Stockholders' Equity and Convertible Preferred Stock

12 Months Ended

Dec. 31, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity and Convertible Preferred Stock

Note 10. Stockholders’ Equity and Convertible Preferred Stock

Common Stock

2017 activity

On July 18, 2017, the Company entered into an underwriting agreement with Laidlaw & Company (UK) Ltd. with respect to the issuance and sale of an aggregate of 1,250,000 shares of the Company’s common stock, par value $0.0001 per share, in a firm commitment underwritten public offering which closed on July 24, 2017. Each share was sold for a price of $2.00 for aggregate gross proceeds of $2.5 million, with net proceeds of approximately $2.1 million, after deducting the underwriting discounts and commissions (equivalent to 8% of gross proceeds) and estimated offering expenses.  

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 2,222,222 shares of its common stock in the offering at a purchase price of $1.35 per share.

The Company had designated separate series of its capital stock as of December 31, 2018 and December 31, 2017 as summarized below:

	Number of Shares Issued
	and Outstanding as of
	December 31, 2018		December 31, 2017		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, 2018 and 2017, 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, 2018 and 2017, 834 shares of Series D-1 Preferred Stock remained issued and outstanding.

Warrants

A summary of warrant activity for year ended December 31, 2018 and 2017 is presented below: 

	Warrants		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2017		1,249,754	$	8.98	$	—		2.92
Outstanding as of December 31, 2018		1,249,754	$	8.98				1.92

Stock Options

2012 Plan

At December 31, 2018, there were 521 shares available for grant under the 2012 Equity Incentive Plan.

2013 Plan

At December 31, 2018, there were 105,547 fully vested options outstanding and 41,821 shares available for grant under the Spherix Incorporated 2013 Equity Incentive Plan.

2014 Plan and Option Grants

At December 31, 2018, there were 422,880 options outstanding and 11,330 shares available for grant under the Spherix Incorporated 2014 Equity Incentive Plan.

The fair value of options granted in 2018 and 2017 was estimated using the following assumptions: 

	For the Years Ended December 31,
	2018	2017
Exercise price	$1.04-$1.50	$	1.02
Expected stock price volatility	131.8%-132.2%		134.5	%
Risk-free rate of interest	2.65%-2.80%		1.4	%
Term (years)	9.13-9.34		4.42

A summary of option activity under the Company’s employee stock option plan for year ended December 31, 2018 and 2017 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, 2017		325,597	$	78.20	$	5,999		3.2
Employee options granted		200,000		1.39		—		9.2
Outstanding as of December 31, 2018		525,597	$	48.96	$	—		4.9
Options vested and expected to vest		525,534	$	48.96	$	—		4.9
Options vested and exercisable		500,534	$	51.35	$	—		4.6

A summary of options that the Company granted to non-employees for the year ended December 31, 2018 and 2017 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, 2017		2,893	$	98.07	$	—		3.4
Outstanding as of December 31, 2018		2,893	$	98.07	$	—		2.4
Options vested and expected to vest		2,893	$	98.07	$	—		2.4
Options vested and exercisable		2,893	$	98.07	$	—		2.4

Stock-based compensation associated with the amortization of stock option expense was $213,000 and $14,000 for the years ended December 31, 2018 and 2017, respectively.

Estimated future stock-based compensation expense relating to unvested stock options is approximately $8,000. The weighted average remaining contractual term of exercisable options is approximately 4.8 years at December 31, 2018.

Restricted Stock Awards

2017 activity

On October 11, 2017, the Company granted a consultant 5,000 shares of restricted common stock for consulting services. The restricted stock award vested immediately. The grant date fair value of restricted stock award was $8,400.

2018 activity

During 2018 approximately 84,410 shares with a fair value of approximately $106,000 was granted. These restricted stock awards vested immediately.

Restricted Stock Units

On March 14, 2017, 35,969 restricted stock units (“RSUs”) were delivered to Anthony Hayes. 23,287 shares of common stock were withheld (at the closing price of the Company’s common stock on the NASDAQ Capital Market on March 14, 2017) to satisfy the tax obligation relating to the vesting of the RSUs.

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

Stock-based Compensation Expense

Stock-based compensation expense for the year ended December 31, 2018 and 2017 was comprised of the following ($ in thousands): 

	For the Years Ended December 31,
	2018		2017
Employee restricted stock awards	$	107	$	—
Non-employee restricted stock awards		—		9
Employee stock option awards		213		14
Total compensation expense	$	320	$	23