of January 1, 2018 was decreased by approximately
$3.2 million so that the Company will not recognize revenue on earnings statements in the future as to its license. In
January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In
May 2017, the Financial Accounting Standards Board (the FASB) issued ASU 2017-09, Compensation-Stock Compensation (Topic 718):
Scope of Modification Accounting |
