☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☒ Emerging Growth Company ☐~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practicable date.

Spherix Incorporated (the “Company”) is ~~an intellectual property~~technology development company committed to the fostering of innovative ideas. The Company was incorporated in 1967 in the State of Delaware ~~that owns patented and unpatented intellectual property. The Company was formed in 1967~~ as a scientific research company, and for much of its history pursued drug development including through Phase III clinical studies which were discontinued. Through the Company’s acquisition of patents and patent applications developed by Nortel Networks Corporation from Rockstar Consortium US, LP (“Rockstar”) and Harris Corporation from North South Holdings Inc. (“North South”) in 2013, the Company has expanded its activities.

The Company ~~is a patent commercialization company~~was formerly focused on ~~generating revenues from the monetization of intellectual property, or IP. Such monetization includes, but is not limited to,~~commercializing and monetizing patents by acquiring IP from patent holders in order to maximize the value of the patent holdings by conducting and managing a licensing campaign, or through the settlement and litigation of patents. We intend to generate revenues and related cash flows from the granting of intellectual property rights for the use of patented technologies that we own, that we manage for others, or that others manage on our behalf. To date, we have generated minimal revenues and no assurance can be provided that our business model will be successful.

Since March 1, 2013, the Company has received limited funds from its IP monetization. In addition to ~~our~~its patent monetization efforts, since the fourth quarter of 2017, ~~we have~~the Company has been transitioning to focus ~~our~~its efforts as a technology development company. These efforts have focused on biotechnology research and blockchain technology research. The Company’s biotechnology research development includes investments in Hoth Therapeutics Inc. and the proposed merger with CBM BioPharma, Inc. (“CBM”).

On May 10, 2019, the Company effected a development stage biopharmaceutical company focused on proprietary therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. To treat indications impacting more than 32 million Americans, Hoth is working to develop and commercializereverse stock split of its outstanding shares of common stock at a ratio of one-for-4.25 (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the ~~BioLexa™ Platform, a proprietary, patented, drug compound platform developed~~Company’s board of directors under authority granted by the Company’s stockholders at the ~~University~~Company’s 2019 Annual Meeting of ~~Cincinnati. The BioLexa™ Platform has achieved positive results at preclinical studies conducted at the University of Miami.~~

In addition to Hoth, the Company is proposing a merger with CBM. In October 2018, the Company entered into an agreement and plan of merger, subject to shareholder approval, with CBM BioPharma, Inc. (“CBM”), a pharmaceutical company focusingStockholders held on ~~the development of cancer treatments,~~April 15, 2019, was consummated pursuant to ~~which~~a Certificate of Amendment filed with the Secretary of State of Delaware on May 9, 2019 (the “Certificate of Amendment”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Standard Time, on May 10, 2019 (the “Effective Date”). Unless the context otherwise requires, all ~~shares of capital stock of CBM will be converted into the right~~references in this report to ~~receive an aggregate of 15,000,000~~ shares of the Company’s common stock, ~~with CBM continuing as~~including prices per share of its common stock, reflect the ~~surviving corporation in~~Reverse Stock Split. Fractional shares were not issued, and the ~~merger.~~final number of shares were rounded up to the next whole share.

Pursuant to a Share Purchase Agreement, dated as of ~~blockchain research,~~May 15, 2019, the Company ~~previously~~purchased 50,000 shares of CBM for $350,000.

In addition, on May 15, 2019, the Company restructured the terms of its proposed merger with CBM and entered into an Asset Purchase Agreement (the “APA”) with CBM. In connection with the execution of the APA, the agreement and plan of merger between with CBM, dated as of October 10, 2018, was terminated and any and all termination fees thereunder have been waived.

As consideration for the purchase, the Company agreed to pay aggregate consideration of $8.0 million to CBM consisting of an aggregate number of shares of common stock equal to $7.0 million (based upon a per share price of $3.61) and cash consideration in the amount of $1.0 million. The cash consideration is held back and becomes payable to CBM upon the consummation by the Company of the first sale by the Company of common stock, Series L convertible preferred stock or any other equity or equity-linked financing of Spherix to investors in one or more transactions for which Spherix receives aggregate gross proceeds of greater than $2,000,000 (a “Qualified Financing”) after the closing date, upon which the Company will retain the first $2,000,000 of gross proceeds received in connection with such Qualified Financing and CBM will receive 100% of the gross proceeds of such Qualified Financing received by the Company in excess of $2,000,000 as well as the gross proceeds of any subsequent equity financings by the Company until the cash consideration amount is satisfied in full.

The obligations of the Company and CBM to consummate the transaction are subject to: (a) all necessary approvals being obtained by relevant governmental authorities and third parties. The APA may be terminated (i) by mutual written consent of the Company and CBM, (ii) by written notice by the Company or CBM if any of the conditions to Closing (as defined in the APA) are not satisfied or waived by September 30, 2019. The transactions contemplated by the APA remain subject to shareholder approval with DatChat, Inc. (the “DatChat Merger”), a secure messaging application that utilizes blockchain technology. After further negotiations, the Company determined not to pursue a merger with DatChat and on August 8, 2018, entered into a Securities Purchase Agreement with DatChat pursuant to whichof the Company and DatChat agreed to terminate the DatChat Merger and the Company agreed to make a $1,000,000 strategic investment in DatChat which consisted of (a) a cash payment of $500,000, (b) the forgiveness of prior advances made to DatChat by the Company, and (c) an obligation of the Company to pay certain specific future compensation expenses of DatChat (amounts in clauses (b) and (c) not to exceed a maximum of $500,000 in the aggregate); in exchange for $1,000,000 of restricted shares of DatChat common stock which is equal to 4.37% of the issued and outstanding common stock of DatChat. Pursuant to the Securities Purchase Agreement, the Companyapplied a total of approximately $152,000 prior advances towards its investment in DatChat (“Prior Incurred Amount”), including $131,000 of compensation related costs and $21,000 professional fees. The Company also recorded approximately $348,000 compensation expenses payable to DatChat (“Payable to DatChat”) in addition to the $152,000 advances to reach the $500,000 maximum.CBM.

~~The breakdown of investment at Datchat as September 30, 2018 are as follows ($ in thousands):~~

The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities through:

~~Management believes the Company currently has sufficient funds~~Notes to ~~meet its operating requirements for at least the next twelve months.~~Consolidated Financial Statements

The Company’s ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely basis. The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business plan to support new technologies and help advance innovation. The Company’s working capital amounted to approximately ~~$2.3~~$0.6 million at ~~September~~June 30, ~~2018.~~2019. Absent generation of sufficient revenue from the execution of the Company’s long-term business plan, the Company will need to obtain additional debt or equity financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or operations. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

~~Disputes regarding~~Because of recurring operating losses and net operating cash flow deficits there is substantial doubt about the ~~assertion~~Company’s ability to continue as a going concern within one year from the date of ~~patents and other intellectual property rights are highly complex and technical.~~this filing. The Company may be forced to litigate against others to enforce or defend its intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in whichcondensed consolidated financial statements have been prepared assuming that the Company is involved may allege defenses and/or file counterclaims or initiate inter-party reviews in an effort to avoid or limit liability and damages for patent infringement or cause the Company to incur additional costswill continue as a ~~strategy. If such efforts are successful, they may have an impact~~going concern, and do not include any adjustments to reflect the possible future effects on the ~~value~~recoverability and classification of assets, or the ~~patents~~amounts and ~~preclude the Company from deriving revenue~~classification of liabilities that may result from the ~~patents. The patents could be declared invalid by a court or the United States Patent and Trademark Office, in whole or in part, or the costs~~outcome of the Company can increase. Recent rulings also create an increased risk that if the Company is unsuccessful in litigation it could be responsible to pay the attorneys’ fees and other costs of defendants by lowering the standard for legal fee shifting sought by defendants in patent cases.this uncertainty.

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Nuta Technology Corp. (“Nuta”), Spherix Portfolio Acquisition II, Inc. (“SPAII”), Guidance IP, LLC (“Guidance”), Directional IP, LLC (“Directional”), Spherix Management Services, LLC (“SMS”), Spherix Delaware Merger Sub Inc. (“Merger Sub”), Spherix Merger Subsidiary, Inc (“SMSI”) and NNPT, LLC (“NNPT”).subsidiaries. All ~~significant~~material intercompany balances and transactions have been ~~eliminated~~eliminated. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in ~~consolidation.~~accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2019, condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018, condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and six months ended June 30, 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2019 or for any future interim period. The condensed consolidated balance sheet at December 31, 2018 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 12, 2019.

The accompanying condensed consolidated financial statements have been prepared in conformity with ~~accounting principles generally accepted in the United States of America (“~~US ~~GAAP”).~~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,~~its investments, 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.

~~The Company maintains cash balances at two financial institutions~~Other than as described below, there have been no material changes in ~~checking accounts and money market accounts. The Company considers all highly liquid investments~~the Company’s significant accounting policies to those previously disclosed in the Company’s annual report on Form 10-K, which was filed with ~~original maturities of three months or less when purchased to be cash and cash equivalents. As of September 30, 2018 and December 31, 2017,~~ the Company had $0.1 million and 0.2 million, respectively, 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 riskSEC on ~~cash.~~

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 which are valued at quoted market prices.March 12, 2019.

The realized gain or loss, unrealized gain or loss, and dividend income related to marketable securities for the three and nine months ended September 30, 2018 and 2017 are as follows ($ in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2018 2017 2018 2017
Realized gain (loss) $ (86 ) $ (174 ) $ (361 ) $ (303 )
Unrealized gain (loss) 3 124 (14 ) 262
Dividend income 44 18 121 72
$ (39 ) $ (32 ) $ (254 ) $ 31

The Company reinvested such dividend income into its marketable securities during the nine months ended September 30, 2018 and 2017. The fair values of such marketable securities held as of September 30, 2018 and December 31, 2017 were $3.4 million and $4.0 million, respectively.

~~The marketable securities were classified as a Level 2 financial instrument at September 30, 2018 (see Note 8).~~

The Company records its investment in Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”) at fair value. As of September 30, 2018, the fair value of this investment was $1,700,000. The Company also records its investment in TheBit Daily LLC, a Delaware limited liability company (“TheBit Daily”) at fair value. As of September 30, 2018, the fair value of this investment was $25,000. In addition, the Company made an $1,000,000 investment in DatChat on August 8, 2018. These investments were classified as a Level 3 financial instrument at September 30, 2018 (see Note 8).Notes to Consolidated Financial Statements

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, are recognized as an unrealized gain on investment in the Condensed Consolidated Statements of Operations.(Unaudited)

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)~~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 ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are as follows:

~~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~~In August 2018, the ~~services have been provided~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-13,Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the ~~customer, the sales price is fixed~~Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify 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~~. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

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:

~~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 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 uncertaintyremove certain disclosure requirements associated with the ~~variable consideration~~movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is ~~subsequently resolved.~~effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

~~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 September 30, 2018, there were no contract assets or liabilities associated with the Company’s settlement and licensing agreements. During the nine months ended September 30, 2018, the Company did not generate any revenue.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842), which supersedes FASB ASC Topic 840,Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company does not have any long-term leases, therefore the adoption of this standard ison January 1, 2019 did not ~~expected to~~ have a material impact on the Company’s condensed consolidated financial position and results of operations.

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, (ASU 2017-11). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company ~~is currently assessing the potential impact of adopting~~adopted ASU 2017-11 on ~~its~~January 1, 2019 and the adoption did not have an impact on the Company’s condensed consolidated financial ~~statements and related disclosures.~~statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company ~~is currently assessing the effect this guidance may have on its financial statements.~~

~~In August 2018, the SEC~~ adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is evaluating the impact of this guidance on its condensed consolidated financial statements.

~~In August 2018, the FASB issued~~ ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated Financial Statements.

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~~. ASU No. 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted the provisions of ASU 2016-012018-07 on January 1, ~~2018. The adoption of this update did not impact the Company’s consolidated financial statements~~2019 and ~~related disclosures.~~

~~In May 2017, the Financial Accounting Standards Board (the FASB) issued ASU 2017-09,~~~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~, (ASU 2017-09). ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption ~~date. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU 2017-09 on January 1, 2018. The adoption of this ASU~~ did not have ~~a material~~an impact on the Company’s condensed consolidated financial ~~position~~statements

The realized gain or ~~results~~loss, unrealized gain or loss, and dividend income related to marketable securities for the three and six months ended June 30, 2019 and 2018, which are recorded as a component of ~~operations.~~other (expenses) income on the consolidated statements of operations, are as follows ($ in thousands):

On ~~June 30, 2017 (the “Closing Date”),~~February 20, 2019, Hoth closed its initial public offering (“IPO) at an initial offering price to the ~~Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”), for the purchase~~public of an aggregate of 6,800,000 shares of common stock, par value $0.0001 (the “Shares”), of Hoth, for a purchase price of $675,000. Company records this investment at fair value and recorded changes in fair value in the statement of operations (see Note 8).

On March 23, 2018, Spherix Incorporated purchased 8.0% of the issued and outstanding limited liability company membership interests of TheBit Daily LLC, a development stage media and education platform focused on the blockchain and cryptocurrency space, for a subscription price of $25,000.

$5.60 per share. The Company records this investment at fair value and ~~changes~~records any change in fair value ~~are recorded (see Note 8).~~

On August 8, 2018, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with DatChat. Under the Securities Purchase Agreement, the Company agreed to make a $1,000,000 strategic investment in DatChat. See Note 1 for further explanation.

As described in Note 3 to these condensed consolidated financial statements, effective January 1, 2018, the Company adopted ASU 2016-01 concerning recognition and measurement of financial assets and financial liabilities. In adopting this new guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for its investment in DatChat. The Company records its investment at fair value and changes in fair value are recorded in the ~~statement~~statements of operations (see Note 8)6). The following summarizes the Company investment in Hoth:

The Company’s intangible assets with finite lives consist of its patents and patent rights. For all periods presented, all of the Company’s identifiable intangible assets were subject to amortization. The carrying amounts related to acquired intangible assets as September 30, 2018 are as follows ($ in thousands):

~~The amortization expenses related to acquired intangible assets for the nine months ended September 30, 2018 and 2017 are as follows ($ in thousands):~~

The Company reviews its patent portfolio for impairment as a single asset group whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During the third quarter of 2018, the Company determined that certain events occurred that were indicators of a potential impairment. In accordance with ASC 360-10, the Company first estimated the future undiscounted cash flows anticipated to be generated by the patent portfolio based on the Company’s current usage and future plans for the patent portfolio over its remaining weighted average useful life. Given the short-term nature of the patents the undiscounted cash flows approximate discounted cash flows. The analysis concluded that the carrying amount of the patent portfolio was not recoverable at September 30, 2018. As a result, the Company performed an analysis to determine if the carrying value of the patent portfolio exceeded its fair value. As a result, the Company determined that the fair value of ~~the patent portfolio at September~~Hoth common shares as of June 30, 2018 was $1.5 million. The Company recorded a $1.1 million impairment charge against its patent portfolio in the third quarter of 2018. The new cost basis of the patent portfolio of $1.5 million will be amortized over its weighted average remaining useful life of 1.00 years.

~~The future amortization of these intangible assets~~2019 was based on the ~~adjusted carrying amount. Future amortization~~closing price of ~~all patents is~~$5.81 reported on The Nasdaq Capital Market as ~~follows ($ in thousands):~~of June 28, 2019.

Financial instruments, including cash and cash equivalents, ~~accounts and other receivables,~~ accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The following table presents the Company’s assets and liabilities that are measured at fair value at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 ($ in thousands):

In May 2019, the Company purchased a senior convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share (b) a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d) a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, and (e) a contingent option to put 200,000 shares of DatChat common stock. The aggregate purchase price was nominal. As a result of the nominal purchase price associated with is transaction, the Company reviewed its existing holdings in DatChat and reduced its existing carrying amount from $1.0 million to $0.

The table above excludes the Company’s investment in Mellow Scooters for $0.1 million and its other investments for $0.1 million as of June 30, 2019. Such investments were recorded on adjusted cost method measurement alternative in accordance with ASU 2016-01.

Due to the Hoth’s IPO in February 2019, the Company’s investment in Hoth was transferred from Level 3 to Level 1 during the six months ended June 30, 2019 and there were no transfers between Level 1, 2 or 3 during the ~~nine~~six months ended ~~September~~June 30, 2018.

The fair values of Level 2 marketable securities are determined using one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in “change in fair value of warrant liabilities” in the Company’s consolidated statements of operations.

The Series A and Series B warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The warrants require, at the option of the holder, a net-cash settlement following certain fundamental transactions at the Company or require the issuance of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted for as derivative liabilities.

A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 is as follows:

The risk-free interest rate was based on rates established by the Federal Reserve. For the July 2015 Warrants, the expected volatility in the Black-Scholes model is based on an expected volatility of 100% for both periods which represents the percentage required to be used when valuing the cash settlement feature as contractually stated in the form of warrant. The general expected volatility is based on standard deviation of the Company’s underlying stock price’s daily logarithmic returns. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact that the Company has not historically paid dividends on its common stock and does not expect to pay dividends on its common stock in the future.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities ~~for the nine months ended September 30, 2018 and 2017~~ that are measured at fair value on a recurring basis for the six months ended June 30, 2019 and 2018 ($ in thousands):

On May 29, 2019, the Company entered into a Securities Purchase Agreement (the “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 $787 thousand which transaction closed on May 31, 2019.

On June 6, 2019, the Company entered into an amendment to the 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 ~~Company owns approximately 34%~~exchange of ~~common shares in Hoth as~~115,269 Penny Warrants do not meet the definition of ~~September 30, 2018. The~~a derivative under ASC 815 because their fair value ~~of the Company’s investment in Hoth increased by approximately $0.7 million during the nine months ended September 30, 2018.~~

~~The following table sets forth a summary of the changes in~~at issuance is equal to the fair value of the ~~Company’s Level 3 financial assets~~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 ~~nine months ended September 30, 2018 and 2017 that are measured at fair value on a recurring basis:~~context of earnings per share, as discussed in ASC 260-10-45-13.

~~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.~~

A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company’s valuation in Hoth that are categorized within Level 3 of the fair value hierarchy at the date of issuance and as of September 30, 2018 and December 31, 2017 is as follows:

The investment in Hoth Therapeutics was valued using a hybrid probability weighted expected return method, with scenarios including (1) Hoth continuing to operate as a private company through an estimated potential exit date, and (2) Hoth undergoing an IPO in the near future. The private-company scenario utilizes a reverse option pricing method (backsolve) based on the recent Series A transaction. Key inputs to the backsolve, in addition to the Series A price, include volatility (75.00%) and expected maturity (1.0 years). The IPO scenario is based on initial value indications proposed by investment bankers. The primary inputs, in addition to the pre-money value indications, include the estimated time to IPO (end of November) and a discount rate of 15%. The valuation conclusion is sensitive to the probability weightings assigned to each scenario. The weightings (1/3 IPO scenario, 2/3 private company scenario), were determined according to management expectations regarding exit opportunities, based on what was known or knowable as of September 30, 2018.

~~The costs of its investment in the BitDaily and DatChat approximate fair value as there have been no significant changes to its investment since the date of purchase.~~

~~Intangible Assets Measured at Fair Value on a Non-Recurring Basis using Level 3 Inputs~~

~~The following tables presents the Company’s hierarchy for nonfinancial assets measured at fair value on a non-recurring basis (in thousands):~~

~~The Company’s intangible assets are measured at fair value on a non-recurring basis using Level 3 inputs. See Note 7 for valuation techniques for patents.~~

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.

A summary of warrant activity for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 is presented below:

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, with each warrant immediately exercisable for 33,333 shares of common stock with a $0.01 strike price. The first warrant of 33,333 was issued on June 28, 2019. The Company recorded $0.1 million in stock-based compensation during the three-month ended June 30, 2019 related to this arrangement.

On February 16, 2018, pursuant to and subject to the available number of shares reserved under the 2014 Plan, the Company issued an aggregate of 150,000 options to purchase common stock of the Company to three of its directors. The aggregate grant date fair value of these options was approximately $0.2 million. These stock options vested over six months.

On May 3, 2018, a new director was granted options to purchase 50,000 shares of the Company’s common stock, at an exercise price of $1.04 per share, which options vested 50% at May 3, 2018 with the remaining 50% vesting at May 3, 2019. The aggregate grant date fair value of these options was approximately $46,000. These stock options vest over twelve months.

A summary of option activity under the Company’s ~~employee~~ stock option plan for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 is presented below:

~~A summary of option activity under the Company’s non-employee stock option plan for the nine months ended September 30, 2018 is presented below:~~

Stock-based compensation associated with the amortization of stock option expense was approximately $28,000 and $2,000 for the three months ended September 30, 2018 and 2017, and was approximately $208,000 and $13,000 for the nine months ended September 30, 2018 and 2017, respectively.

On February 16, 2018, the Company granted three of its directors 20,000 shares of restricted common stock each. The grant date fair value of each restricted stock award was approximately $27,000. These restricted stock awards vested immediately.

On April 26, 2018, the Company issued 25,410 shares of its common stock to an employee for services pursuant to an employment agreement. The grant date fair value of this restricted stock award was approximately $27,000 (based upon the closing price of the Company’s common stock on April 26, 2018). This restricted stock award vested immediately.

Stock-based compensation for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 was comprised of the following ($ in thousands):

~~Unamortized stock-based compensation expense was approximately $14,000 at September 30, 2018.~~

In the past, in the ordinary course of business, the Company actively ~~pursues~~pursued legal remedies to enforce its intellectual property rights and to stop unauthorized use of ~~patented~~ technology. From time to time, the Company may be involved in various claims and counterclaims and legal actions arising in the ordinary course of business. ~~There were~~The Company knows of no pending material claims or legal matters against it as of the date of this ~~report other than the following matters:~~report.

~~Under our Monetization Agreement with Equitable, ILEA filed the patent infringement litigation below.~~

Under our Monetization Agreement with Equitable, Optic153 LLC, an Equitable subsidiary, has filed the following litigations relating to patents acquired under the terms of settlement of one of our prior litigations:

In the ordinary course of business, we, or with our wholly-owned subsidiaries or monetization partners, will initiate litigation against parties whom we believe have infringed on our intellectual property rights and technologies. The initiation of such litigation exposes us to potential counterclaims initiated by the defendants. Currently, there are no counterclaims pending against us. In the event such counterclaims are filed, we can provide no assurance that the outcome of these claims will not have a material adverse effect on our financial position and results from operations.

On ~~October 10, 2018,~~August 9, 2019, the Company entered into an At The Market Offering Agreement ~~and Plan of Merger~~ (the “~~Merger Agreement~~”“Offering Agreement”) with H.C. Wainwright & Co., ~~by and among the Company, Spherix Delaware Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Spherix~~LLC, as agent (“~~Merger Sub~~~~”), CBM, and Scott Wilfong in the capacity as the representative from and after the effective time of the Merger (as defined below) (the “~~~~Effective Time~~~~”) for the stockholders of CBM as of immediately prior to the Effective Time (the “~~~~Stockholder Representative~~~~”).~~

Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into CBM (the “Merger”), with CBM continuing as the surviving corporation in the Merger.Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time: (i) all shares of capital stock of CBM (the “CBM Stock”) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive the Stockholder Merger Consideration (as defined below).

As consideration for the Merger, the Company shall deliver to the stockholders of CBM an aggregate of 15,000,000 shares of Company common stock (the “Stockholder Merger Consideration”), with each share of Company common stock valued at $1.10 per share. At or prior to the Closing, the Company, the Stockholder Representative, and a mutually agreeable escrow agent (the “Escrow Agent”), shall enter into an Escrow Agreement, effective as of the Effective Time, in form and substance reasonably satisfactory to the parties (the “Escrow Agreement”H.C. Wainwright”), pursuant to which the Company ~~shall deposit with the Escrow Agent 1,500,000 shares~~may offer and sell, from ~~the Stockholder Merger Consideration otherwise deliverable~~time to the stockholders of CBM who own beneficially and of record greater than 10% of the CBM common stock issued and outstanding immediately prior to the Closing (each a “Significant Company Stockholder”) (including any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted, the “Escrow Shares”), to be held in a segregated escrow account (the “Escrow Account”) and disbursed by the Escrow Agent. Each stockholder of CBM Stockholder at the Effective Time (each, a “CBM Stockholder”) shall receive its pro rata share of the Stockholder Merger Consideration (less, in the case of each of the Significant Company Stockholders, its pro rata portion of the Escrow Shares held in the Escrow Account) based on the number of shares of CBM Stock owned by such CBM Stockholder as compared to the total number of shares of CBM Stock owned by all CBM Stockholders as of immediately prior to the Effective Time. The Escrow Shares shall serve as a security for, and a source of payment of, the indemnity rights of the Company indemnified parties.

In the event that this Agreement is terminated by the Company pursuant to certain sections of the Agreement, then the Company may be required to deliver to CBM certificate(s) representing an aggregate of 400,000time through H.C. Wainwright shares of the Company’s ~~Common Stock within two (2) business days~~common stock having an aggregate offering price of ~~termination.~~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 and have agreed to provide H.C.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~Forward-Looking Statements

You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-Q. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements. All references to “we,” “us,” “our” and the “Company” refer to Spherix Incorporated, a Delaware corporation and its consolidated subsidiaries unless the context requires otherwise.

We are ~~an intellectual property~~a technology development company ~~that owns patented and unpatented intellectual property.~~committed to the fostering of innovative ideas. Spherix Incorporated was formed in 1967 as a scientific research company and for much of our history pursued drug development including through Phase III clinical studies which were largely discontinued in 2012. In 2012 and 2013, we shifted our focus to being a firm that owns, develops, acquires and monetizes intellectual property assets. ~~Through our acquisitions~~Such monetization included, but was not limited to, acquiring IP from patent holders in order to maximize the value of ~~108 patents~~the patent holdings by conducting and ~~patent applications from Rockstar Consortium US, LP~~managing a licensing campaign, commercializing the IP, or through the settlement and ~~acquisition~~litigation of several hundred patents issued to Harris Corporation as a result of our acquisition of North South, we have expanded our activities in wireless communications and telecommunication sectors including antenna technology, Wi-Fi, base station functionality and cellular.patents.

Our activities generally include the acquisition and development of patents through internal or external research and development. In addition, we seek to acquire existing rights to intellectual property through the acquisition of already issued patents and pending patent applications, both in the United States and abroad. We may alone, or in conjunction with others, develop products and processes associated with ~~our~~technology development and monetizing related intellectual property and license our intellectual property to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes. Using our patented technologies, we employ strategies seeking to permit us to derive valueproperty.

Since March 1, 2013, the Company has received limited funds from ~~licensing, commercialization, settlement and litigation from our patents. We will continue to seek to obtain patents from inventors and patent owners to monetize patent portfolios.~~

its IP monetization. In addition to our patent monetization efforts, since the fourth quarter of 2017, we have been transitioning to ~~focus our efforts as~~ a technology development company. These efforts have focused on biotechnology research and blockchain technology research. The ~~Company made no~~Company’s biotechnology research development includes investments ~~in new IP during 2017 and started the transition with its investment in~~in: (i) Hoth Therapeutics Inc. ~~during the third quarter of 2017.~~

~~In March 2018, the Company entered into an agreement and plan of merger, subject to shareholder approval, with~~(“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema, (ii) DatChat, Inc. ~~(the “DatChat Merger”~~(“DatChat”), a ~~secure messaging application that utilizes blockchain technology, as amended~~privately held personal privacy platform focused on ~~May 3, 2018. After further negotiations, the Company determined not to pursue~~encrypted communication, internet security and digital rights management, and (iii) a merger with DatChat and on August 8, 2018, entered into a securities purchase agreement (the “Securities Purchase Agreement”) with DatChat pursuant to which the Company and DatChat agreed to terminate the DatChat Merger and eachproposed acquisition of ~~the parties to the Merger Agreement agreed to release and discharge and hold harmless each~~assets of ~~the other parties with respect to the transaction contemplated by the Merger Agreement.~~

In addition to the termination, under the Securities Purchase Agreement, the Company agreed to make a $1,000,000 strategic investment in DatChat which consisted of (a) a cash payment of $500,000, (b) the forgiveness of prior advances made to DatChat by the Company, and (c) an obligation of the Company to pay certain specific future compensation expenses of DatChat (amounts in clauses (b) and (c) not to exceed a maximum of $500,000 in the aggregate); in exchange for $1,000,000 of restricted shares of DatChat common stock which is equal to 4.37% of the issued and outstanding common stock of DatChat.

DatChat agreed to certain covenants, including the covenant in the event that DatChat completes (i) a public offering of its securities pursuant to an effective registration statement or (ii) a merger, consolidation, transfer or share exchange transaction pursuant to which DatChat becomes subject to the reporting requirements of the Securities Exchange Act of 1934, (each, a “Going Public Event”), and until the time that the Company holds no shares of DatChat, DatChat agreed to certain covenants, including the covenant to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by DatChat pursuant to the Exchange Act of 1934, as amended the “Exchange Act”), provided that, if after becoming subject to the Exchange Act, DatChat is thereafter no longer required to file reports pursuant to the Exchange Act, DatChat will, for as long as the Company owns shares of DatChat, prepare and furnish to the Company and make publicly available in accordance with Rule 144(c) such information as is required for the Company to sell such shares, including without limitation, under Rule 144. Under the Securities Purchase Agreement, DatChat further covenants that it will take such further action as the Company may reasonably request, to the extent required from time to time to enable the Company to sell its DatChat shares without registration under the Securities Act of 1933, as amended, including, without limitation, within the requirements of the exemption provided by Rule 144.

DatChat also agreed that, from and after a Going Public Event, and subject to certain exceptions, neither DatChat nor any other person acting on its behalf will provide the Company with any information that constitutes, or that DatChat reasonably believes constitutes, material non-public information, unless prior thereto, the Company shall have consented to the receipt of such information and agreed with DatChat to keep such information confidential.

~~In October 2018, the Company entered into an agreement and plan of merger, subject to shareholder approval, with~~ CBM BioPharma, Inc. (“CBM”), a pharmaceutical company focusing on the development of cancer ~~treatments,~~treatments.

Pursuant to a Share Purchase Agreement, dated as of May 15, 2019, the Company purchased (i) 50,000 shares of common stock of CBM BioPharma, Inc. (“CBM”) and (ii) certain securities and uncertificated rights of DatChat from an existing shareholder of CBM and DatChat for an aggregate purchase price of $350,000. The investment represents a 20% interest in CBM, and the securities and rights of DatChat that were purchased include: (a) a senior convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share (b) a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d) a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, and (e) a contingent option to put 200,000 shares of DatChat common stock, subject to certain terms and conditions .. The transaction closed on May 22, 2019.

On February 20, 2019, Hoth closing on its initial public offering of 1,250,000 shares of its common stock at an initial offering price to the public of $5.60 per share, which commenced trading on The Nasdaq Capital Market on February 15, 2019 under the symbol “HOTH”. As of the date of this report, the Company and its affiliates own approximately 19% of Hoth.

In October 2018, the Company entered into an agreement and plan of merger (the “CBM Merger Agreement”) with CBM, pursuant to which all shares of capital stock of CBM ~~will~~would be converted into the right to receive an aggregate of ~~15,000,000~~3,529,411 shares of the Company’s common stock with CBM continuing as the surviving corporation in the merger. On May 15, 2019, the Company restructured the terms of its proposed merger with CBM and entered into an Asset Purchase Agreement (the “APA”) with CBM, whereby the Company purchased certain assets of CBM, including, among other things:

As consideration for the Purchase, the Company agreed to pay aggregate consideration of $8,000,000 to CBM consisting of (i) an aggregate number of shares of common stock equal to $7,000,000 (the “Stock Consideration”) comprised of (A) an aggregate number of shares of common stock equal to 9.9% of the issued and outstanding shares of common stock as of the date that the acquisition closes (the “Closing Date”) (the “Common Stock Consideration”) based on a per share purchase price of $3.61, subject to adjustment (the “Buyer Common Stock Price”), which ultimately limits CBM’s maximum voting control of the Company to 9.9% of the Company’s issued and outstanding common stock, and (B) such number of shares of nonvoting Series L Preferred Stock as shall be equal to the Stock Consideration less the value of the shares of common stock comprising the Common Stock Consideration, with each share constituting the Stock Consideration valued at the Buyer Common Stock Price, and (ii) cash consideration in the amount of $1,000,000 (the “Cash Consideration Amount”, and together with the Stock Consideration, the “Purchase Consideration”). The Cash Consideration Amount from the Purchase Consideration is held back and becomes payable to CBM upon the consummation by the Company of the first sale by Spherix of common stock, Series L convertible preferred stock or any other equity or equity-linked financing of Spherix to investors in one or more transactions for which Spherix receives aggregate gross proceeds of greater than $2,000,000 (a “Qualified Financing”) after the Closing Date. Upon consummation of a Qualified Financing by the Company, the Company will retain the first $2,000,000 of gross proceeds received in connection with such Qualified Financing and CBM will receive 100% of the gross proceeds of such Qualified Financing received by the Company in excess of $2,000,000 as well as the gross proceeds of any subsequent equity financings by the Company until the Cash Consideration Amount is satisfied in full.

Upon the execution of the APA, the Company and CBM agreed to terminate the CBM Merger Agreement, including all schedules and exhibits thereto, and all ancillary agreements contemplated thereby, and waived that certain termination fee due to CBM pursuant to the CBM Merger Agreement.

Additionally, at or prior to the Closing, the Company, CBM, and a mutually agreeable escrow agent (the “Escrow Agent”), shall enter into an escrow agreement in form and substance reasonably satisfactory to the parties (the “Escrow Agreement”), pursuant to which the Company shall deposit with the Escrow Agent 10% of the Stock Consideration (including any equity securities paid in the future as dividends or distributions with respect to such shares or into which such shares are exchanged or converted, the (“Escrow Shares”), to be held in a segregated escrow account (the “Escrow Account”) and disbursed by the Escrow Agent. Such Escrow Shares shall be held in the Escrow Account for a period of six months following closing and shall serve as a security for, and a source of payment for, CBM’s obligations to the Company and its representatives and any successor or assign thereof under the APA. Any Escrow Shares remaining in escrow and not subject to pending indemnification claims after the six month escrow period expires shall be released from the Escrow Account and disbursed to CBM.

The obligations of the Company and CBM to consummate the transaction are subject to: (a) all necessary approvals being obtained by any relevant governmental authorities or any third parties, and the shareholders of the Company and CBM, (b) the absence of any law being enacted, issued, promulgated, enforced or entered, or any order by any federal or national, state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, court, tribunal, official arbitrator or arbitral body in each case whether domestic or foreign (each a “Governmental Authority”) which makes the transaction illegal, and (c) no pending action being brought by a third-party non-affiliate to enjoin or restrict the transaction; (d) the Company holding a special meeting of its stockholders to approve, among other things, the issuance of the Stock Consideration; and (e) certain customary closing conditions, including but not limited to the accuracy of certain representations and warranties, the performance in all material respects of each parties’ obligations, agreements and covenants under the APA, and no Material Adverse Effect having occurred with respect to either the Company or CBM since the date of the APA. “Material Adverse Effect” means, with respect to CBM, any event, fact, condition, change, circumstance, occurrence or effect, which, either individually or in the aggregate with all other events, facts, conditions, changes, circumstances, occurrences or effects, (a) has had, or would reasonably be expected to have, a material adverse effect on the business, operations, properties, prospects, assets, liabilities, value, condition (financial or otherwise), licenses or results of operations of CBM’s business or the Purchased Assets or the Assumed Liabilities or (b) does or would reasonably be expected to materially impair or delay the ability of CBM to perform its obligations under the APA and the ancillary documents or to consummate the transactions contemplated hereby and thereby; provided, however, that a Material Adverse Effect will not include any adverse effect or change resulting from any change, circumstance or effect relating to (A) the economy in general, (B) securities markets, regulatory or political conditions in the United States (including terrorism or the escalation of any war, whether declared or undeclared or other hostilities), (C) changes in applicable laws or generally accepted accounting principles or the application or interpretation thereof or (D) a natural disaster (provided, that in the cases of clauses (A) through (D), CBM’s business is not disproportionately affected by such event as compared to other similar companies and businesses in similar industries and geographic regions as CBM’s business).

The APA may be terminated (i) by mutual written consent of the Company and CBM, (ii) by written notice by the Company or CBM if any of the conditions to Closing are not satisfied or waived by December 31, 2019 (unless a condition to Closing is due to breach or violation of the Company or CBM of any representation, warranty, covenant or obligation under the APA), (iii) by written notice by the Company or CBM if a Governmental Authority has issued an order or taken action restraining, enjoining or prohibiting the transactions contemplated by the APA (unless a condition to Closing is due to breach or violation of the Company or CBM of any representation, warrant, covenant or obligation under the APA), (iv) by written notice of the Company if there is has been an incurable material breach by CBM of any of its representations, warranties, covenants or obligations, (v) by written notice of CBM if there is has been an incurable material breach by the Company of any of its representations, warranties, covenants or obligations, (vi) by written notice by the Buyer if there shall have been a Material Adverse Effect on the Company following the date of the APA, or (vii) by written notice by the Company or CBM in the event that Company’s stockholders did not approve the issuance of the Stock Consideration at a special meeting of Company .. In the event that the APA is terminated on or prior to December 31, 2019 (i) by CBM as a result of a material breach by the Company of any of its representations, warranties, covenants or agreements under the APA, which such breach is not cured within 20 days after written notice by CBM to the Company, or (ii) by either the Company or CBM in the event that the Company’s stockholders did not approve the issuance of the Stock Consideration at a duly held special meeting of the Company, the Company will issue to CBM or CBM’s designee an aggregate of 250,000 shares of the Company’s common stock (the “Buyer Termination Fee”) within two business days of termination, it being understood that in no event will CBM be entitled to the Buyer Termination Fee on more than one occasion.

In connection with the APA, at Closing, Spherix and CBM shall enter into that certain Leak-Out Agreement, whereby CBM will agree that for a period of 21 months following the Closing Date (such period, the “Restricted Period”), neither CBM nor any affiliate of CBM, collectively, shall sell, dispose or otherwise transfer, directly or indirectly, during any calendar month during the Restricted Period, shares acquired pursuant to the APA in an amount more than 5% of the issued and outstanding shares of Spherix common stock as of the end of each month immediately preceding any such disposition following the Closing Date. Such restriction shall be subject to certain exceptions, including but not limited to transfers of Stock Consideration to certain permitted transferees. Additionally, so long as the bid price of Spherix common stock is at or above $1.00 (subject to adjustment), CBM and its affiliates may sell shares: (a) at a bona-fide sales price greater than $4.25 (subject to adjustment), provided that sales on the applicable date (excluding sales made pursuant to clause (b) below, if any) do not exceed 20% of the trading volume of Spherix common stock as reported by Bloomberg, LP for such date or (b) at a bona-fide sales price greater than $5.00 (subject to adjustment). Additionally, CBM agrees that in the event that, during the Restricted Period, Spherix engages the services of an investment bank to undertake a registered offering of Spherix’s equity securities, if required by the lead investment bank, CBM shall enter into a reasonable and customary lock-up with such investment bank for a period of at least 30 days but no more than 90 days upon closing of the transaction, provided, that such lock-up shall in no event extend beyond the Restricted Period.

On May 30, 2019, the Company entered into Amendment No. 1 (the “Amendment”) to the APA, pursuant to which the APA was amended to include a termination fee whereby, in the event that the APA is terminated on or prior to December 31, 2019 (i) by CBM as a result of a material breach by the Company of any of its representations, warranties, covenants or agreements under the APA, which such breach is not cured within 20 days after written notice by CBM to the Company, or (ii) by either the Company or CBM in the event that the issuance of the equity portion of the consideration to be paid to CBM by the Company pursuant to the APA is not approved by the Company’s stockholders at a duly held special meeting of the Company, the Company will issue to CBM or CBM’s designee an aggregate of 250,000 shares of the Company’s Common Stock (the “Buyer Termination Fee”) within two business days of termination, it being understood that in no event will CBM be entitled to the Buyer Termination Fee on more than one occasion.

On May 10, 2019, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of one-for-4.25 (the “Reverse Stock Split”). The Reverse Stock Split, which was approved by the Company’s board of directors under authority granted by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders held on April 15, 2019, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on May 9, 2019. the context otherwise requires, all references in this report to shares of our common stock, including prices per share of our common stock, reflect the Reverse Stock Split.

On May 29, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single accredited investor (the “Purchaser”) pursuant to which the Company sold 221,000 shares (the “Shares”) of 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 (the “Warrants”) 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. The Company sold the Shares and Warrants for aggregate gross proceeds of approximately $799,991 which transaction closed on May 31, 2019. On June 6, 2019, the Company entered into an amendment (the “Amendment”) to the Purchase Agreement, pursuant to which the Purchaser surrendered an aggregate of 115,269 Shares to the Company and the Company issued an aggregate of 115,269 Warrants to the Purchaser in order to limit the Purchaser’s beneficial ownership in the Company to 4.99%. The Warrants are immediately exercisable for $0.0001 per share until exercised in full, except that a holder will not have the right to exercise any portion of the Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, any holder may increase or decrease such percentage to any other percentage upon notice to the Company, but in no event in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice. The Warrants may also be exercisable on a “cashless” basis. The Company received net proceeds of approximately $799,979 from the sale of the Shares and Warrants.

Three months ended ~~September~~June 30, ~~2018~~2019 compared to three months ended ~~September~~June 30, ~~2017~~2018

During the three months ended ~~September~~June 30, ~~2018~~2019 and 2017, revenue was approximately $0 and $0.3 million, respectively. $0.3 million in 2017 represented the amortization of deferred revenue related to the two patent license agreements we entered into with RPX Corporation (“RPX”) on November 23, 2015 and May 22, 2016 (the “RPX License Agreements”). 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 through a debit adjustment in the amount of approximately $3.2 million through the accumulated deficit at the beginning of 2018. The Company will not recognize revenue from the RPX license in the future.

~~During the three months ended September 30,~~ 2018, ~~and 2017,~~ we incurred a loss from operations of approximately ~~$2.0~~$0.9 million and ~~$1.0~~$1.3 million, respectively. The ~~increase~~decrease in net loss in the ~~net loss from operations~~2019 period was primarily attributed to $0.3 decrease in amortization of patent portfolio and $0.2 million decrease in compensation and related expenses.

During the three months ended June 30, 2019 and 2018, other income was approximately $0.2 million and $0.9 million, respectively. The decrease in other income was primarily attributed to a $0.5 million decrease in change in investments recorded at fair value, and partially offset by $0.2 million decrease in change in fair value of warrant liabilities. During the three months ended June 30, 2019, we recorded a change in fair value adjustment of $(1.0) million related to our investment in DatChat; offset by a $1.1 million ~~increase~~unrealized gain on our investment in ~~impairment~~Hoth as the closing stock price Hoth increased from $5.15 as of ~~intangible assets, $19,000 increase~~March 29, 2019 to $5.81 as of June 28, 2019.

During the six months ended June 30, 2019 and 2018, we incurred a loss from operations of approximately $1.6 million and $2.8 million, respectively. The decrease in net loss in the 2019 period was primarily attributed to $0.7 decrease in amortization of patent portfolio, $0.3 million decrease in compensation and related expenses, $0.1 million decrease in professional fees and $0.1 million decrease in acquisition costs related to the DatChat Merger and $21,000 increase in depreciation expense, and was partially offset by $0.3 million decrease in compensation expense, $70,000 decrease in professional fees and $55,000 decrease in in other selling, general and administrative expenses.transaction.

During the ~~three~~six months ended ~~September~~June 30, 2019 and 2018, other income (expense) was approximately ~~$60,000 as compared to~~$(0.2) million and $1.0 million, respectively. The decrease of other income ~~of approximately $1.4 million for the comparable prior period. The decrease in other income in 2018~~(expense) was primarily attributed to ~~$0.3 million decrease in fair value of our investment in Hoth, and~~a $1.0 million decrease in change in fair value of ~~warrant liabilities.~~

~~Due to the above, net loss was $1.9 million in the three months ended September 30, 2018 compared to net income of $0.5 million in the three months ended September 30, 2017.~~

~~Nine months ended September 30, 2018 compared to nine months ended September 30, 2017~~

~~During the nine months ended September 30, 2018~~investments and 2017, revenue was approximately $0 and $1.0 million, respectively. $1.0 million represents the amortization of deferred revenue related to the two patent license agreements we entered into with RPX Corporation (“RPX”) on November 23, 2015 and May 22, 2016 (the “RPX License Agreements”). 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 through a ~~debit in the amount of approximately $3.2 million through the accumulated deficit at the beginning of 2018. The Company will not recognize revenue from the RPX license in the future.~~

During the nine months ended September 30, 2018 and 2017, we incurred a loss from operations of approximately $4.8 million and $2.7 million, respectively. The increase in net loss was primarily attributed to $1.1 increase in impairment of intangible assets, $1.0$0.4 million decrease in ~~revenue, $0.4 million increase in professional fees and $0.2 million increase in acquisition costs related to~~ the ~~DatChat Merger, and was partially offset by $0.5 million decrease in compensation and related expenses.~~

During the nine months ended September 30, 2018, total other income was approximately $1.0 million as compared to other income of approximately $0.4 million for the comparable prior period. The increase in other income was primarily attributed to $0.3 million increase in fair value of our investment in Hoth and $0.8 million increase in change in fair value of warrant liabilities, and ~~was~~ partially offset by ~~$0.5~~$0.3 million decrease in other ~~income.~~expenses. During the six months ended June 30, 2019, we recorded a change in fair value adjustment of $(1.0) million related to our investment in DatChat; offset by an $0.6 million unrealized gain on our investment in Hoth as the closing stock price Hoth increased from $5.60 as of the IPO date to $5.81 as of June 28, 2019.

~~Due to the above, the net loss was $3.8 million in the nine months ended September 30, 2018 compared to net loss of $2.3 million in the nine months ended September 30, 2017.~~

We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue.

We While we continue to implement our business strategy, we intend to finance our activities through:

~~Cash Flows from Operating Activities -~~ For the nine months ended September 30, 2018 and 2017, net cash used in operations was approximately $2.3 million and $2.5 million, respectively. The cash used in operating activities for the nine months ended September 30, 2018 primarily resulted from a net loss of $3.8 million, $0.7 million change in fair value of our investment in Hoth and $0.6 million change in fair value of warrant liabilities, and partially offset by impairment of goodwill and intangible assets of $1.1 million and amortization of patent portfolio expenses of $1.0 million. The cash used in operating activities for the nine months ended September 30, 2017 primarily resulted from $0.3 million change in fair value of warrant liabilities and $1.2 million of changes in assets and liabilities, and partially offset by amortization of patent portfolio expenses of $1.0 million.

~~Cash Flows from Investing Activities~~- For the nine months ended September 30, 2018 and 2017, net cash used in investing activities was approximately $0.5 million and net cash provided by investing activities was approximately $0.6 million, respectively. The cash used in investing activities primarily resulted from our purchase of marketable securities for the nine months ended September 30, 2018 of $13.3 million, purchase of investment at fair value of $0.7 million, and was partially offset by our sale of marketable securities of $13.5 million. The cash provided by investing activities primarily resulted from our sale of marketable securities for the nine months ended September 30, 2017 of $12.5 million, partially offset by our purchase of marketable securities of $11.3 million.

~~Cash Flows from Financing Activities -~~ Cash provided by financing activities for the nine months ended September 30, 2018 was approximately $2.7 million, which related to issuance of 2,222,222 shares of its common stock. Cash provided by financing activities for the nine months ended September 30, 2017 was approximately $2.1 million, which related to issuance of shares of common stock in an equity raise.

~~The Company’s~~Our ultimate success is dependent on ~~its~~our ability to obtain additional financing and generate sufficient cash flow to meet ~~its~~our obligations on a timely basis. ~~The Company’s~~Our business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business ~~plan. The Company’s~~plan to support new technologies and help advance innovation. Our working capital amounted to approximately ~~$2.3~~$0.6 million at ~~September~~June 30, ~~2018.~~2019. Absent generation of sufficient revenue from the execution of ~~the Company’s~~our long-term business plan, ~~the Company~~we will need to obtain additional debt or equity financing, especially if ~~the Company experiences~~we experience downturns in ~~its~~our business that are more severe or longer than anticipated, or if ~~the Company experiences~~we experience significant increases in expense levels resulting from being a publicly-traded company or operations. If ~~the Company attempts~~we attempt to obtain additional debt or equity financing, ~~the Company~~we cannot assume that such financing will be available to the Company on favorable terms, or at all.

We have filed a shelf registration statement on Form S-3 with the SEC. The registration statement, which has been declared effective, was filed in reliance on Instruction I.B.6 of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6. Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.

~~On March 19, 2018, we closed on a public offering~~Because of ~~common stock for gross proceeds of approximately $3.0 million~~recurring operating losses, net operating cash flow deficits, and ~~net proceeds of approximately $2.7 million. The offering was a shelf takedown off of~~an accumulated deficit, there is substantial doubt about our registration statement on Form S-3 (File No. 333-222488) and was conducted pursuant to a placement agency agreement between us and Laidlaw & Company (UK) Ltd., the sole placement agent, on a best-efforts basis with respect to the offering (“Laidlaw”), that was entered into on March 14, 2018. We sold 2,222,222 shares of our common stock in the offering at a purchase price of $1.35 per share.

Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. We may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other parties’ proprietary rights. The defendants or other third parties involved in the lawsuits in which we are involved may allege defenses and/or file counterclaims or initiate inter parties reviews in an effort to avoid or limit liability and damages for patent infringement. If such efforts are successful, they may have an impact on the value of the patents and preclude us from deriving revenue from the patents, the patents could be declared invalid by a court or the United States Patent and Trademark Office, in whole or in part.

Should we be unsuccessful in our efforts to execute our business plan, it could become necessary for us to reduce expenses, curtail operations or explore various alternative business opportunities or possibly suspend or discontinue our business activities.

Rockstar will be entitled to receive a contingent recovery percentage of future profits (“Participation Payments”) from licensing, settlements and judgments against defendants with respect to patents purchased under the First Patent Purchase Agreement; however, no payment is required unless the Company receives a recovery. The Participation Payments under the First Patent Purchase Agreement are equal to zero percent until the Company recovers with respect to patents purchased under the First Patent Purchase Agreement at least (a) $8.0 million or (b) if we recover less than $17.0 million, an amount equal to $5.0 million plus $3.0 million times a fraction equal to total recoveries minus $10.0 million, divided by $7.0 million (clause (a) or (b), as applicable, being the “Initial Return”), in each case net of certain expenses. Once we obtain recoveries in excess of the Initial Return, we are required to make a payment to Rockstar of $13.0 million, payable only from the proceeds of such recovery, within six months after such recovery. In addition, no later than 30 days after the end of each quarter in which we make such a recovery, we are required to pay to Rockstar a percentage of such recovery, net of certain expenses, scaling from 30% if such cumulative recoveries net of certain expenses are less than or equal to $50.0 million, to 70% to the extent cumulative recoveries net of certain expenses are in excess of $1.0 billion.

Rockstar will also be entitled to receive Participation Payments from licensing, settlements and judgments against defendants with respect to patents purchased under the Second Patent Purchase Agreement; however, no payment is required unless we receive a recovery. The Participation Payments under the Second Patent Purchase Agreement are equal to zero percent until we recover with respect to patents purchased under the Second Patent Purchase Agreement at least $120.0 million, net of certain expenses. Once we obtain recoveries in excess of that amount, we are required to pay to Rockstar 50% of our recovery in excess of that amount, no later than 30 days after the end of each quarter in which we make such a recovery.

~~Our~~ ability to fund these Participation Payments or the $13.0 million contingent payment will depend on the liquidity of our assets, recoveries, alternative demands for cash resources and access to capital at the time. Furthermore, our obligation to fund Participation Payments could adversely impact our liquidity and financial position. As ofcontinue as a going concern within one year from the date of this ~~report,~~filing. The consolidated financial statements have been prepared assuming that we ~~have~~will continue as a going concern, and do not ~~made~~include any ~~such Participation Payments.~~adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Cash Flows from Operating Activities - For the six months ended June 30, 2019 and 2018, net cash used in operations was approximately $1.6 million and $1.8 million, respectively. The cash used in operating activities for the six months ended June 30, 2019 primarily resulted from a net loss of $1.8 million, $0.1 million unrealized loss on marketable securities and $0.2 million changes in assets and liabilities, and partially offset by $0.3 million change in fair value of our investment. The cash used in operating activities for the six months ended June 30, 2018 primarily resulted from a net loss of $0.4 million, $0.7 million change in fair value of our investment in Hoth and $0.5 million change in fair value of warrant liabilities, and partially offset by amortization expenses of $0.3 million.

Cash Flows from Investing Activities - For the six months ended June 30, 2019 and 2018, net cash provided by investing activities was approximately $1.4 million and net cash used in investing activities was approximately $1.0 million, respectively. The cash provided by investing activities primarily resulted from our sale of marketable securities for the six months ended June 30, 2019 of $6.9 million, partially offset by our purchase of marketable securities of $5.0 million. The cash used in investing activities primarily resulted from our purchase of marketable securities for the six months ended June 30, 2018 of $10.0 million, partially offset by our sale of marketable securities of $9.1 million.

Cash Flows from Financing Activities -Cash provided by financing activities for the six months ended June 30, 2019 was $0.8 million, which reflects the net proceeds from investors in exchange of issuance of common stock and prefunded common stock warrants. Cash provided by financing activities for the six months ended June 30, 2018 was approximately $2.7 million, which related to issuance of 2,222,222 shares of its common stock.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With respect to the quarter ended ~~September~~June 30, ~~2018,~~2019, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures were not effective as of ~~September~~June 30, ~~2018~~2019 due to the material weaknesses in our internal controls over financial reporting. We have a lack of segregation of duties, and a lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended ~~September~~June 30, ~~2018~~2019 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the past, in the ordinary course of business, we ~~work with Equitable under our Monetization Agreement~~actively pursued legal remedies to enforce our intellectual property rights and to stop unauthorized use of our technology. ~~Other than~~From time to time, the Company may be involved in various claims and counterclaims and legal actions arising in the ordinary ~~routine litigation incidental to the business and other than as set forth below, we~~course of business. We know of no pending material ~~active~~claims or ~~pending~~ legal ~~proceedings~~matters against us ~~except for those described below.~~as of the date of this report.

~~Under our Monetization Agreement with Equitable, ILEA has filed the patent infringement litigations listed below.~~

Under our Monetization Agreement with Equitable, Optic 153 LLC, an Equitable subsidiary, has filed the following litigations relating patents acquired under the terms of settlement of one of our prior litigations:

Investing in our common stock is subject to a number of risks and uncertainties. You should carefully consider the risk factors described under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, in other reports we file with the SEC, and below.

We are exploring and evaluating strategic alternatives and there can be no assurance that we will be successful in identifying, or completing any strategic alternative or that any such strategic alternative will yield additional value for shareholders.

Our management and Board of Directors has commenced a review of strategic alternatives which could result in, among other things, a sale, a merger, consolidation or business combination, asset divestiture, partnering or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. For example, on October 10, 2018, we entered into an agreement and plan of merger with CBM, ~~Biopharma, Inc. (“CBM”),~~ pursuant to which all shares of capital stock of CBM ~~will~~would be converted into ~~15,000,000~~3,529,411 shares of the Company’s common stock. On May 15, 2019, we restructured the Company restructured the terms of its proposed merger with CBM and entered into the APA, pursuant to which the Company agreed to purchase certain assets of CBM, including, among other things, a license agreement relating to certain technologies in the areas of acute myeloid leukemia (“AML”), acute lymphoblastic leukemia (“ALL”) and pancreatic cancer and contracts with a chief scientist and an advisory board. CBM is a privately held pharmaceutical company focused on the development of cancer treatments. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction, and there can be no assurance that the transaction with CBM will close. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure you that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our shareholders than that reflected in the current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms.

If we find appropriate opportunities in the future, we may acquire businesses to strategically increase the number of patents in our portfolio and pursue monetization. For example, on June 30, 2017, we acquired a stake in Hoth Therapeutics, Inc. (“Hoth”), a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth has a sublicense from Chelexa Biosciences, Inc. to use Chelexa’s BioLexa products for the treatment of eczema and such sublicense includes the right to further sublicense to third parties to make, use, have made, import, offer for sale and sell BioLexa products. There can be no guarantee that Hoth will be successful in its efforts to monetize its sublicense agreement with Chelexa. In addition, on March 12, 2018, we entered into an agreement and plan of merger with DatChat, ~~Inc. (“DatChat”),~~ pursuant to which we were going to acquire 100% ownership of DatChat, which is a privately held personal privacy platform focused on encrypted communication, internet security and digital rights management, which we subsequently terminated on August 8, 2018. Most recently, on October 10, 2018, we entered into an agreement and plan of merger with CBM, pursuant to which CBM ~~will~~would be the surviving corporation in the merger. On May 15, 2019, we restructured the Company restructured the terms of its proposed merger with CBM and entered into the APA, pursuant to which the Company agreed to purchase certain assets of CBM, including, among other things, a license agreement relating to certain technologies in the areas of acute myeloid leukemia (“AML”), acute lymphoblastic leukemia (“ALL”) and pancreatic cancer and contracts with a chief scientist and an advisory board. There can be no guarantee that we will be successful in closing the transaction contemplated by the agreement with CBM or that we will be successful in managing the operations of CBM, which is in the early stages of development of cancer treatments.

As we acquire businesses or substantial stakes in certain businesses, the process of integration may produce unforeseen operating difficulties and expenditures, fail to result in expected synergies or other benefits and absorb significant attention of our management that would otherwise be available for the ongoing development of our business. In addition, in the event of any future acquisitions, we may record a portion of the assets we acquire as goodwill, other indefinite-lived intangible assets or finite-lived intangible assets. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The recoverability of goodwill and indefinite-lived intangible assets is dependent on our ability to generate sufficient future earnings and cash flows. Changes in estimates, circumstances or conditions, resulting from both internal and external factors, could have a significant impact on our fair valuation determination, which could then have a material adverse effect on our business, financial condition and results of operations. We cannot guarantee that we will be able to identify suitable acquisition opportunities, consummate any pending or future acquisitions or that we will realize any anticipated benefits from any such acquisitions.

If the CBM ~~merger~~Asset Acquisition is completed, the Company may not be able to successfully integrate the business of CBM and realize the anticipated benefits of the ~~merger.~~Asset Acquisition.

Realization of the anticipated benefits inof the ~~merger with~~ CBM asset acquisition will depend on our ability to successfully integrate our businesses and operations with CBM. We will be required to devote significant management attention and resources to integrating its business practices, operations, and support functions. The process of integrating CBM’s operations could cause an interruption of, or loss of momentum in, our business and financial performance, and in CBM’s business and financial performance as well. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on the business, financial results.

Our stockholders will have a reduced ownership and voting interest after the ~~merger~~Asset Acquisition and will exercise less influence over our management and policies than they did prior to the ~~Merger.~~Asset Acquisition.

Our stockholders currently have the right to vote in the election of our board of directors on other matters affecting us. When, and if the ~~merger~~Asset Acquisition occurs, because of the issuance of shares of common stock to the CBM shareholders, our current stockholders will hold a percentage ownership of the ~~post-merger~~post-acquisition company that is much smaller than the stockholder’s current percentage ownership of ours. Because of this, our current stockholders will have less influence over the management and policies of the Company than they now have after the consummation of the ~~merger.~~Asset Acquisition.

The ~~merger with~~ CBM Asset Acquisition is subject to certain conditions to closing that could result in the ~~merger~~Asset Acquisition not being completed or being delayed, either of which could negatively impact its stock price and future business and results of operations.In the event that this Agreement is terminated by the Company pursuant to certain sections of the Agreement, then the Company may be required to deliver to CBM certificate(s) representing an aggregate of 400,000 shares of the Company’s Common Stock within two (2) business days of termination.

Completion of the ~~merger~~Asset Acquisition is subject to a number of customary conditions, including, but not limited to, the approval of the ~~merger~~Asset Acquisition Agreement by our stockholders. In addition, if any governmental authority shall have enacted, issued, promulgated or enforced any law or order which has the effect of making the transactions or agreements contemplated by the ~~Merger~~Asset Acquisition Agreement illegal or which otherwise prevents or prohibits consummation of the transactions contemplated by the ~~Merger~~Asset Acquisition Agreement, CBM may elect not to consummate the ~~Merger.~~Asset Acquisition. There is no assurance that we will satisfy the conditions necessary for completion of the ~~merger.~~Asset Acquisition. If any of the conditions to the ~~merger~~Asset Acquisition are not satisfied or, where waiver is permissible, waived, the ~~merger~~Asset Acquisition will not be consummated. Failure to complete the ~~merger~~Asset Acquisition would prevent us from realizing the anticipated benefits of the ~~merger.~~Asset Acquisition. We have already and expect to continue to incur significant costs associated with transaction fees, professional services, taxes and other costs related to the ~~merger.~~Asset Acquisition. In the event that the ~~merger~~Asset Acquisition is not completed, we will remain liable for these costs and expenses. In addition, the current market price of our common stock may reflect a market assumption that the ~~merger~~Asset Acquisition will occur, and a failure to complete the ~~merger~~Asset Acquisition could result in a negative perception by the market of ours generally and a resulting decline in the market price of ~~the~~ our common stock. The market price may also decline if the market disapproves of the ~~Merger.Any~~Asset Acquisition. Any delay in the consummation of the ~~merger~~Asset Acquisition or any uncertainty about the consummation of the ~~merger~~Asset Acquisition could also negatively impact our stock price and future business and results of operations. The ~~merger~~Asset Acquisition may not be consummated, there may be a delay in the consummation of the ~~merger~~Asset Acquisition or the ~~merger~~Asset Acquisition may not be consummated on the terms contemplated by the ~~Merger~~Asset Acquisition Agreement.

Pursuant to a Share Purchase Agreement, dated as of May 15, 2019, the Company purchased: (i) 50,000 shares of common stock of CBM, and (ii) certain securities and uncertificated rights of DatChat from an existing shareholder of CBM and DatChat for an aggregate purchase price of $350,000. The investment represents a 20% interest in CBM, and the securities and rights of DatChat that were purchased include: (a) a senior convertible note issued by DatChat with outstanding principal of $300,000, with an initial conversion rate of $0.20 per share (b) a warrant to purchase 2,250,000 shares of DatChat common stock at an initial exercise price of $0.20 per share, (c) an option to acquire an additional $300,000 senior convertible note and a warrant to purchase 1,500,000 shares of DatChat common stock, (d) a contingent option to purchase 500,000 shares of DatChat common stock from an existing DatChat stockholder, and (e) a contingent option to put 200,000 shares of DatChat common stock, subject to certain terms and conditions. The transaction closed on May 22, 2019.

Additionally, on May 15, 2019, the Company restructured the terms of its proposed merger with CBM and entered into an Asset Purchase Agreement with CBM, whereby the Company purchased agreed to purchase CBM’s Purchased Assets (as defined in the APA), including, among other things, a license agreement, university contracts, and contracts with a chief scientist and an advisory board. See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview” for a description of the restructuring of the proposed transaction with CBM.

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		52-0849320
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~Class~~Title of each class		~~Outstanding as~~Trading Symbol(s)		Name of ~~November 13, 2018~~each exchange on which registered
Common Stock, $0.0001 par value		~~8,542,530 shares~~SPEX		The Nasdaq Capital Market LLC

		Page No.
Part I. Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018 (Unaudited)~~2019 and December 31, ~~2017~~2018	1

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017 (Unaudited)~~2018	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018 ~~(Unaudited)~~	3

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017 (Unaudited)~~2018	4

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1813

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4.	Controls and Procedures	17

~~Item 3.~~		~~Quantitative and Qualitative Disclosures About Market Risk~~	21

~~Item 4.~~	~~Controls and Procedures~~	21

Part II. Other Information

Item 1.	Legal Proceedings	2118

Item 1A.	Risk Factors	2218

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2219

Item 5.	Other Information

Item 6.	Exhibits	2220

Signatures		23
		21

	September 30			December 31			June 30,			December 31,
	2018			2017			2019			2018
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	109		$	197		$	564		$	17
Marketable securities		3,409			3,998			817			2,700
Prepaid expenses and other assets		76			150			106			188
Total current assets		3,594			4,345			1,487			2,905

Property and equipment, net		1			3			-			1
Patent portfolios and patent rights, net		1,500			3,578
Investments at fair value		2,725			1,020
Deposit		26			26
Investments								10,565			10,345
Total assets	$	7,846		$	8,972		$	12,052		$	13,251

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	68		$	56		$	232		$	132
Accrued salaries and benefits		578			695			605			732
Warrant liabilities		262			822			8			82
Payable to DatChat		348			—			-			207
Short-term deferred revenue		—			957
Short-term lease liabilities		—			48
Total current liabilities		1,256			2,578			845			1,153

Long-term deferred revenue		—			2,288
Total liabilities		1,256			4,866			845			1,153

Stockholders’ equity
Series D: 4,725 shares issued and outstanding at September 30, 2018 and December 31, 2017; liquidation value of $0.0001 per share		—			—
Series D-1: 834 shares issued and outstanding at September 30, 2018 and December 31, 2017; liquidation value of $0.0001 per share		—			—
Common stock, $0.0001 par value, 100,000,000 shares authorized; 8,542,542 and 6,234,910 shares issued at September 30, 2018 and December 31, 2017, respectively; 8,542,530 and 6,234,898 shares outstanding at September 30, 2018 and December 31, 2017, respectively		1			—
Stockholders' equity
Series D: 4,725 shares issued and outstanding at June 30, 2019 and December 31, 2018; liquidation value of 0.0001 per share								-			-
Series D-1: 834 shares issued and outstanding at June 30, 2019 and December 31, 2018; liquidation value of 0.0001 per share								-			-
Common stock, 0.0001 par value, 100,000,000 shares authorized; 2,321,091 and 2,010,028 shares issued at June 30, 2019 and December 31, 2018; 2,321,088 and 2,010,025 shares outstanding at June 30, 2019 and December 31, 2018								-			-
Additional paid-in-capital		152,438			149,425			153,347			152,445
Treasury stock, at cost, 12 shares at September 30, 2018 and December 31, 2017		(264	)		(264	)
Treasury stock, at cost, 3 shares at March 31, 2019 and December 31, 2018								(264	)		(264	)
Accumulated deficit		(145,585	)		(145,055	)		(141,876	)		(140,083	)
Total stockholders’ equity		6,590			4,106
Total liabilities and stockholders’ equity	$	7,846		$	8,972
Total stockholders' equity								11,207			12,098
Total liabilities and stockholders' equity							$	12,052		$	13,251

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating costs and expenses
Amortization of patent portfolio	$	-		$	343		$	-		$	681
Compensation and related expenses (including stock-based compensation)		175			342			356			697
Professional fees		548			395			947			992
Acquisition costs		66			66			77			211
Other selling, general and administrative		99			116			221			258
Total operating expenses		888			1,262			1,601			2,839
Loss from operations		(888	)		(1,262	)		(1,601	)		(2,839	)

Other (expenses) income
Other income (expenses) , net		(28	)		(93	)		64			(190	)
Change in fair value of investment		145			680			(330	)		680
Change in fair value of warrant liabilities		127			277			74			465
Total other income (expense)		244			864			(192	)		955
Net income (loss)	$	(644	)	$	(398	)	$	(1,793	)	$	(1,884	)

Net income (loss) per share attributable to common stockholders, basic and diluted
Basic	$	(0.30	)	$	(0.20	)	$	(0.87	)	$	(1.06	)
Diluted	$	(0.30	)	$	(0.20	)	$	(0.87	)	$	(1.06	)

Weighted average number of shares outstanding, basic and diluted
Basic		2,124,631			2,008,382			2,067,645			1,780,199
Diluted		2,124,631			2,008,382			2,067,645			1,780,199

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller Reporting Company	☒
Emerging growth company	☐

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues	$	—		$	314		$	—		$	952

Operating costs and expenses
Amortization of patent portfolio		346			346			1,027			1,027
Compensation and related expenses (including stock-based compensation)		206			488			903			1,371
Professional fees		210			280			1,202			815
Impairment of intangible assets		1,051			—			1,051			—
Rent		16			21			57			70
Depreciation expense		21			1			38			2
Acquisition costs		19			—			230			—
Other selling, general and administrative		82			137			282			372
Total operating expenses		1,951			1,273			4,790			3,657
Loss from operations		(1,951	)		(959	)		(4,790	)		(2,705	)

Other (expenses) income
Other (expenses) income, net		(35	)		6			(225	)		299
Change in fair value of investment		—			345			680			345
Change in fair value of warrant liabilities		95			1,067			560			(259	)
Total other income		60			1,418			1,015			385
Net (loss) income	$	(1,891	)	$	459		$	(3,775	)	$	(2,320	)

Net income (loss) per share attributable to common stockholders, basic and diluted
Basic	$	(0.22	)	$	0.08		$	(0.48	)	$	(0.44	)
Diluted	$	(0.22	)	$	0.08		$	(0.48	)	$	(0.44	)

Weighted average number of common shares outstanding,
Basic		8,542,530			5,998,920			7,894,936			5,304,201
Diluted		8,542,530			6,009,042			7,894,936			5,304,201

	Common Stock				Preferred Stock				Additional Paid-in Capital		Treasury Stock					Accumulated Deficit			Total Stockholder’ Equity
	Shares		Amount		Shares		Amount		Additional Paid-in Capital		Shares		Amount			Accumulated Deficit			Total Stockholder’ Equity
Balance at December 31, 2017		6,234,898	$	—		5,559	$	—	$	149,425		12	$	(264	)	$	(145,055	)	$	4,106
Issuance common stock in equity raise, net of offering cost		2,222,222		1		—		—		2,699		—		—			—			2,700
Stock-based compensation		85,410		—		—		—		314		—		—			—			314
Cumulative effect of the changes related to adoption of ASC 606		—		—		—		—		—		—		—			3,245			3,245
Net loss		—		—		—		—		—		—		—			(3,775	)		(3,775	)
Balance at September 30, 2018		8,542,530	$	1		5,559	$	—	$	152,438		12	$	(264	)	$	(145,585	)	$	6,590

	Common Stock					Preferred Stock				Additional Paid-in		Treasury Stock					Accumulated			Total Stockholders'
	Shares			Amount		Shares		Amount		Capital		Shares		Amount			Deficit			Equity
Balance at March 31, 2019		2,010,025		$	-		5,559	$	-	$	152,451		3	$	(264	)	$	(141,232	)	$	10,955
Issuance of common stock and prefunded common stock warrants, net of offering cost		221,000			-		-		-		787		-		-			-			787
Exercise of prefunded common stock warrants		201,961			-		-		-		-		-		-			-			-
Exchange of common shares for prefunded warrants		(115,269	)		-		-		-		-		-		-			-			-
Fractional shares adjusted for reverse split		3,371			-		-		-		-		-		-			-			-
Stock-based compensation		-			-		-		-		109		-		-			-			109
Net income		-			-		-		-		-		-		-			(644	)		(644	)
Balance at June 30, 2019		2,321,088		$	-		5,559	$	-	$	153,347		3	$	(264	)	$	(141,876	)	$	11,207

	DatChat Investment as of September 30, 2018
Cash Payment	$	500
Prior Incurred Amount Made to DatChat		152
Payable to DatChat		348
Total		1,000

	●	seeking additional liquidity through credit facilities or other debt arrangements, and
●	~~increasing revenue from its patent portfolios, license fees and new business ventures.~~

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Realized gain (loss)	$	(86	)	$	(174	)	$	(361	)	$	(303	)
Unrealized gain (loss)		3			124			(14	)		262
Dividend income		44			18			121			72
	$	(39	)	$	(32	)	$	(254	)	$	31

	As of September 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

	As of June 30,
	2019		2018
Convertible preferred stock		688		688
Warrants to purchase common stock		285,273		294,072
Options to purchase common stock		100,407		124,396
Total		386,368		419,156

●	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).

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Realized gain (loss)	$	(25	)	$	(177	)	$	(98	)	$	(275	)
Unrealized gain (loss)		(10	)		41			138			(17	)
Dividend income		7			44			24			78
	$	(28	)	$	(92	)	$	64		$	(214	)

Security Name		Shares Owned as of June 30, 2019				Fair value per Share as of June 30, 2019				Fair value as of June 30, 2019 (in thousands)
HOTH			1,735,714			$	5.81			$	10,084

	Net Carrying Amount			Weighted average amortization period (years)
Patent Portfolios and Patent Rights at December 31, 2017, net	$	3,578			2.67
Amortization expenses		(1,027	)
Impairment loss		(1,051	)
Patent Portfolios and Patent Rights at September 30, 2018, net	$	1,500			1.00

	Amortization Expense for the Three Months Ended September 30,				Amortization Expense for the Nine Months Ended September 30,
Date Acquired and Description	2018		2017		2018		2017
7/24/13 - Rockstar patent portfolio	$	18	$	18	$	54	$	53
9/10/13 - North South patent portfolio		5		5		16		16
12/31/13 - Rockstar patent portfolio		323		323		957		958
	$	346	$	346	$	1,027	$	1,027

	Rockstar		North South		Rockstar
	Portfolio		Portfolio		Portfolio
	Acquired		Acquired		Acquired		Total
	24-Jul-13		10-Sep-13		31-Dec-13		Amortization
Nine Months Ended December 31, 2018		42		15		321		378
Year Ended December 31, 2019		129		42		951		1,122
Total	$	171	$	57	$	1,272	$	1,500

	Fair value measured at September 30, 2018
	Total carrying value at September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities - mutual and exchange traded funds	$	3,409	$	—	$	3,409	$	—
Investments at Hoth	$	1,700	$	—	$	—	$	1,700
Investments at TheBit Daily	$	25	$	—	$	—	$	25
Investments at DatChat	$	1,000	$	—	$	—	$	1,000

Liabilities
Fair value of warrant liabilities	$	262	$	—	$	—	$	262

	Fair value measured at June 30, 2019
	Total at June 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2019		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities - mutual and exchange traded funds	$	817	$	817	$	-	$	-
Investments in Hoth	$	10,084	$	10,084	$	-	$	-

Liabilities
Fair value of warrant liabilities	$	8	$	-	$	-	$	8

	Fair value measured at December 31, 2017
	Total carrying value at December		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities - mutual and exchange traded funds	$	3,998	$	—	$	3,998	$	—
Investments at Hoth	$	1,020	$	—	$	—	$	1,020

Liabilities
Fair value of warrant liabilities	$	822	$	—	$	—	$	822

	Fair value measured at December 31, 2018
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities - mutual and exchange traded funds	$	2,700	$	2,700	$	-	$	-
Investments in Hoth	$	9,214	$	-	$	-	$	9,214

Liabilities
Fair value of warrant liabilities	$	82	$	-	$	-	$	82

Date of valuation	September 30, 2018		December 31, 2017
Risk-free interest rate		2.81%		1.98%
Expected volatility		69.41% - 106.63%		100.00% - 132.21%
Expected life (in years)		2.19-2.31		2.94 - 3.06
Expected dividend yield		—		—

Date of valuation	June 30, 2019	December 31, 2018
Risk-free interest rate	1.75% - 1.92%	2.48%
Expected volatility	67.11% - 100.00%	72.03% - 103.13%
Contractual life (in years)	1.44-2.00	1.94-2.06
Expected dividend yield	-	-

	Fair Value of Level 3 financial liabilities
	June 30, 2019			June 30, 2018
Beginning balance	$	82		$	822
Fair value adjustment of warrant liabilities		(74	)		(465	)
Ending balance	$	8		$	357

	Fair Value of Level 3 financial liabilities
	September 30, 2018			September 30, 2017
Beginning balance	$	822		$	702
Fair value adjustment of warrant liabilities		(560	)		259
Ending balance	$	262		$	961

	Fair Value of Level 3 investment
	September 30,		September 30,
	2018		2017
Beginning balance	$	1,020	$	—
Purchase of investment in TheBit Daily LLC at fair value		25		—
Purchase of investment in DatChat at fair value		1,000
Fair value of Hoth upon issuance		—		675
Change in fair value of Hoth		680		345
Ending balance	$	2,725	$	1,020

	Net carrying value at December 31, 2017		Impairment Charges - Nine months ended September 30, 2018
Assets
Patent Portfolios, net	$	1,500	$	1,051

	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		235,294			-		587,881		0.28
Exercised		(201,961	)		-		504,882		-
Expired		(8,799	)		476.66		-		-
Outstanding as of June 30, 2019		318,606		$	22.05		82,999		1.43

						Weighted Average
							Remaining Contractual
			Weighted Average				Life
	Warrants		Exercise Price		Total Intrinsic Value		(in years)
Outstanding as of December 31, 2017	1,249,754	$	8.98	$	—		2.92
Outstanding as of September 30, 2018	1,249,754	$	8.98				2.17
Exercisable as of September 30, 2018	1,249,754	$	8.98	$	—		2.17

	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		(23,664	)		378.67		-		-
Non-employee options expired		(310	)		571.71		-		-
Outstanding as of June 30, 2019		100,407		$	169.21	$	-		5.5
Options vested and expected to vest		100,407		$	169.21	$	-		5.5
Options vested and exercisable		100,407		$	169.21	$	-		5.5

~~2.1~~3.1		Certificate of Amendment to the Certificate of Incorporation, as amended, filed with the Secretary of State of Delaware on May 9, 2019.
10.1		Asset Purchase Agreement, ~~and Plan of Merger,~~ dated ~~as of October 10, 2018,~~May 15, 2019, by and ~~among~~between Spherix Incorporated ~~Spherix Delaware Merger Sub~~and CBM BioPharma, Inc.~~, CBM Biopharma, Inc. and Scott Wilfong (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on October 16, 2018)~~
10.2		~~10.1~~Amendment No. 1 to Asset Purchase Agreement, dated May 30, 2019, by and between Spherix Incorporated and CBM BioPharma, Inc.
10.3		Form of Share Purchase Agreement, dated May 15, 2019, by and between Spherix Incorporated and the sellers signatory thereto.
10.4		Securities Purchase Agreement, dated ~~as of August 8, 2018,~~May 29, 2019, by and between Spherix Incorporated and ~~DatChat, Inc. (incorporated by reference to Exhibit 10.1 to~~ the ~~Quarterly Report on Form 10-Q filed on August 14, 2018)~~purchaser signatory thereto.
10.5		~~31.1~~Amendment to Securities Purchase Agreement, dated June 6, 2019, by and between Spherix Incorporated and the purchaser signatory thereto.
31.1		Certification of Principal Executive Officer and Principal Financial Officer of Spherix Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer and Principal Financial Officer of Spherix Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document

	Spherix Incorporated (Registrant)

Date: ~~November~~August 14, ~~2018~~2019	By: ~~/s/~~	/s/ Anthony Hayes
		Anthony Hayes
		Chief Executive Officer
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)