Stockholders' Equity and Convertible Preferred Stock

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity and Convertible Preferred Stock

Note 9. Stockholders' Equity and Convertible Preferred Stock

Common Stock

At The Market Offering Agreement

On August 9, 2019, the Company entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC, as agent ("H.C. Wainwright"), pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright, shares of the Company's common stock having an aggregate offering price of up to $1.2 million (the "Shares"). The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares.

During the year ended December 31, 2019, the Company sold a total of 532,070 shares of common stock under the ATM for aggregate total gross proceeds of approximately $1.2 million at an average selling price of $2.17 per share, resulting in net proceeds of approximately $1.1 million after deducting commissions and other transaction costs.

Registered Common Stock and Warrant Financing

On May 29, 2019, the Company entered into a Securities Purchase Agreement (the "Common Stock Purchase Agreement") for the sale by the Company of 221,000 shares of the Company's common stock, at a purchase price of $2.60 per share, and pre-funded common stock purchase warrants to purchase up to 86,692 shares of common stock at a purchase price of $2.5999 per Warrant, which represents the per share purchase price, less a $0.0001 per share exercise price for each of the warrants ("Penny Warrants"). The Company sold the shares and warrants for net proceeds of approximately $0.8 million which transaction closed on May 31, 2019. 

Common Stock Warrant Exchange

On June 6, 2019, the Company entered into an amendment to the Common Stock Purchase Agreement, pursuant to which the Purchaser surrendered an aggregate of 115,269 shares to the Company and the Company issued 115,269 Penny Warrants to the Purchaser in order to limit the Purchaser's beneficial ownership.

The exchange of 115,269 Penny Warrants do not meet the definition of a derivative under ASC 815 because their fair value at issuance is equal to the fair value of the shares underlying the warrant. As such, they have the characteristics of a prepaid forward sale of equity. Since the shares underlying the Penny Warrants are issuable for little or no consideration, they are considered outstanding in the context of earnings per share, as discussed in ASC 260-10-45-13.

2018 activity

On March 19, 2018, the Company closed a public offering of common stock for gross proceeds of approximately $3.0 million. The offering was a shelf takedown off of the Company's registration statement on Form S-3 (File No. 333-222488) and was conducted pursuant to a placement agency agreement (the "Agreement") between the Company and Laidlaw & Company (UK) Ltd., the sole placement agent, on a best-efforts basis with respect to the offering (the "Placement Agent"), that was entered into on March 14, 2018. The Company sold 522,876 shares of its common stock in the offering at a purchase price of $5.74 per share.

The Company had designated separate series of its capital stock as of December 31, 2019 and December 31, 2018 as summarized below:

	Number of Shares Issued
	and Outstanding as of
	December 31, 2019		December 31, 2018		Par Value		Conversion Ratio
Series "A"		—		—	$	0.0001	N/A
Series "C"		—		—		0.0001	0.05:1
Series "D"		4,725		4,725		0.0001	0.53:1
Series "D-1"		834		834		0.0001	0.53:1
Series "F-1"		—		—		0.0001	0.05:1
Series "H"		—		—		0.0001	0.53:1
Series "I"		—		—		0.0001	1.05:1
Series "J"		—		—		0.0001	0.05:1
Series "K"		—		—		0.0001	263.16:1

Series D Convertible Preferred Stock

In connection with the acquisition of North South's patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred 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-nineteenths of a share of Common Stock. Upon the liquidation, dissolution or winding up of the 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 value or (ii) the amount the holder would receive as a holder of Common Stock on an "as converted" basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its 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 limitations described below. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

As of December 31, 2019 and 2018, 4,725 shares of Series D Preferred Stock remained issued and outstanding.

Series D-1 Convertible Preferred Stock

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-nineteenths of a share of Common Stock.  Upon the liquidation, dissolution or winding up of the 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 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 the 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.  The conversion ratio of the Series D-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company's outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company's Series D-1 Preferred Stock on a one-for-one basis.

As of December 31, 2019 and 2018, 834 shares of Series D-1 Preferred Stock remained issued and outstanding.

Warrants

A summary of warrant activity for year ended December 31, 2019 and 2018 is presented below:

	Warrants			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2018		294,072		$	38.15	$	-		1.92
Issued		301,960			-		506,273		-
Exercised		(235,294	)		-		394,940		-
Expired		(8,799	)		476.66		-		-
Outstanding as of December 31, 2019		351,939		$	19.96		111,332		0.94

On May 29, 2019, the Company entered into the Master Service Agreement ("MSA") with a consultant, World Wide Holdings, LLC ("Consultant"). In consideration for services provided by Consultant, the Company paid to Consultant three warrants (the "Consultant Warrants"), with each warrant immediately exercisable for 33,333 shares of common stock with a $0.01 strike price. The Company issued each of the three warrants on June 28, July 28 and August 27, 2019, respectively. The Company recorded $0.3 million in stock-based compensation during the year ended December 31, 2019 related to this arrangement. On July 12, 2019, the Company issued 33,333 shares of common stock upon exercise of one Consultant Warrant which resulted in gross proceeds of approximately $333.

Stock Options

2012 Plan

At December 31, 2019, there were 123 shares available for grant under the 2012 Equity Incentive Plan.

2013 Plan

At December 31, 2019, there were 24,840 fully vested options outstanding and 9,835 shares available for grant under the Spherix Incorporated 2013 Equity Incentive Plan.

2014 Plan and Option Grants

At December 31, 2019, there were 64,110 options outstanding and 38,058 shares available for grant under the Spherix Incorporated 2014 Equity Incentive Plan.

The fair value of options granted in 2019 and 2018 was estimated using the following assumptions:

	For the Years Ended December 31,
	2019	2018
Exercise price	-	$1.04 - $1.50
Term (years)	-	9.13 - 9.34
Expected stock price volatility	-	131.8% - 132.2%
Risk-free rate of interest	-	2.65% - 2.80%

A summary of option activity under the Company's stock option plan for year ended December 31, 2019 and 2018 is presented below:

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2018		124,381		$	209.22	$	-		4.8
Employee options expired		(35,121	)		302.29		-		-
Non-employee options expired		(310	)		571.71		-		-
Outstanding as of December 31, 2019		88,950		$	172.39	$	-		5.7
Options vested and exercisable		88,950		$	172.39	$	-		5.7

Stock-based compensation associated with the amortization of stock option expense was $8,000 and $213,000 for the years ended December 31, 2019 and 2018, respectively.

Estimated future stock-based compensation expense relating to unvested stock options is zero.

Restricted Stock Awards

During 2018 approximately 19,861 shares with a fair value of approximately $106,000 was granted. These restricted stock awards vested immediately.

Restricted Stock Units

As of December 31, 2019 and 2018, the Company did not have unrecognized stock-based compensation expense related to restricted stock unit awards.