Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'SPHERIX INC | ' |
Entity Central Index Key | '0000012239 | ' |
Document Type | 'S-1 | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Entity Voluntary Filers | 'No | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 2,429,904 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Current assets | ' | ' | ' |
Cash | $2,541,743 | $4,498,237 | $4,911,350 |
Trade accounts receivable, net of allowance of $0, $0, and $8,174 at September 30, 2013, December 31, 2012, and December 31, 2011 | ' | ' | ' |
Other receivables | ' | 3,425 | 293 |
Prepaid research expenses | ' | ' | 209,780 |
Prepaid expenses and other assets | 51,074 | 100,474 | 116,565 |
Assets of segment held for sale | ' | 104,265 | 289,927 |
Total current assets | 2,592,817 | 4,706,401 | 5,527,915 |
Other assets | ' | ' | ' |
Property and equipment, net of accumulated depreciation of $332,395 and $308,386 | ' | 24,009 | 85,374 |
Patent portfolio, net of accumulated amortization of $133,785, $0, and $2,146 at September 30, 2013, December 31, 2012, and December 31, 2011 | 4,967,911 | ' | ' |
Deposit | 29,505 | 25,625 | 35,625 |
Goodwill | 1,711,883 | ' | ' |
Assets of segment held for sale, non-current | ' | ' | 6,108 |
Total assets | 9,302,116 | 4,756,035 | 5,655,022 |
Current liabilities | ' | ' | ' |
Accounts payable and accrued expenses | 486,136 | 425,774 | 269,996 |
Accrued salaries and benefits | 48,505 | 280,263 | 242,550 |
Accrued patent costs | 1,000,000 | ' | ' |
Liabilities of segment held for sale | 2,551 | 25,040 | 380,136 |
Total current liabilities | 1,537,192 | 731,077 | 892,682 |
Deferred rent | 45,008 | 45,081 | 47,675 |
Warrant liabilities | 39,923 | 3,125,393 | 916,621 |
Total liabilities | 1,622,123 | 3,901,551 | 1,856,978 |
Stockholders' equity | ' | ' | ' |
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized; | ' | ' | ' |
Series A: No shares issued and outstanding, at September 30, 2013, December 31, 2012, and December 31, 2011; liquidation preference $1,000 per share | ' | ' | ' |
Series B: 1 share issued and outstanding, at September 30, 2013, December 31, 2012, and December 31, 2011; liquidation preference $1,000 per share | ' | ' | ' |
Series C: 1 and no shares issued and outstanding, at September 30, 2013, December 31, 2012, and December 31, 2011; liquidation preference $0.0001 per share | ' | ' | ' |
Series D: 1,379,685 and no shares issued and outstanding, at September 30, 2013 December 31, 2012, and December 31, 2011; liquidation preference $0.0001 per share | 138 | ' | ' |
Series E: No shares issued and outstanding, at September 30, 2013, December 31, 2012, and December 31, 2011; liquidation preference $0.0001 per share | ' | ' | ' |
Series F: No shares issued and outstanding, at September 30, 2013, December 31, 2012, and December 31, 2011; liquidation preference $0.0001 per share | ' | ' | ' |
Common stock, $0.0001 par value, 50,000,000 shares authorized; 2,430,305, 814,114, and 155,150 shares issued at September 30, 2013, December 31, 2012, and December 31, 2011 respectively; 2,429,904, 813,713, and 154,749 outstanding shares outstanding at September 30, 2013, December 31, 2012, and December 31, 2011 respectively | 244 | 82 | 16 |
Additional Paid-in capital | 57,239,275 | 36,630,406 | 35,717,008 |
Treasury stock at cost, 401 shares at September 30, 2013, December 31, 2012, and December 31, 2011, respectively | -464,786 | -464,786 | -464,786 |
Accumulated deficit | -49,094,878 | -35,311,218 | -31,454,194 |
Total stockholders' equity | 7,679,993 | 854,484 | 3,798,044 |
Total liabilities and stockholders' equity | $9,302,116 | $4,756,035 | $5,655,022 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Consolidated Balance Sheets Parenthetical | ' | ' | ' |
Property and equipment, accumulated depreciation (in dollars) | $332,395 | $308,386 | $244,711 |
Patent portfolio, net of accumulated amortization | 133,785 | 0 | 2,146 |
Trade accounts receivable, allowance (in dollars) | ' | $0 | $8,174 |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 | $0.00 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred stock, series A shares issued | ' | ' | ' |
Preferred stock, series A shares outstanding | ' | ' | ' |
Preferred stock, series A liquidation preference, per share | $1,000 | $1,000 | ' |
Preferred stock, series B shares issued | 1 | 5,250 | 5,250 |
Preferred stock, series B shares outstanding | 1 | 1 | 1 |
Preferred stock, series B liquidation preference, per share | $1,000 | $1,000 | ' |
Preferred stock, series C shares issued | 1 | ' | ' |
Preferred stock, series C shares outstanding | 1 | ' | ' |
Preferred stock, series C liquidation preference, per share | $0.00 | $0.00 | ' |
Preferred stock, series D shares issued | 1,379,685 | ' | ' |
Preferred stock, series D shares outstanding | 1,379,685 | ' | ' |
Preferred stock, series D liquidation preference, per share | $0.00 | $0.00 | ' |
Preferred stock, series E shares issued | ' | ' | ' |
Preferred stock, series E shares outstanding | ' | ' | ' |
Preferred stock, series E liquidation preference, per share | $0.00 | $0.00 | ' |
Preferred stock, series F shares issued | ' | ' | ' |
Preferred stock, series F shares outstanding | ' | ' | ' |
Preferred stock, series F liquidation preference, per share | $0.00 | $0.00 | ' |
Common stock, par value (in dollars per share) | $0.00 | $0.00 | $0.00 |
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 |
Common stock, shares issued | 2,430,305 | 814,114 | 155,150 |
Common stock, shares outstanding | 2,429,904 | 813,713 | 154,749 |
Treasury stock, shares | 401 | 401 | 401 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Consolidated Statements Of Operations | ' | ' | ' | ' | ' | ' |
Revenue | $1,837 | $16,710 | $7,811 | $16,710 | $19,922 | ' |
Operating costs and expenses | ' | ' | ' | ' | ' | ' |
Amortization of patents | 133,785 | ' | 133,785 | ' | ' | ' |
Compensation and compensation related expenses (including stock based compensation) | 6,392,503 | 89,959 | 7,129,025 | 492,456 | ' | ' |
Research and development expense | 9,648 | 107,817 | 9,648 | 617,469 | -727,091 | -1,645,939 |
Professional fees | 2,139,977 | 316,671 | 2,867,945 | 848,498 | ' | ' |
Rent | 60,433 | 42,905 | 132,475 | 121,630 | ' | ' |
Depreciation expense | 2,519 | 16,993 | 24,009 | 50,936 | ' | ' |
Other selling, general and administrative | 579,740 | 76,010 | 884,858 | 252,201 | -2,764,836 | -2,548,007 |
Total operating expenses | 9,318,605 | 650,355 | 11,181,745 | 2,383,190 | -3,491,927 | -4,193,946 |
Operating loss | -9,316,768 | -633,645 | -11,173,934 | -2,366,480 | -3,472,005 | -4,193,946 |
Other Income from Change in Fair Value of Warrants | ' | ' | ' | ' | 1,202,489 | 3,716,812 |
Loss on issuance of warrants | ' | ' | ' | ' | -621,983 | -4,983 |
Interest income | 202 | 830 | 739 | 2,774 | 3,466 | 3,455 |
Other income | ' | ' | ' | ' | ' | 51,261 |
Gain on settlement of obligations | ' | ' | ' | ' | ' | -845,000 |
Fair value adjustments for warrant liabilities | 36,583 | 58,413 | -2,610,465 | 740,605 | ' | ' |
Loss from continuing operations before taxes | -9,279,983 | -574,402 | -13,783,660 | -1,623,101 | -2,888,033 | 417,599 |
Income tax expense | ' | ' | ' | ' | ' | -14,485 |
Loss from continuing operations | -9,279,983 | -574,402 | -13,783,660 | -1,623,101 | -2,888,033 | 403,114 |
Discontinued operations | ' | ' | ' | ' | ' | ' |
Loss from discontinued operations before taxes | ' | -133,148 | ' | -323,423 | -968,991 | -383,529 |
Income tax expense | ' | ' | ' | ' | ' | ' |
Loss from discontinued operations | ' | -133,148 | ' | -323,423 | -968,991 | -383,529 |
Net loss | ($9,279,983) | ($707,550) | ($13,783,660) | ($1,946,524) | ($3,857,024) | $19,585 |
Net (loss) income per share, basic | ' | ' | ' | ' | ' | ' |
Continuing operations | ($6.93) | ($2.76) | ($14.43) | ($8.09) | ($10.56) | $3.07 |
Discontinued operations | ' | ($0.64) | ' | ($1.61) | ($3.54) | ($2.92) |
Net (loss) income per share | ($6.93) | ($3.40) | ($14.43) | ($9.70) | ($14.10) | $0.15 |
Net loss per share, diluted | ' | ' | ' | ' | ' | ' |
Continuing operations | ($6.93) | ($2.76) | ($14.43) | ($8.09) | ($10.56) | ($2.37) |
Discontinued operations | ' | ($0.64) | ' | ($1.61) | ($3.54) | ($2.77) |
Net loss per share | ($6.93) | ($3.40) | ($14.43) | ($9.70) | ($14.10) | ($5.14) |
Weighted average shares outstanding, basic | 1,339,300 | 207,806 | 955,292 | 200,547 | 273,567 | 131,285 |
Weighted average shares outstanding, diluted | 1,339,300 | 207,806 | 955,292 | 200,547 | 273,567 | 138,346 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Cash flows from operating activities | ' | ' | ' | ' |
Net loss | ($13,783,660) | ($1,946,524) | ($3,857,024) | $19,585 |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' | ' |
Issuance costs of warrants accounted for at fair value | ' | ' | 245,513 | 230,604 |
Loss on issuance of warrants | ' | ' | 621,983 | 4,983 |
Gain on settlement of obligations | ' | ' | ' | -845,000 |
Provision for doubtful accounts | ' | -8,174 | -8,174 | 8,174 |
Depreciation and amortization | 24,009 | 50,936 | 63,675 | 66,308 |
Fair value adjustment of warrant liabilities | 2,610,465 | -740,605 | -1,202,489 | -3,716,812 |
Stock-based compensation | 7,402,485 | 40,350 | 56,448 | 35,534 |
Amortization of patent portfolio | 133,785 | ' | ' | ' |
Changes in assets and liabilities: | ' | ' | ' | ' |
Prepaid expenses and other assets | 60,023 | 316,041 | 235,871 | 289,830 |
Accounts receivable | ' | 103,746 | 5,042 | 262,333 |
Other receivables | 3,425 | ' | ' | ' |
Accounts payable, accrued expenses and accrued salaries and benefits | -171,396 | -151,994 | 193,491 | -366,885 |
Deferred payables | -73 | 5,206 | -2,594 | -33,270 |
Deferred compensation | ' | ' | ' | -305,000 |
Net cash used in continuing operations | -3,720,937 | -2,331,018 | -3,648,258 | -4,349,616 |
Net cash provided by discontinued operations | 81,776 | 17,636 | -167,429 | -10,044 |
Net cash used in operating activities | -3,639,161 | -2,313,382 | -3,815,687 | -4,359,660 |
Cash flow from investing activities | ' | ' | ' | ' |
Cash acquired in acquisition of North South | 2,684,363 | ' | ' | ' |
Purchase of fixed assets | ' | -1,599 | -2,309 | -2,374 |
Purchase of patent portfolio | -2,001,696 | ' | ' | ' |
Net cash used in activities of continuing operations | ' | ' | -2,309 | -2,374 |
Net cash provided by (used in) activities of discontinued operations | ' | ' | 4,102 | -2,478 |
Net cash used in investing activities | 682,667 | -1,599 | 1,793 | -4,852 |
Cash flow from financing activities | ' | ' | ' | ' |
Proceeds from issuance of note payable | 500,000 | ' | ' | ' |
Proceeds from issuance of preferred stock | 500,000 | 1,055,353 | ' | ' |
Proceeds from issuance of common stock and warrants | ' | ' | 3,724,991 | 4,034,352 |
Issuance cost of common stock and warrants | ' | ' | -322,525 | -333,800 |
Reverse stock split fractional share payment | ' | -1,685 | -1,685 | ' |
Net cash provided by activities of continuing operations | ' | ' | 3,400,781 | 3,700,552 |
Net cash provided by financing activities | 1,000,000 | 1,053,668 | 3,400,781 | 3,700,552 |
Net decrease in cash and cash equivalents | -1,956,494 | -1,261,313 | -413,113 | -663,960 |
Cash and cash equivalents, beginning of period | 4,498,237 | 4,911,350 | 4,911,350 | 5,575,310 |
Cash and cash equivalents, end of period | 2,541,743 | 3,650,037 | 4,498,237 | 4,911,350 |
Supplemental disclosures of cash flow information: | ' | ' | ' | ' |
Interest paid | ' | ' | ' | ' |
Income taxes paid | ' | ' | ' | 160,829 |
Non-cash financing activity: | ' | ' | ' | ' |
Issuance of Series C Convertible Preferred Stock in connection with exchange of warrants | 5,695,935 | ' | ' | ' |
Conversion of Convertible Preferred Stock - Series C into common stock | 23 | ' | ' | ' |
Issuance of common stock in connection with cashless exercise of warrants | 1 | ' | ' | ' |
Issuance of common stock in connection with acquisition of patent portfolio | 1,000,000 | ' | ' | ' |
Accrued patent costs | 1,000,000 | ' | ' | ' |
Acquisition of North South Holding Prepaid expenses | -14,503 | ' | ' | ' |
Acquisition of North South Holding Patent portfolio | -1,100,000 | ' | ' | ' |
Acquisition of North South Holding Goodwill | -1,711,883 | ' | ' | ' |
Acquisition of North South Holding Common and preferred stock issued | 5,510,749 | ' | ' | ' |
Acquisition of North South Holding Cash acquired in acquisition of North South | $2,684,363 | ' | ' | ' |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Stockholders' Equity (USD $) | Preferred Stock | Common Stock | Paid-in Capital in Excess of Par | Treasury Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2010 | ' | $11 | $34,536,947 | ($464,786) | ($31,473,779) | $2,598,393 |
Beginning Balance, Shares at Dec. 31, 2010 | 1 | 107,181 | ' | 401 | ' | ' |
Sale of common stock, net of offering costs of $103,196, Amount | ' | 5 | 1,144,527 | ' | ' | 1,144,532 |
Sale of common stock, net of offering costs of $103,196, Shares | ' | 47,969 | ' | ' | ' | ' |
Stock-based compensation, Amount | ' | ' | 35,534 | ' | ' | 35,534 |
Net loss | ' | ' | ' | ' | 19,585 | 19,585 |
Ending Balance, Amount at Dec. 31, 2011 | ' | 16 | 35,717,008 | -464,786 | -31,454,194 | 3,798,044 |
Ending Balance, Shares at Dec. 31, 2011 | 1 | 155,150 | ' | 401 | ' | ' |
Sale of common stock, net of offering costs of $77,012, Amount | ' | 54 | 858,647 | ' | ' | 858,701 |
Sale of common stock, net of offering costs of $77,012, Shares | ' | 536,898 | ' | ' | ' | ' |
Stock-based compensation, Amount | ' | 12 | 56,436 | ' | ' | 56,448 |
Stock-based compensation, Shares | ' | 122,250 | ' | ' | ' | ' |
Fractional shares payment, Amount | ' | ' | -1,685 | ' | ' | -1,685 |
Fractional shares payment, Shares | ' | -184 | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | -3,857,024 | -3,857,024 |
Ending Balance, Amount at Dec. 31, 2012 | ' | $82 | $36,630,406 | ($464,786) | ($35,311,218) | $854,484 |
Ending Balance, Shares at Dec. 31, 2012 | 1 | 814,114 | ' | 401 | ' | ' |
Consolidated_Statements_of_Cha1
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Statement of Stockholders' Equity [Abstract] | ' | ' |
Offering costs | $77,012 | $103,196 |
Business_Merger_and_Basis_of_P
Business, Merger and Basis of Presentation | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
Business, Merger and Basis of Presentation | ' |
Business and Merger | |
Until the sale of Spherix Consulting, Inc. in December 2012, the Company’s principal segments of Spherix Incorporated (the “Company”) have been Biospherics, the biotechnology research and development business, and Spherix Consulting, the technical and regulatory consulting business. On December 3, 2012, the Company sold all of the stock of Spherix Consulting, Inc. Accordingly, the operations of Spherix Consulting, Inc. are reported in the accompanying condensed consolidated financial statements as discontinued operations. We were 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 discontinued in 2012. The Company has shifted its focus during 2013 and is now an intellectual property company that owns patented and unpatented intellectual property. | |
On December 27, 2012, the Company formed a new wholly-owned subsidiary, Nuta Technology Corp., (“Nuta”), which is incorporated in the state of Virginia. On April 2, 2013, the Company entered into an Agreement and Plan of Merger, as amended (the "Merger Agreement") with its wholly owned subsidiary, Nuta, North South Holdings, Inc., a Delaware corporation ("North South"), the owner or assignee of certain patents, licenses and applications (the “North South Intellectual Property”), and the shareholders of North South (the "North South Shareholders"). On September 10, 2013 the transaction contemplated under the Merger Agreement was completed (the “Merger”). At closing, North South merged with and into Nuta with Nuta as the surviving corporation. Nuta will continue its operations in the State of Virginia as the record owner of the North South’s intellectual property. Pursuant to the terms and conditions of the Merger, at the closing of the Merger, all of North South’s 5,213 issued and outstanding shares of common stock were converted into an aggregate of 1,203,153 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and all of North South’s 491 issued and outstanding shares of Series A Preferred Stock and 107 issued and outstanding shares of Series B Preferred Stock were converted into an aggregate of 1,379,685 shares of the Company's Series D Convertible Preferred Stock, par value $0.0001 per share, which is convertible into shares of the Company’s common stock on a one-for-ten basis (collectively with the 1,203,153 common shares of the Company, the “Merger Consideration”). | |
The closing of the Merger was subject to customary closing conditions, including the receipt of a fairness opinion that the Merger Consideration is fair to stockholders and the Company from a financial point of view, based on, among other things, the North South Intellectual Property assets, and the approval of the Company’s shareholders holding a majority of the outstanding voting capital stock of the Company as of the record date (July 10, 2013) to issue the Merger Consideration pursuant to NASDAQ listing standards. | |
On July 24, 2013, the Company purchased a group of patents in the mobile communication sector (the “Purchased Patents”) from Rockstar Consortium US LP, a Delaware limited partnership (“Rockstar”) at a contractual price of $4,000,000. In consideration for the Purchased Patents, the Company paid an aggregate $3,000,000 in consideration to Rockstar, which consisted of a $2,000,000 cash payment and 176,991 shares of common stock accepted by the seller in settlement of the $1,000,000 remaining balance of the Company’s common stock (176,991 shares at $5.65 per share). The Shares are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of (i) six months from the issuance of the shares or (ii) the date that the Company’s Common Stock achieves a trading volume of at least 50,000 shares per day and a closing price of at least $15 per share for a period of five consecutive days. The Company has filed a registration statement covering the resale of the shares issued to Rockstar with the Securities and Exchange Commission (the “SEC”) on September 5, 2013. On the anniversary of one year and one day after the Company files its first complaint against a defendant with any one or more of the patents acquired in this transaction, the Company shall deliver $1,000,000 to Rockstar. The initial complaint was filed on August 30, 2013, and at that time the additional $1,000,000 was accrued and included in patent portfolio on the condensed consolidated balance sheet. | |
Rockstar will also be entitled to receive a percentage of future profits after recovery of patent monetization costs and an initial priority return on investment to the Company. | |
Basis of Presentation and Principles of Consolidation | |
The accompanying condensed consolidated financial statements of the Company are unaudited and do not include all of the information and disclosures generally required for annual financial statements. In the opinion of management, the statements contain all material adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s consolidated financial position as of September 30, 2013, the consolidated results of its operations for the three-and nine-month periods ended September 30, 2013 and 2012, and the consolidated results of its cash flows for the nine-month periods ended September 30, 2013 and 2012. This report should be read in conjunction with the Company’s Annual Report on Form 10-K, which does contain the complete information and disclosure, for the year ended December 31, 2012. | |
The accompanying condensed consolidated financial statements include the accounts of Spherix Incorporated and its wholly-owned subsidiaries, Biospherics Incorporated and Nuta Technology Corp. Prior to the Merger with Nuta, North South formed two Delaware limited liability corporations on July 26, 2013, Guidance IP, LLC (“Guidance”) and Directional IP, LLC. (“Directional”). All significant intercompany balances and transactions have been eliminated in consolidation. |
Liquidity_and_Capital_Resource
Liquidity and Capital Resources | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Dec. 31, 2012 | |||
Notes to Financial Statements | ' | ' | ||
Liquidity and Capital Resources | ' | ' | ||
The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding revenue. | We continue to incur ongoing administrative and other expenses, including public company expenses, without any corresponding revenue. If we re-commence our pharmaceutical development efforts, we will begin to incur substantial development costs and will not likely receive any revenue for the foreseeable future. | |||
The Company intends to finance its activities through: | Until such time as we earn revenue from our pharmaceutical development business or from a new business venture, we intend to finance our activities through: | |||
· | managing current cash and cash equivalents on hand from our past equity offerings, | · the remaining proceeds of our equity offerings; and | ||
· | seeking additional funds raised through the sale of additional securities in the future, | · additional funds we will seek to raise through the sale of additional securities in the future. | ||
· | increasing revenue from the monetization of its patent portfolios, license fees, and new business ventures. | |||
Working capital was $4.0 million and $4.6 million at December 31, 2012 and December 31, 2011, and cash on hand was $4.5 million and $4.9 million, respectively. Management believes that this cash on hand will be sufficient to sustain operations for the next twelve months. | ||||
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. The Company’s working capital amounted to $1,055,625 and $3,975,324 at September 30, 2013 and December 31, 2012, respectively and, cash on hand amounted to $2,541,743 and $4,498,237, respectively. Upon closing of the Merger on September 10, 2013, the North South cash balance (approximately $2,684,363) became available for the operations of the Company. | ||||
In early December 2012, we sold the stock of our subsidiary Spherix Consulting, Inc. for nominal consideration. This sale allows the Company to minimize its administrative and other costs pending completion of the Company’s review of its strategic alternatives. | ||||
The Company in November of 2013 sold an aggregate of 304,250 shares of its newly designated Series F Preferred Stock and 48,438 shares of common stock to five accredited investors for gross proceeds to the Company of $2,235,000 pursuant to subscription agreements. The effective purchase price per share of Common Stock and 156,250 of the Series F Preferred Stock was $6.40 for $1,310,000 of such investment and 148,000 shares of Series F Stock was $6.25 for $925,000 of such investment. The proceeds of the sale of the common stock and Series F Convertible Preferred Stock will be used to further the operations of the Company (Series F Convertible Preferred Stock - see Note 8, Subsequent Events). | ||||
In November 2012, the Company obtained net proceeds of approximately $2.3 million in a private placement of common stock and warrants. The Company sold an aggregate of 483,657 shares of common stock at a price of $5.324 per share along with warrants to purchase an additional 483,657 shares of common stock at an exercise price of $6.53 per share. The warrants are exercisable for a period of five years. The Company has agreed to register the common stock sold in the offering and the common stock issuable upon exercise of the warrants. Failure on the part of the Company to satisfy certain registration deadlines may subject the Company to payment of certain monetary penalties. The investors have agreed to temporarily waive their right to cause the Company to register these shares. The investors have the right to participate for 100% of any future debt or equity offerings of the Company during the two years following the Closing. | ||||
Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. 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 which the Company is 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 or cause the Company to incur additional costs as a strategy. If such efforts are successful, they may have an impact on the value of the patents and preclude the Company from deriving revenue from the patents. The patents could be declared invalid by a court or the US Patent and Trademark Office, in whole or in part, or the costs of the Company can increase. | ||||
In early 2013, nearly all of the warrants issued in November 2012 were exchanged for shares of Series C Convertible Preferred Stock. | ||||
As a result, a negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact the Company’s business. Additionally, the Company anticipates that legal fees which are not included in contingency fee arrangements, experts and other expenses will be material and could have an adverse effect on its financial condition and results of operations if its efforts to monetize these patents are unsuccessful. | ||||
In February 2012, the Company obtained net proceeds of approximately $1.1 million in a registered direct offering of common stock and warrants. Both the common stock issued in the offering and the underlying common stock for the warrants issued in the offering were previously registered under a Form S-3 shelf registration statement declared effective by the SEC in October 2009. | ||||
In addition, the costs of enforcing the Company’s patent rights may exceed its recoveries from such enforcement activities. Accordingly, in order for the Company to generate a profit from its patent enforcement and monetization activities, the revenues from such enforcement and monetization activities must be high enough to offset both the cash outlays and the contingent fees payable from such revenues, including any profit sharing arrangements with inventors or prior owners of the patents. The Company’s failure to monetize its patent assets or the occurrence of unforeseen circumstances that could have a negative impact on the Company’s liquidity could significantly harm its business. | ||||
We believe our current capital is inadequate to pursue business opportunities, which we may desire to pursue in the future and as a result we anticipate we will need to raise additional funds from time to time, which could take the form of debt, equity, convertible securities or a combination of the above. We may be required to raise capital at prices that are below our current market capitalization value. | ||||
Should the Company be unsuccessful in its efforts to execute its business plan, it could become necessary for the Company to reduce expenses, curtail its operation or explore various alternative business opportunities or possibly suspend or discontinue its business activities. | ||||
The Company cannot be assured that it will be able to attract an investor in our securities or raise the additional funds it will likely require in the future; that the Company will be able to obtain any required stockholder approval; or that the Company will be able to successfully complete additional offerings or sales of its securities. If we reach a point where we are unable to raise needed additional funds to continue our business activities, we will be forced to cease our business activities in which case the Company could also be required to terminate its operations and dissolve. However, we believe that the Company presently has sufficient cash balances to continue as a going concern for the next 12 months based upon its reduced requirements for salaries and other expenses following the disposition of the consulting segment and the reduced activity of its research and development program. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | ' | ||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | ' | ' | ||||||||||||||||||||||||||||||
Use of Estimates | Nature of Business and Basis of Presentation | |||||||||||||||||||||||||||||||
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, valuation of warrants, the valuation of assets acquired and common and preferred stock issued in the acquisition of North South and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions. | The Company previously operated via two principal segments, Biospherics, our biotechnology research and development business, and Health Sciences, a technical and regulatory consulting business. The Health Sciences business provided technical and regulatory consulting services to biotechnology and pharmaceutical companies, as well as providing technical support for the Company’s own R&D activities. The Company generally provided its consulting services on either a fixed price basis or on a “time and expenses” basis, charging hourly rates for each staff member involved in a project, based on his or her skills and experience. | |||||||||||||||||||||||||||||||
Concentration of Cash | During the years covered by this report, the Company had two wholly-owned subsidiaries, Biospherics Incorporated and Spherix Consulting, Inc., for its two operating segments. The Company’s Health Sciences contracts are in the name of Spherix Consulting, Inc. and the Company’s patents are in the name of Biospherics Incorporated. Spherix Incorporated provides management, strategic guidance, business development, marketing and other services to its subsidiaries. The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale of the subsidiary. Certain assets of Spherix Consulting, Inc. were retained by the Company but are presented as assets held for sale in the consolidated balance sheet at December 31, 2012 as they relate to the discontinued operations. | |||||||||||||||||||||||||||||||
The Company maintains cash balances at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2013, the Company’s cash and cash equivalents in excess of the FDIC limits were $1,932,739. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks. | On May 6, 2011, the Company effected a one-for-ten reverse split of its common stock. The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on November 17, 2009. The reverse stock split reduced the number of outstanding shares of Common Stock from 25,624,872 shares to 2,562,488 shares at that time. | |||||||||||||||||||||||||||||||
Accounts Receivable | On September 21, 2012, the Company effected a one-for-twenty reverse split of its common stock. The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on August 14, 2012. The reverse stock split reduced the number of outstanding shares of Common Stock from 4,159,777 shares to 207,806 shares. All per share amounts and outstanding shares, including all Common Stock equivalents, stock options, equity compensation plans, and warrants, have been retroactively adjusted in the Financial Statements and in the Notes to the Financial Statements for all periods presented to reflect the reverse stock split. | |||||||||||||||||||||||||||||||
Credit is extended to customers based on an evaluation of a customer’s financial condition and, in general, collateral is not required. Management regularly reviews accounts receivable for uncollectible and potentially uncollectible accounts, and when necessary establishes an allowance for doubtful accounts. Balances that are outstanding after management has used reasonable collection efforts are written-off through a reduction in the allowance for doubtful accounts and a credit to accounts receivable. | The consolidated financial statements include the accounts of Spherix Incorporated and Biospherics Incorporated. All intercompany balances and transactions have been eliminated in consolidation. | |||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Use of Estimates and Assumptions | |||||||||||||||||||||||||||||||
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. | The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Significant estimates include the fair value of warrants, the valuation allowance on deferred tax assets, stock compensation expense, amortization and depreciation. Accordingly, actual results could differ from those estimates and assumptions. | |||||||||||||||||||||||||||||||
The Company uses three levels of inputs that may be used to measure fair value: | Cash and Cash Equivalents | |||||||||||||||||||||||||||||||
Level 1 — quoted prices in active markets for identical assets or liabilities | The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. The Company maintains cash balances at several banks. Interest bearing accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At December 31, 2012, the Company’s interest bearing deposits in excess of the FDIC limits was $4.5 million. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. | |||||||||||||||||||||||||||||||
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) | Property and Equipment and Depreciation | |||||||||||||||||||||||||||||||
Property and equipment are stated at cost and consist of office furniture and equipment, computer hardware and software, and leasehold improvements. The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets: | ||||||||||||||||||||||||||||||||
Revenue Recognition | ||||||||||||||||||||||||||||||||
Office furniture and equipment | 3 to 10 years | |||||||||||||||||||||||||||||||
The Company currently derives its revenues from past production payments. Past production payment revenues are royalty payments for the use of the Company’s intellectual property and where payments are made as part of a settlement of a patent infringement dispute. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability is reasonably assured. Based on the criteria enumerated in Accounting Standards Codification (“ASC”) 605, the Company records its revenues and costs associated with its patent enforcement activities gross on the consolidated statement of operations. | Computer hardware and software | 3 to 5 years | ||||||||||||||||||||||||||||||
Cost of Revenues | Leasehold improvements are depreciated or amortized over the shorter of the term of the related lease or the estimated useful lives of the assets (generally 5 to 10 years). Major additions, improvements and renewals are capitalized at cost and ordinary repairs, maintenance, and renewals are expensed in the year incurred. Gains or losses from the sale or retirement of property and equipment result from the difference between sales proceeds (if any) and the assets’ net book value, and are recorded in the consolidated Statements of Operations. | |||||||||||||||||||||||||||||||
Cost of revenues include the costs and expenses incurred in connection with the Company’s patent enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs. | Impairment of Long-Lived Assets | |||||||||||||||||||||||||||||||
Inventor Royalties and Contingent Legal Expenses | Whenever events or changes in circumstances indicate that the carrying amount of long-lived assets, including patents and property and equipment, may not be fully recoverable, the Company evaluates the probability that the future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. If any impairment is indicated as a result of this review, the Company would recognize a loss based on the amount by which the carrying amount exceeds the estimated fair value, determined based on the discounted future cash flows. In 2012 and 2011, no such impairment was noted. | |||||||||||||||||||||||||||||||
Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense. | Treasury Stock | |||||||||||||||||||||||||||||||
Contingent legal fees are expensed in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred. | The Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders’ equity. | |||||||||||||||||||||||||||||||
Intangible Assets – Patent Portfolios | Common Stock Purchase Warrants | |||||||||||||||||||||||||||||||
Intangible assets include the Company’s patent portfolios with original estimated useful lives ranging from 6 months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. As disclosed in Note 1, the Company acquired certain patent portfolios in the third quarter of 2013. The weighted average remaining amortization period of the Company’s patents is approximately 8.5 years. Future amortization of all patents is as follows: | The Company accounts for the issuance of Common Stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). | |||||||||||||||||||||||||||||||
For the Years Ending | Harris | CompuFill | Rockstar | See Note 2 related to the restatement for the accounting for stock purchase warrants. | ||||||||||||||||||||||||||||
31-Dec | Patent Portfolio | Patent Portfolio | Patent Portfolio | Total | ||||||||||||||||||||||||||||
Other Costs | Amortization | Preferred Stock | ||||||||||||||||||||||||||||||
2013 | * | $ | 11,765 | $ | 10,294 | $ | 247,001 | $ | 10,344 | $ | 279,404 | |||||||||||||||||||||
2014 | 47,059 | 41,176 | 795,348 | 41,376 | 924,959 | Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Accordingly the Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares as a component of stockholders’ equity. | ||||||||||||||||||||||||||
2015 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||||||||||||
2016 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | The Company’s Series B Convertible Preferred Stock does not feature any redemption rights within the holders’ control or conditional redemption features not solely within the Company’s control as of December 31, 2012. Accordingly, the Series B Convertible Preferred Stock is presented as a component of stockholders’ equity. | ||||||||||||||||||||||||||
2017 | 47,059 | 41,176 | 433,918 | 41,376 | 563,529 | |||||||||||||||||||||||||||
Thereafter | 196,077 | 171,571 | 1,056,112 | 172,417 | 1,596,177 | Revenue Recognition | ||||||||||||||||||||||||||
Total | $ | 396,078 | $ | 346,569 | $ | 3,876,999 | $ | 348,265 | $ | 4,967,911 | ||||||||||||||||||||||
Revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the contract price is fixed or determinable and collectability is reasonably assured. On time and expense contracts revenue is recognized at contractually agreed-upon rates based upon direct labor hours expended and other direct costs incurred. Revenue for fixed-price contracts is recognized under the proportional performance method based upon labor charged in relation to total expected labor charges. Losses, if any, on contracts are recorded during the period when first determined. | ||||||||||||||||||||||||||||||||
* Represents three months remaining for 2013 | ||||||||||||||||||||||||||||||||
Research and Development Costs | ||||||||||||||||||||||||||||||||
Amortization of the intangible assets for the three and nine months ended September 30, 2013 was $133,785. There was no amortization prior to July 24, 2013 as the first assets were placed into service on July 24, 2013. | ||||||||||||||||||||||||||||||||
Research and development costs are charged to operations as incurred. | ||||||||||||||||||||||||||||||||
Impairment of Long-lived Assets | ||||||||||||||||||||||||||||||||
Selling, General and Administrative Expense | ||||||||||||||||||||||||||||||||
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The Company has not identified any such impairment losses. | ||||||||||||||||||||||||||||||||
The Company’s selling, general and administrative expenses consist primarily of executive management salaries and fringe benefits, sales and marketing costs, finance and accounting, human resources, as well as general corporate costs and costs related to being a public company. | ||||||||||||||||||||||||||||||||
Reclassifications | ||||||||||||||||||||||||||||||||
Other Income from Change in Fair Value of Warrants | ||||||||||||||||||||||||||||||||
The Company has reclassified certain amounts from its previously reported consolidated financial statements for comparative purposes to conform to the fiscal 2013 presentation. These reclassifications had no impact on the Company’s previously reported consolidated operations or cash flows. | ||||||||||||||||||||||||||||||||
The fair value of warrants is measured each quarter and the change in fair value between periods is recognized as other income or expense in the respective periods. | ||||||||||||||||||||||||||||||||
Goodwill | ||||||||||||||||||||||||||||||||
Loss on Issuance of Warrants | ||||||||||||||||||||||||||||||||
Under ASC No. 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise. | ||||||||||||||||||||||||||||||||
The loss on issuance of warrants reflects the difference in the fair market value of the warrants as determined using the Black-Scholes option valuation method and the proceeds received. The proceeds received from Warrants issued with other instruments (such as common stock or preferred stock) are determined based upon the fair value of liability classified warrants with the residual allocated to the other instruments. | ||||||||||||||||||||||||||||||||
Goodwill impairment is tested at least annually or when factors indicate potential impairment using a two-step process that begins with an estimation of the fair value of each reporting unit. Step 1 is a screen for potential impairment pursuant to which the estimated fair value of each reporting unit is compared to its carrying value. | ||||||||||||||||||||||||||||||||
Other Income | ||||||||||||||||||||||||||||||||
The Company estimates the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and margins multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a Step 2 test is required. | ||||||||||||||||||||||||||||||||
Other income consists of two grants from the U.S. Government awarded in October 2010 in support of the Company’s diabetes and triglyceride research. As a result, in 2011 the Company recognized $51,000 in other income and a related tax expense of $14,000. No grant awards were recognized in 2012. | ||||||||||||||||||||||||||||||||
Income Taxes | ||||||||||||||||||||||||||||||||
Income Taxes | ||||||||||||||||||||||||||||||||
The Company adopted the provisions of ASC 740-10, which prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. | ||||||||||||||||||||||||||||||||
Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established based upon periodic assessments made by management to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the current tax provision for the period and the change during the period in deferred tax assets and liabilities. | ||||||||||||||||||||||||||||||||
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of September 30, 2013. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. | ||||||||||||||||||||||||||||||||
The Company’s policy is to recognize interest and penalties on tax liabilities as interest expense. At December 31, 2012 and 2011, the Company had no unrecognized income tax benefits and recognized no interest or penalties on income tax liabilities. | ||||||||||||||||||||||||||||||||
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations. | ||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||
Net Loss Per Share | ||||||||||||||||||||||||||||||||
The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale. The Spherix Consulting segment generated nearly all of the Company’s revenue and provided technical support for the Company’s Biospherics segment. | ||||||||||||||||||||||||||||||||
Basic earnings and loss per share are computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. 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 antidilutive. | ||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Securities that could potentially dilute earnings per share in the future that were not included in the computation of diluted loss per share at September 30, 2013 and 2012 are as follows: | Revenue | $ | 728,312 | $ | 820,925 | |||||||||||||||||||||||||||
30-Sep-13 | 30-Sep-12 | Direct cost and operating expense | (417,428 | ) | (388,065 | ) | ||||||||||||||||||||||||||
Convertible preferred stock | 13,796,852 | 4 | Selling, general and administrative expense | (1,279,875 | ) | (816,389 | ) | |||||||||||||||||||||||||
Warrants to purchase common stock | 66,062 | 67,637 | Loss from discontinued operations before taxes | $ | (968,991 | ) | $ | (383,529 | ) | |||||||||||||||||||||||
Non-vested restricted stock awards | 250 | - | ||||||||||||||||||||||||||||||
Options to purchase common stock | 2,012,163 | 2,425 | Fair Value Information | |||||||||||||||||||||||||||||
Total | 15,875,327 | 70,066 | ||||||||||||||||||||||||||||||
We group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: | ||||||||||||||||||||||||||||||||
Stock-based Compensation | ||||||||||||||||||||||||||||||||
Level 1 | Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from available pricing sources for market transactions involving identical assets or liabilities. | |||||||||||||||||||||||||||||||
The Company accounts for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a four- to ten-year period. | ||||||||||||||||||||||||||||||||
Level 2 | Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||||||||||||||||||||||||||
The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant. The expected volatility assumption is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns. | ||||||||||||||||||||||||||||||||
The Company’s model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Company’s model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions. | Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||||||||||||||||||||||||||||||
The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company’s estimate of pre-vesting forfeitures is primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the options vest. | The estimated fair value of the Company’s warrants was determined by the use of unobservable Level 3 inputs. The warrants are measured at estimated fair value using the Black-Scholes valuation model, which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of issuance, and at each subsequent reporting period, based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our historical rate. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates. However these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. | |||||||||||||||||||||||||||||||
Segment Reporting | At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively (see note 9 – Warrant Liability). The Company’s other financial instruments, which consist only of cash and cash equivalents approximate their carrying value given their short maturities. | |||||||||||||||||||||||||||||||
The Company follows the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. As of September 30, 2013 and for the nine months ended September 30, 2013, the Company operates in two segments. The segments are as follows: biotechnology and patent monetization. The Company’s biotechnology segment is minimal in 2013 and represented 100% of the Company in 2012. Since the acquisition of the Rockstar patent portfolio and merger with North South, the Company is primarily a patent monetization company and a majority of the Company’s operations and assets are in the patent monetization segment. | The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the year ended December 31, 2012: | |||||||||||||||||||||||||||||||
The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company’s chief operating decision-maker is considered to be the Company’s chief executive officer. | Fair Value Measurements of Warrants Using Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 3,125,000 | ||||||||||||||||||||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||||||||||||||||||||
Change in fair value of Warrant Liability | (2,208,000 | ) | ||||||||||||||||||||||||||||||
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit , or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. | ||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 917,000 | ||||||||||||||||||||||||||||||
For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations. | ||||||||||||||||||||||||||||||||
Accounting for Stock-Based Compensation | ||||||||||||||||||||||||||||||||
The Company applies the fair value method, which requires that the fair value measurement of all employee share-based payments to employees, including grants of employee stock options, be expensed over their requisite service period based on their value at the grant date using their fair value, determined using a prescribed option-pricing model. The Company uses a Black-Scholes option valuation method to value stock options. For the years ended December 31, 2012 and 2011, the Company recognized $56,000 and $36,000, respectively, in stock based compensation expense relating to the issuance of 2,250 stock options awarded in November 2011, the issuance of 1,333 stock options awarded in April 2010 and the issuance of 2,950 stock options awarded in February 2006 (see Note 10, “Stockholders’ Equity”). | ||||||||||||||||||||||||||||||||
Net (Loss) Income Per Share | ||||||||||||||||||||||||||||||||
Basic net (loss) income per common share has been computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the year. Diluted net income per common share has been computed by dividing net income by the weighted-average number of common shares outstanding plus an assumed increase in common shares outstanding for common stock equivalents. At December 31, 2012, the exercise price of 1,151 of the Company’s 7,163 outstanding options and 483,657 of the Company’s 550,664 warrants was below the average market price of the Company’s common stock for the period, however these were excluded from the dilutive calculation as their inclusion would have been anti-dilutive. At December 31, 2011, the exercise price of 293 shares of the Company’s 2,425 outstanding options and 27,427 shares of the Company’s 55,391 warrants was below the average market price of the Company’s common stock for the period. | ||||||||||||||||||||||||||||||||
Diluted earnings per share Calculation | 31-Dec-12 | 31-Dec-11 | ||||||||||||||||||||||||||||||
Net (loss) income | $ | (3,857,024 | ) | $ | 19,585 | |||||||||||||||||||||||||||
Less other income from change in fair value of warrants assumed exercised | -- | (730,862 | ) | |||||||||||||||||||||||||||||
Adjusted net loss | $ | (3,857,024 | ) | $ | (711,277 | ) | ||||||||||||||||||||||||||
Diluted shares outstanding | ||||||||||||||||||||||||||||||||
Weighted average shares outstanding, | 273,567 | 131,285 | ||||||||||||||||||||||||||||||
Shares assumed exercised | -- | 7,061 | ||||||||||||||||||||||||||||||
Diluted shares outstanding | 273,567 | 138,346 | ||||||||||||||||||||||||||||||
Net loss per share, diluted | $ | (14.10 | ) | $ | (5.14 | ) | ||||||||||||||||||||||||||
New Accounting Pronouncements | ||||||||||||||||||||||||||||||||
In June 2011, the FASB issued a new accounting standard on the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new standard was effective for fiscal years beginning after December 15, 2011 with retrospective application. The adoption of the new standard had no impact on the Company’s financial statements as the Company has no items which would be included in comprehensive income other than net income (loss). The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB deferred the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income, while still requiring entities to adopt the other requirements. We adopted the new standard on January 1, 2012. The adoption of this standard had no impact on our consolidated financial statements. In February of 2013, the FASB issued a new accounting standard to improve the transparency of reporting reclassifications out of accumulated other comprehensive income by requiring entities to present in one place information about significant amounts reclassified and, in some cases, to provide cross-references to related footnotes. We are required to adopt this standard as of the beginning of 2013. We do not expect this adoption to have a material impact on our financial statements. | ||||||||||||||||||||||||||||||||
In May 2011, the FASB issued a new accounting standard which was an amendment to achieve common fair value measurement and disclosure requirements in GAAP and international financial reporting standards (“IFRS”). The amendments explain how to measure fair value and will improve the comparability of fair value measurement presented and disclosed in financial statements prepared in accordance with GAAP and IFRS. The standard requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as transfers between Level 1 and Level 2 of the fair value hierarchy. This authoritative guidance is to be applied prospectively. The standard was effective and adopted by the Company during 2012. |
Accounts_Receivable
Accounts Receivable | 12 Months Ended | ||||
Dec. 31, 2012 | |||||
Notes to Financial Statements | ' | ||||
Accounts Receivable | ' | ||||
Credit is extended to customers based on an evaluation of a customer’s financial condition and, in general, collateral is not required. Management regularly reviews accounts receivable for uncollectible and potentially uncollectible accounts, and when necessary establishes an allowance for doubtful accounts. Balances that are outstanding after management has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. | |||||
At December 31, 2012 and 2011, the allowance for doubtful accounts was $0 and $8,000, respectively. | |||||
Balance, January 1, 2011 | $ | - | |||
Provision for doubtful accounts | 8,000 | ||||
Balance December 31, 2011 | 8,000 | ||||
Bad debt recovery | (8,000 | ) | |||
Balance December 31, 2012 | $ | - |
Property_and_Equipment
Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ||||||||
Property and Equipment | ' | ||||||||
The components of property and equipment as of December 31, at cost are: | |||||||||
2012 | 2011 | ||||||||
Computers | $ | 9,000 | $ | 7,000 | |||||
Office furniture and equipment | 94,000 | 94,000 | |||||||
Leasehold improvements | 229,000 | 229,000 | |||||||
Total cost | 332,000 | 330,000 | |||||||
Accumulated depreciation and amortization | (308,000 | ) | (245,000 | ) | |||||
Property and equipment, net | $ | 24,000 | $ | 85,000 | |||||
The Company’s depreciation expense for the years ended December 31, 2012 and 2011 was $64,000 and $66,000, respectively. |
Patents_and_Intangible_Assets
Patents and Intangible Assets | 12 Months Ended |
Dec. 31, 2012 | |
Notes to Financial Statements | ' |
Patents and Intangible Assets | ' |
The Company’s amortization expense for the years ended December 31, 2012 and 2011 was $0 and $2,000 on patents with an original value of $53,000, of which $2,000 and $51,000 expired in 2012 and 2011, respectively. |
Acquisition_of_North_South
Acquisition of North South | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||
Acquisition of North South | ' | ||||||||||||||||
As disclosed in Note 1, on September 10, 2013, the Company completed its acquisition of North South. The Company acquired North South to expand its patent portfolio and continue its business plan of the monetization of its intellectual property. The Company accounted for its acquisition of North South using the acquisition method of accounting. Accordingly, the results of operations for the three and nine months ended September 30, 2013, include operations of the acquired business since September 10, 2013. | |||||||||||||||||
The fair value of the purchase consideration issued to the sellers of North South was allocated to fair value of the net tangible assets acquired, with the resulting excess allocated to separately identifiable intangibles, and the remainder recorded as goodwill. Goodwill recognized from the transactions mainly represented the expected operational synergies upon acquisition of the subsidiary and intangibles not qualifying for separate recognition. Goodwill is nondeductible for income tax purposes in the tax jurisdiction of the acquired business. | |||||||||||||||||
The purchase price was allocated as follows: | |||||||||||||||||
Purchase Consideration: | |||||||||||||||||
Value of common stock and convertible preferred stock issued to sellers | $ | 5,510,749 | |||||||||||||||
Tangible assets acquired: | |||||||||||||||||
Cash | 2,684,363 | ||||||||||||||||
Prepaid expenses | 14,503 | ||||||||||||||||
Net tangible assets acquired | 2,698,866 | ||||||||||||||||
Purchase consideration in excess of fair value of net tangible assets | 2,811,883 | ||||||||||||||||
Allocated to: | |||||||||||||||||
Patent portfolios | 1,100,000 | ||||||||||||||||
Goodwill | 1,711,883 | ||||||||||||||||
$ | - | ||||||||||||||||
The purchase price allocation was based, in part, on management’s knowledge of North South’s business and the results of a third party appraisal commissioned by management. | |||||||||||||||||
For the nine months ended September 30, 2013 | For the nine months ended September 30, 2012 | For the three months ended September 30, 2013 | For the three | ||||||||||||||
months | |||||||||||||||||
ended | |||||||||||||||||
September | |||||||||||||||||
30, 2012 | |||||||||||||||||
Revenues | $ | 101,811 | $ | 16,710 | $ | 95,837 | $ | 16,710 | |||||||||
Net loss | $ | (14,214,571 | ) | $ | (1,720,160 | ) | $ | (9,421,574 | ) | $ | (606,755 | ) | |||||
Loss per share- basic and diluted | $ | (6.84 | ) | $ | (1.23 | ) | $ | (4.08 | ) | $ | (0.43 | ) | |||||
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2012 or to project potential operating results as of any future date or for any future periods. | |||||||||||||||||
On August 6, 2013, the Company sold a promissory note in the principal amount of $500,000 to North South Holdings, Inc. pursuant to the terms of a Note Purchase Agreement with gross proceeds to the Company of $500,000. The Note accrues interest at the rate of 0.25% per annum and is due and payable twenty-four months from the date of issuance, subject to acceleration in the event of default and may be prepaid in whole or in part without penalty or premium. The note has been eliminated in consolidation. |
Accounts_Payable_and_Accrued_E
Accounts Payable and Accrued Expenses | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ||||||||
Accounts Payable and Accrued Expenses | ' | ||||||||
Accounts payable and accrued expenses consisted of the following at December 31: | |||||||||
2012 | 2011 | ||||||||
Accounts payable | $ | 210,000 | $ | 106,000 | |||||
Accrued expenses | 218,000 | 164,000 | |||||||
$ | 428,000 | $ | 270,000 |
Accrued_Salaries_and_Benefits
Accrued Salaries and Benefits | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ||||||||
Accrued Salaries and Benefits | ' | ||||||||
Accrued salaries and benefits consisted of the following at December 31: | |||||||||
2012 | 2011 | ||||||||
Accrued Payroll | $ | 21,000 | $ | 29,000 | |||||
Accrued annual bonuses | 173,000 | 176,000 | |||||||
Accrued severance | 40,000 | - | |||||||
Accrued vacation | 42,000 | 38,000 | |||||||
Other | 4,000 | - | |||||||
$ | 280,000 | $ | 243,000 |
Warrant_Liability
Warrant Liability | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||||||||
Warrant Liability | ' | ||||||||||||||||||||||||
At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively, and recognized $1.2 million and $3.7 million in other income from changes in fair value of warrants, respectively. | |||||||||||||||||||||||||
Warrant | Exercise | Estimated fair value | Change in estimated fair value | ||||||||||||||||||||||
Date | Shares | Price | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
11/16/09 | 5,522 | $ | 650 | $ | - | $ | 41,000 | $ | (40,000 | ) | $ | (524,000 | ) | ||||||||||||
11/16/09 | 414 | $ | 575 | - | - | - | (1,000 | ) | |||||||||||||||||
10/7/10 | 10,500 | $ | 300 | 3,000 | 157,000 | (154,000 | ) | (1,069,000 | ) | ||||||||||||||||
10/7/10 | 630 | $ | 312.5 | - | - | - | (50,000 | ) | |||||||||||||||||
1/19/11 | 10,673 | $ | 160 | 7,000 | 184,000 | (177,000 | ) | (1,277,000 | ) | ||||||||||||||||
1/19/11 | 640 | $ | 162.5 | - | 1,000 | (1,000 | ) | (65,000 | ) | ||||||||||||||||
10/25/11 | 26,628 | $ | 44.8 | 106,000 | 528,000 | (422,000 | ) | (709,000 | ) | ||||||||||||||||
10/25/11 | 799 | $ | 59.13 | - | 6,000 | (6,000 | ) | (22,000 | ) | ||||||||||||||||
2/2/12 | 10,648 | $ | 28 | 49,000 | - | (144,000 | ) | - | |||||||||||||||||
2/2/12 | 1,597 | $ | 27 | - | - | (21,000 | ) | - | |||||||||||||||||
11/8/12 | 483,657 | $ | 6.53 | 2,960,000 | - | (237,000 | ) | - | |||||||||||||||||
3,125,000 | $ | 917,000 | $ | (1,202,000 | ) | $ | (3,717,000 | ) | |||||||||||||||||
The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of warrants at December 31, 2011 and 2012 (as retroactively adjusted for the 2012 and 2011 reverse stock splits). | |||||||||||||||||||||||||
As of December 31, 2011 | |||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/7/10 | 1/19/11 | 10/25/11 | |||||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | |||||||||||||||||||||
Stock price | $ | 23.4 | $ | 23.4 | $ | 23.4 | $ | 23.4 | |||||||||||||||||
Exercise price | $ | 650 | $ | 300 | $ | 160 | $ | 44.8 | |||||||||||||||||
Expected terms (yrs) | 2.9 | 3.8 | 4.1 | 4.8 | |||||||||||||||||||||
Risk-free interest rate | 0.36 | % | 0.6 | % | 0.6 | % | 0.83 | % | |||||||||||||||||
Estimated volatility | 144.55 | % | 156.71 | % | 156.71 | % | 143.85 | % | |||||||||||||||||
As of December 31, 2012 | |||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/7/10 | 1/19/11 | 10/25/11 | 2/2/12 | 11/8/12 | |||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | 10,648 | 483,657 | |||||||||||||||||||
Stock price | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | |||||||||||||
Exercise price | $ | 650 | $ | 300 | $ | 160 | $ | 44.8 | $ | 28 | $ | 6.53 | |||||||||||||
Expected terms (yrs) | 1.9 | 2.8 | 3.1 | 3.8 | 4.1 | 4.9 | |||||||||||||||||||
Risk-free interest rate | 0.25 | % | 0.36 | % | 0.36 | % | 0.54 | % | 0.54 | % | 0.72 | % | |||||||||||||
Estimated volatility | 110.99 | % | 101.94 | % | 101.94 | % | 133.28 | % | 133.28 | % | 146.03 | % | |||||||||||||
As of the date of issuance for warrants issued in 2011 and 2012 | |||||||||||||||||||||||||
Grant Date | 1/19/11 | 10/25/11 | 2/2/12 | 11/8/12 | |||||||||||||||||||||
Shares | 10,673 | 26,628 | 10,648 | 483,657 | |||||||||||||||||||||
Stock price | $ | 155 | $ | 51.4 | $ | 20.6 | $ | 7.31 | |||||||||||||||||
Exercise price | $ | 160 | $ | 44.8 | $ | 28 | $ | 6.53 | |||||||||||||||||
Expected terms (yrs) | 5 | 5 | 5 | 5 | |||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 1.01 | % | 0.71 | % | 0.65 | % | |||||||||||||||||
Estimated volatility | 138.7 | % | 144.6 | % | 144.7 | % | 146 | % |
Stockholders_Equity
Stockholders' Equity | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Equity Offerings | |||||||||||||||||||||||||||||||||||||||||
The Company has authorized the issuance of 5,000,000 shares of convertible preferred stock and has certificates of designation of five separate series as summarized below as of September 30, 2013. | On November 7, 2012, the Company obtained net proceeds of approximately $2.3 million in a private placement of common stock and warrants. The Company sold an aggregate of 483,657 shares of common stock at a price of $5.324 per share along with warrants to purchase an additional 483,657 shares of common stock at an exercise price of $6.53 per share. Subject to certain ownership limitations, the warrants are exercisable for a period of five years. The common stock and warrants were issued in a private placement of securities exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. The warrants are classified as a liability and the common stock is classified as permanent equity. The investors shall have the right to participate for 100% of any future debt or equity offerings of the Company during the two years following the Closing. Certain of these warrants were exchanged for shares of Series C Convertible Preferred Stock in early 2013. | |||||||||||||||||||||||||||||||||||||||||
Number of Shares Issued | Conversion to Common Stock | On February 2, 2012, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 53,241 shares of its common stock and warrants to purchase up to an additional 10,648 shares of its common stock to such investors for gross proceeds of approximately $1.15 million. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.2 of a share of common stock. The purchase price per unit was $21.60. Subject to certain ownership limitations, the warrants are exercisable at any time commencing six (6) months after the initial issue date and on or prior to August 7, 2017, but not thereafter, at an exercise price of $28.00 per share. The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $1.1 million. The common stock issued in the February 2012 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009. The warrants are classified as a liability and the common stock is classified as permanent equity. | ||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Par Value | |||||||||||||||||||||||||||||||||||||||||
Series “A" (1) | 0 | $ | 0.0001 | N/A | In connection with the closing of our February 2012 offering, the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants to purchase up to 1,597 shares of our common stock at an exercise price of $27.00 per share. The estimated fair value of the warrants at the date of grant was $19,000. The warrants are exercisable at the option of the holder at any time beginning six (6) months after the closing through and including February 6, 2014. These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering. These warrants are classified as a liability. | |||||||||||||||||||||||||||||||||||||
Series “B" (2) | 1 | $ | 0.0001 | 1:01 | ||||||||||||||||||||||||||||||||||||||
Series “C" (3) | 1 | $ | 0.0001 | 1:01 | In October 2011, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 26,628 shares of its common stock and warrants to purchase up to an additional 26,628 shares of its common stock to such investors for gross proceeds of approximately $1.25 million. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock. The purchase price per unit was $47.40. Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $44.80 per share. The net proceeds to the Company from the offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $1.1 million. The common stock issued in the October 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants were registered with the Securities and Exchange Commission pursuant to a registration statement on Form S-3 (File No. 333-177748), which became effective on November 21, 2011. The warrants are classified as a liability and the common stock is classified as permanent equity. | |||||||||||||||||||||||||||||||||||||
Series “D” (4) | 1,379,685 | $ | 0.0001 | 10:01 | ||||||||||||||||||||||||||||||||||||||
Series “E” (5) | 0 | $ | 0.0001 | 1:01 | In connection with the closing of the October 2011 offering, the Company issued to Rodman & Renshaw, LLC warrants with a term of two years to purchase 799 shares of our common stock (at an exercise price of $59.00 per share). The estimated fair value of the warrants at the date of grant was $25,000. These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering. These warrants are classified as a liability. | |||||||||||||||||||||||||||||||||||||
On January 19, 2011, the Company entered into a securities purchase agreement with certain investors to sell an aggregate of 21,345 shares of its common stock and warrants to purchase up to an additional 10,673 shares of its common stock to such investors for gross proceeds of approximately $2.77 million. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock. The purchase price per unit was $130.00. Subject to certain ownership limitations, the warrants are exercisable for a five-year period at an exercise price of $160.00 per share. The net proceeds to the Company from the registered direct offering, after deducting placement agent fees and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $2.6 million. The common stock issued in the January 2011 offering and the common stock that may be issued pursuant to the exercise of the warrants have been registered pursuant to a Form S-3 registration statement (File No. 333-161531), which became effective on October 1, 2009. The warrants are classified as a liability and the common stock is classified as permanent equity. | ||||||||||||||||||||||||||||||||||||||||||
-1 | See Rights Agreement below. | |||||||||||||||||||||||||||||||||||||||||
In connection with the closing of our January 2011 offering, the Company issued to Rodman & Renshaw, LLC, as partial consideration for its services as placement agent, warrants with a term of two years to purchase up to 640 shares of our common stock at an exercise price of $163 per share. The estimated fair value of the warrants at the date of grant was $42,000. These warrants were offered and sold by us in reliance upon exemptions from the registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering. These warrants are classified as a liability. | ||||||||||||||||||||||||||||||||||||||||||
-2 | 1 share was issued October 12, 2010 and remains issued and outstanding. Liquidation preference is $1,000 per share. | |||||||||||||||||||||||||||||||||||||||||
Restricted Stock | ||||||||||||||||||||||||||||||||||||||||||
-3 | See Warrant Exchange Agreement below. | |||||||||||||||||||||||||||||||||||||||||
On December 28, 2012, the Company issued 120,000 shares of restricted stock under the Company’s 2012 Equity Compensation Plan. The total fair value of the issuances of the stock was approximately $816,000, which will be recognized as performance targets are obtained. On December 31, 2012, the Company issued 2,250 shares of restricted stock under the Company’s 2012 Equity Compensation Plan. The total fair value of the issuances of the stock was approximately $15,000, which will be recognized as expense over an eighteen month vesting period. No expense was recognized in 2012. The fair value of the stock awards was based on the closing market price of the Company’s common stock on the date of the grant. | ||||||||||||||||||||||||||||||||||||||||||
-4 | The Company on September 10, 2013, issued 1,379,685 shares of Series D convertible preferred stock in exchange for all the Series A and Series B Preferred shares of North South. See Note 1. | |||||||||||||||||||||||||||||||||||||||||
Stock Option Plan | ||||||||||||||||||||||||||||||||||||||||||
-5 | There were 100,000 shares were issued on June 25, 2013 in consideration for $500,000 to North South pursuant to a private placement. See Series E Convertible Preferred Stock below. The shares were retired on September 30, 2013. | |||||||||||||||||||||||||||||||||||||||||
In late 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) which permits issuance of incentive stock options, non-qualified stock options and restricted stock. The Plan replaced a prior incentive stock plan. During 2012 and 2011, the Company granted 5,487 and 2,250 options to the Company’s Board of Directors and officers under the previous plan. Options issued to employees typically vest over a four-year period and options issued to non-employee directors vested immediately upon being granted. At December 31, 2012, there were 6,789 options under the previous plan that were fully vested. The total unrecognized stock compensation expense at December 31, 2012 is approximately $12,000, which will be recognized over 2.9 years. | ||||||||||||||||||||||||||||||||||||||||||
Warrant Exchange Agreement | ||||||||||||||||||||||||||||||||||||||||||
The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of stock-based compensation in accordance with ASC 718 for stock options granted in 2012 and 2011. | ||||||||||||||||||||||||||||||||||||||||||
On March 6, 2013, the Company, and certain investors that participated in the November 2012 private placement transaction (“Investors”), entered into separate Warrant Exchange Agreements pursuant to which certain of the Investors exchanged common stock purchase warrants acquired in the private placement for shares of the Company’s newly designated Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock is convertible into one (1) share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at the option of the holder, subject to certain limitations on conversions that would result in the Investors acquiring more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) of the outstanding voting stock of the Company. The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (“Certificate of Designation”). The liquidation preference of the Series C Convertible Preferred Stock is $0.0001 per share. | ||||||||||||||||||||||||||||||||||||||||||
11/16/12 | 8/14/12 | 5/15/12 | 11/15/11 | |||||||||||||||||||||||||||||||||||||||
Pursuant to the Warrant Exchange Agreements, certain Investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, each convertible into one share of Common Stock. The number of shares of Common Stock underlying the Series C Convertible Preferred Stock is the same number as would have been-issued upon a “cashless exercise” of the exchanged warrants under the terms of the warrants based on the one-day volume weighted average price of the Company’s Common Stock on February 28, 2013, which was $12.6439 per share, as reported by Bloomberg. | Risk-free interest rate | 0.62 | % | 0.75 | % | 0.74 | % | 0.93 | % | |||||||||||||||||||||||||||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||
The Company agreed to register the shares of Common Stock issuable upon conversion of the Series C Convertible Preferred Stock on the same basis as the shares of Common Stock issued in the November 2012 private placement transaction which registration obligation was subsequently waived by a majority of the Investors. As of September 30, 2013, investors converted 229,336 shares of the Series C Convertible Preferred Stock into 229,336 shares of common stock. | Expected life (years) | 5 | 5 | 5 | 5 | |||||||||||||||||||||||||||||||||||||
Volatility | 91.3 | % | 111.8 | % | 122.7 | % | 130 | % | ||||||||||||||||||||||||||||||||||
Rights Agreement | ||||||||||||||||||||||||||||||||||||||||||
Activity for the two years ended December 31, 2012, for all option grants is shown below: | ||||||||||||||||||||||||||||||||||||||||||
On January 24, 2013, effective as of January 1, 2013, the Company and Equity Stock Transfer, LLC, as Rights Agent, entered into a Rights Agreement which continues through December 31, 2017. The Rights Agreement provides each Stockholder of record a dividend distribution of one “right” for each outstanding share of Common Stock. Rights become exercisable at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of our Common Stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning 10% or more of our outstanding Common Stock. | ||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||||||||||||
All rights held by an acquirer or offeror expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2017, subject to further extension. Each right entitles a Stockholder to acquire, for a price of $7.46, 1/100 of a share of our Convertible Series A Preferred Stock, which carries voting and dividend rights similar to one share of our Common Stock. Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of our Common Stock at a price per share equal to one-half of the average market price for a specified period. In lieu of the stated purchase price, a right holder may elect to acquire one-half of the Common Stock available under the second option. | Shares | Weighted | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Shares | Weighted | ||||||||||||||||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||||||||||||||||||||
The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board and within a specified time period, we may redeem all of the rights at a price of $0.001 per right. The Board may also amend any provisions of the Agreement prior to exercise. | Exercise | Exercise | ||||||||||||||||||||||||||||||||||||||||
Price | Price | |||||||||||||||||||||||||||||||||||||||||
Series E Convertible Preferred Stock | Outstanding at beginning of year | 2,426 | $ | 53.6 | 316 | $ | 322 | |||||||||||||||||||||||||||||||||||
Granted | 5,487 | $ | 10.93 | 2,250 | $ | 40 | ||||||||||||||||||||||||||||||||||||
On June 25, 2013, the Company sold 100,000 shares of its newly designated Series E Convertible Preferred Stock (the “Series E Preferred Stock”) to North South for a purchase price of $5.00 per share with gross proceeds to the Company of $500,000 pursuant to a subscription agreement. These securities were sold pursuant to an exemption from registration under Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of the securities laws. Each share of Series E Preferred Stock is convertible, at the option of the holder at any time, into one (1) share of the Company’s Common Stock and has a stated value of $0.0001. Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions. | Exercised | - | $ | - | - | $ | - | |||||||||||||||||||||||||||||||||||
Expired or forfeited | (750 | ) | $ | 40 | (140 | ) | $ | 440 | ||||||||||||||||||||||||||||||||||
North South is prohibited from effecting the conversion of the Series E Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) in the aggregate of the issued and outstanding shares of the Company’s Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series E Preferred Stock. These 100,000 shares of Series E Convertible Preferred Stock were acquired by the Company in connection with the North South Merger, and thereafter retired and were not outstanding as of September 30, 2013. | Outstanding at end of year | 7,163 | $ | 22.34 | 4.4 | $ | - | 2,426 | $ | 53.6 | ||||||||||||||||||||||||||||||||
Exercisable at end of year | 6,788 | $ | 21.36 | 4.5 | $ | - | 1,176 | |||||||||||||||||||||||||||||||||||
Common Stock | Weighted-average fair value of | |||||||||||||||||||||||||||||||||||||||||
options granted during the year | $ | 8.44 | $ | 34.2 | ||||||||||||||||||||||||||||||||||||||
The Company has 50,000,000 shares authorized as of September 30, 2013 with a par value of $0.0001 per share. | ||||||||||||||||||||||||||||||||||||||||||
Price range of options | ||||||||||||||||||||||||||||||||||||||||||
During the nine months ended September 30, 2013, the Company issued the following shares of common stock: | Outstanding | $ | 9.80-$228.00 | $ | 40.00-$228.00 | |||||||||||||||||||||||||||||||||||||
Exercised | $ | - | $ | - | ||||||||||||||||||||||||||||||||||||||
· 229,336 shares of common stock issued upon conversion of 229,336 shares of Series C Convertible Preferred Stock originally issued in connection with the warrant exchange agreement described above; | Expired or forfeited | $ | 40 | $ | 440 | |||||||||||||||||||||||||||||||||||||
· 176,991 shares of common stock issued in connection with the acquisition of intellectual property in the Rockstar patent portfolio acquisition (see Note 1); | The following table summarizes information with respect to stock options outstanding at December 31, 2012: | |||||||||||||||||||||||||||||||||||||||||
· 6,711 shares of common stock issued upon the cashless exercise of 9,391 warrants; and | Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||||||||||||||
Range of Exercise | Number of | Weighted Average | Weighted Average Remaining Contractual Life | Number of | Weighted Average Exercise | |||||||||||||||||||||||||||||||||||||
· 1,203,153 shares of common stock issued in connection with the acquisition of North South. These shares were issued in exchange for the 5,213 shares of common stock of North South. | Price | Options | Exercise Price | Options | Price | |||||||||||||||||||||||||||||||||||||
$ | 9.80-$15.20 | 5,488 | $ | 10.93 | 4.7 | 5,488 | $ | 10.93 | ||||||||||||||||||||||||||||||||||
The Company’s additional paid in capital increased $20,608,869 in the nine months ended September 30, 2013. Included in this increase is stock based compensation of $7,402,485, increase for the acquisition of North South of $5,510,491, an increase due to the issuance of common shares in the Rockstar patent purchase of $999,982 and an increase due to the conversion of warrants to Series C Convertible Preferred Stock of $5,695,512. | $ | 40 | 1,500 | $ | 40 | 3.9 | 1,125 | $ | 40 | |||||||||||||||||||||||||||||||||
$ | 228 | 175 | $ | 228 | 2.4 | 175 | $ | 228 | ||||||||||||||||||||||||||||||||||
Stock Options | 7,163 | 6,788 | ||||||||||||||||||||||||||||||||||||||||
2013 Plan | ||||||||||||||||||||||||||||||||||||||||||
In April 2013, the Company’s board of directors adopted the Spherix Incorporated 2013 Equity Incentive Plan (the “2013 Plan”), an omnibus equity incentive plan pursuant to which the Company may grant equity and cash and equity-linked awards to certain management, directors, consultants and others. The plan was approved by the Company’s shareholders in August 2013. | ||||||||||||||||||||||||||||||||||||||||||
The 2013 Plan authorized approximately 15% of our fully-diluted Common Stock at the time approved (not to exceed 2,800,000 shares) be reserved for issuance under the Plan, after giving effect to the shares of our capital stock issuable under the Merger. On April 4, 2013, the Company issued 2,005,500 option shares to executives of the Company and certain outside consultants under the 2013 Plan. The total fair value of the options on the date of grant was approximately $15,865,270 under the Black-Scholes and other lattice models of valuing options. | ||||||||||||||||||||||||||||||||||||||||||
On April 4, 2013, the Company, with the approval of the board of directors, granted the following stock options to various employees, directors and consultants at a contractual price of $7.08 per share, which was equal to the fair market value of the Company’s common stock on the date that the terms of those awards were agreed to by the Company and optionees. | ||||||||||||||||||||||||||||||||||||||||||
Awards with service conditions only were granted as follows: | ||||||||||||||||||||||||||||||||||||||||||
· 750,000 stock options to our former interim Chief Executive Officer which vest in four equal installments of 187,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; | ||||||||||||||||||||||||||||||||||||||||||
· 250,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013, which vest in four equal installments of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; | ||||||||||||||||||||||||||||||||||||||||||
· An aggregate of 225,000 options to three directors that fully vested on October 4, 2013, subject to each of these directors’ continued service to the Company through that date; and | ||||||||||||||||||||||||||||||||||||||||||
· An aggregate of 30,500 options to two consultants and one employee that fully vested on August 16, 2013 upon shareholder approval of the plan. | ||||||||||||||||||||||||||||||||||||||||||
Awards with combined market and service conditions were granted as follows: | ||||||||||||||||||||||||||||||||||||||||||
· 250,000 stock options to our former interim Chief Executive Officer for which (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) the continued employment/directorship of the interim Chief Executive Officer over a period of time that permits vesting at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015, subject to a time based service condition only; and | ||||||||||||||||||||||||||||||||||||||||||
· 500,000 stock options to the former Chief Executive Officer of North South, who became the Company’s Chief Executive Officer upon the completion of the acquisition of North South on September 10, 2013 for which (i) (i) the exercisability of the options is subject to the volume weighted average price of the Company’s stock attaining at least $12 per share for at least 30 days during any consecutive 90 day period through December 31, 2014, and (ii) achieving performance conditions as follows: | ||||||||||||||||||||||||||||||||||||||||||
100,000 options subject to the delivery of a business plan acceptable to the board of directors of the Company by no later than June 30, 2013; | ||||||||||||||||||||||||||||||||||||||||||
70,000 options subject to the closing of a financing transaction as set forth in the business plan; | ||||||||||||||||||||||||||||||||||||||||||
70,000 options for two successful patent monetizations; | ||||||||||||||||||||||||||||||||||||||||||
70,000 options upon the completion of an additional purchase of a patent portfolio; | ||||||||||||||||||||||||||||||||||||||||||
70,000 options upon the initiation of litigation upon at least four defendants in infringement cases; | ||||||||||||||||||||||||||||||||||||||||||
70,000 options upon the presentation of at least two additional monetization opportunities acceptable to the board of directors; and | ||||||||||||||||||||||||||||||||||||||||||
50,000 options for attending at least 20 investor relations meetings. | ||||||||||||||||||||||||||||||||||||||||||
The 2013 stock option plan was approved by the Company’s stockholders on August 16, 2013, which resulted in the ratification of the awards approved by the Company’s board of directors on April 4, 2013. | ||||||||||||||||||||||||||||||||||||||||||
The fair value of the stock options issued with service conditions only was calculated on the date that the final approval by the stockholders was obtained using the Black-Scholes option pricing model with the following assumptions: contractual exercise price $7.08 per share; fair value of the Company’s common stock of $12.80 per share; risk free interest rates ranging from 0.36% to 2.84%; dividend yield of 0%; expected terms ranging from 2 to 10 years; and a volatility rate of 78.9%. The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the dividend yield is 0%. The expected term was calculated using the plain vanilla method, which is approximately to the term that Management believes represents a good approximation of the period of time that each class of optionee would likely hold these awards until exercising them. The Company obtained the risk free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison of average volatility rates of similar companies. | ||||||||||||||||||||||||||||||||||||||||||
Compensation expense recognized for the above noted awards amounted to $4,716,070 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for these awards amounted to $7,474,200 and will be amortized over a remaining contractual term of 2 years. | ||||||||||||||||||||||||||||||||||||||||||
The fair value of the stock options issued with combined market and service conditions only was calculated on the date that the final approval by the stockholders was obtained using the same assumptions as the awards that contain service conditions only; however, the fair value was adjusted for the risk associated with attaining the volume weighted average pricing target that must be met in order for the award to become exercisable. The Company determined that the unit fair value of each award amounted to $4.90 based on a 70% probability of attaining the aforementioned price target, which was determined using a Monte Carlo Simulation of the probability of attaining the target. | ||||||||||||||||||||||||||||||||||||||||||
The aggregate fair value of the 250,000 stock options that features the combined market and service condition amounted to $1,225,000 on the date of grant. The fair value of these awards is being amortized over an explicit service period in which the award vests at the rate of 62,500 options each on October 4, 2013, April 4, 2014, October 4, 2014 and April 4, 2015 as noted above. Compensation expense recognized for this award amounted to $306,250 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for this award amounts to $918,750 and will be amortized over the remaining explicit service of 2 years. | ||||||||||||||||||||||||||||||||||||||||||
The aggregate fair value of the 500,000 stock options that features the combined market and performance condition amounted to $2,450,000 on the date of grant. The recipient of these awards attained the required conditions with respect to 240,000 of these options as of the date stockholder approval was obtained. Accordingly, the Company recorded compensation cost in the amount of $1,176,000 for the three and nine month periods ended September 30, 2013. Company Management believes that it is highly probable that the recipient of this grant will attain the conditions necessary to vest 190,000 of the stock options over a derived service period that will end no later than December 31, 2013, and the remaining 70,000 stock options over a derived service period that will end no later than March 31, 2014. Compensation expense relating to these components of the awards amounted to $379,535 for the three and nine month periods ended September 30, 2013. Unamortized compensation cost for these awards amounts to $894,465 and will be amortized over the remaining explicit service of 2 years. | ||||||||||||||||||||||||||||||||||||||||||
A summary of option activity under the Company’s employee stock option plan for the nine months ended September 30, 2013, is presented below: | ||||||||||||||||||||||||||||||||||||||||||
Options | Shares | Weighted- | Weighted- | Aggregate | ||||||||||||||||||||||||||||||||||||||
Average | Average | Intrinsic | ||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Value | ||||||||||||||||||||||||||||||||||||||||
Price | Contractual | |||||||||||||||||||||||||||||||||||||||||
Term | ||||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2012 | 7,163 | $ | 22.34 | 4.4 | ||||||||||||||||||||||||||||||||||||||
Granted | 2,005,500 | $ | 7.08 | 9.5 | ||||||||||||||||||||||||||||||||||||||
Exercised | - | $ | - | |||||||||||||||||||||||||||||||||||||||
Expired or forfeited | (500 | ) | $ | (25.00 | ) | |||||||||||||||||||||||||||||||||||||
Outstanding at September 30, 2013 | 2,012,163 | $ | 7.13 | 9.5 | $ | 1,724,730 | ||||||||||||||||||||||||||||||||||||
Options exercisable at September 30, 2013 | 36,663 | $ | 7.43 | 9.5 | $ | 25,800 | ||||||||||||||||||||||||||||||||||||
The Company established the 2014 Equity Incentive Plan on September 27, 2013. This has been submitted for shareholder approval authorizing the issuance of up to 1,400,000 shares of Common Stock as incentive compensation. The Company’s Annual Meeting of Shareholders is presently scheduled for December 10, 2013 at which time the shareholders will be asked to approve this plan. | ||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Awards | ||||||||||||||||||||||||||||||||||||||||||
A restricted stock award entitles the recipient to receive shares of unrestricted common stock upon vesting of the award and expiration of the restrictions. The fair value of each restricted stock award is determined upon granting of the shares and the related compensation expense is recognized ratably over the vesting period and charged to the operations as non-cash compensation expense. Shares contained in the unvested portion of restricted stock awards are forfeited upon termination of employment, unless otherwise agreed. The fair value of restricted stock issued under the Plan is determined based on the closing price of the Company’s common stock on the grant date. | ||||||||||||||||||||||||||||||||||||||||||
A summary of the restricted stock award activity for the nine months ended September 30, 2013 is as follows: | ||||||||||||||||||||||||||||||||||||||||||
Number of | Weighted | |||||||||||||||||||||||||||||||||||||||||
Units | Average | |||||||||||||||||||||||||||||||||||||||||
Grant | ||||||||||||||||||||||||||||||||||||||||||
Date Fair | ||||||||||||||||||||||||||||||||||||||||||
Value | ||||||||||||||||||||||||||||||||||||||||||
Nonvested at January 1, 2013 | 122,500 | $6.83 | ||||||||||||||||||||||||||||||||||||||||
Granted | - | |||||||||||||||||||||||||||||||||||||||||
Vested | (120,250) | ($6.80) | ||||||||||||||||||||||||||||||||||||||||
Forfeited | -2,000 | ($6.83) | ||||||||||||||||||||||||||||||||||||||||
Nonvested at September 30, 2013 | 250 | $6.83 | ||||||||||||||||||||||||||||||||||||||||
The Company incurred $822,485 and $0 in compensation expense during the nine months ended September 30, 2013 and 2012, respectively, related to the restricted stock awards previously granted. At September 30, 2013, unrecognized compensation expense associated with the restricted stock awards was $683, which will be amortized over approximately one-half of a year. | ||||||||||||||||||||||||||||||||||||||||||
At the end of December 2012, the Company entered into a Consulting Agreement with an entity wholly-owned by Mr. Harvey Kesner, a member of the board of directors and our former Interim Chief Executive Officer, pursuant to which the entity was issued 120,000 shares of common stock in exchange for its services with a grant date value of $816,000. | ||||||||||||||||||||||||||||||||||||||||||
The shares will vest if prior to December 31, 2017, the Company; (i) closes a Qualified Transaction (as defined within the agreement); (ii) closes a private or public financing of at least $7.5 million; or (iii) otherwise undergoes a change in control. In such an event, the affiliate shall also be entitled to a one-time payment of $250,000. Expense is recognized upon satisfaction of the above contingencies. The consummation of the Merger qualified as a Qualified Transaction and was approved by the shareholders, thereby causing the shares to vest on September 10, 2013. | ||||||||||||||||||||||||||||||||||||||||||
The following table provides a summary of stock based compensation expense for all awards during the periods presented: | ||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
Stock Options with: | ||||||||||||||||||||||||||||||||||||||||||
Service conditions only | $ | 4,716,070 | $ | - | $ | 4,718,214 | $ | 40,000 | ||||||||||||||||||||||||||||||||||
Combined market and service conditions | 306,250 | - | 306,250 | - | ||||||||||||||||||||||||||||||||||||||
Combined market and performance conditions | 1,555,535 | - | 1,555,535 | - | ||||||||||||||||||||||||||||||||||||||
Restrcited stock | 816,000 | - | 822,486 | - | ||||||||||||||||||||||||||||||||||||||
$ | 7,393,855 | $ | - | $ | 7,402,485 | $ | 40,000 | |||||||||||||||||||||||||||||||||||
Gain_on_Settlement_of_Obligati
Gain on Settlement of Obligations | 12 Months Ended |
Dec. 31, 2012 | |
Notes to Financial Statements | ' |
Gain on Settlement of Obligations | ' |
On January 14, 2011, Biospherics Incorporated, a wholly-owned subsidiary of the Company, filed a Complaint For Injunction Relief And Damages in The United States District Court For The District Of Maryland against Inalco S.p.A. (the “Complaint”). The Complaint alleged that Inalco had breached the 2009 Manufacturing Support and Supply Agreement as Inalco (i) refused to supply D-tagatose previously paid for by Biospherics, (ii) refused to provide a promised bank guarantee, and (iii) shut-down its D-tagatose production facilities. On March 16, 2011, both parties signed a settlement agreement whereby Inalco agreed to supply Spherix with 8.5 metric tons of D-tagatose, which has been received by Spherix, and both parties have agreed to release each other from any other obligations under the previous agreement. As a result, the Company recognized a gain of $600,000 in March 2011 on the release from its purchase obligation. | |
In January 2011, the Company entered into a Letter Agreement with Gilbert V. Levin and M. Karen Levin pursuant to which the Company agreed to make a one-time lump sum payment of $450,000 to the Levins in full satisfaction of the Company’s obligation to make a series of continuing payments to the Levins relating to their prior employment by the Company. Per the terms of the agreement, Gilbert V. Levin resigned as a member of the Board of Directors of the Company on January 13, 2011. The Company’s estimated liability to the Levins at December 31, 2010, and prior to the above agreement was approximately $695,000. The $450,000 lump sum payment was made on January 31, 2011, and the Company recognized the $245,000 difference as a gain on settlement of obligations in January 2011. |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ||||||||
Income Taxes | ' | ||||||||
Income tax from continuing operations for 2012 and 2011 was as follows: | |||||||||
2012 | 2011 | ||||||||
U.S. Federal income tax expense | $ | — | $ | (13,000 | ) | ||||
State and local income tax expense | $ | — | $ | (1,000 | ) | ||||
Total income tax expense | $ | — | $ | (14,000 | ) | ||||
2012 | 2011 | ||||||||
Current income tax expense | $ | — | $ | (14,000 | ) | ||||
Deferred income tax expense | $ | — | $ | — | |||||
Total income tax expense | $ | — | $ | (14,000 | ) | ||||
The deferred tax assets as of December 31, 2011 have been restated to reflect the deferred tax assets for continuing operations only. The tax effects of significant temporary differences representing deferred tax assets as of December 31, 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets | |||||||||
Deferred rent | $ | 17,000 | $ | 19,000 | |||||
Accrued vacation | 16,000 | 15,000 | |||||||
Tax credit/grants | 82,000 | 82,000 | |||||||
Deferred compensation | 16,000 | — | |||||||
Net operating loss carryforward | 16,852,000 | 15,467,000 | |||||||
Accrued bonus | 68,000 | 68,000 | |||||||
Stock based compensation | 45,000 | 25,000 | |||||||
Accrued expenses | 38,000 | 38,000 | |||||||
Property and equipment | 19,000 | — | |||||||
Warrants | 3,683,000 | 2,813,000 | |||||||
Other | 1,000 | 5,000 | |||||||
Total deferred tax asset | 20,837,000 | 18,532,000 | |||||||
Deferred tax liabilities | |||||||||
Property and equipment | — | (3,000 | ) | ||||||
Change in accounting method - accrued bonus | — | (20,000 | ) | ||||||
— | (23,000 | ) | |||||||
Valuation allowance | (20,837,000 | ) | (18,509,000 | ) | |||||
Net deferred tax asset | $ | — | $ | — | |||||
At December 31, 2012 and 2011, the Company had gross operating loss carryforwards for U.S. federal income tax purposes of approximately $41.4 million and $37.9 million, respectively, which will begin to expire in 2019. At December 31, 2012 and 2011, the Company had gross operating loss carryforwards for state income tax purposes of approximately $51.6 million and $48.6 million, respectively, which will begin to expire in 2018. Based on the Company’s historical losses and its accumulated deficit, the Company has provided a full valuation allowance against the net deferred tax assets. | |||||||||
Utilization of the net operating loss carryforwards and credit could be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The Company has not performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change and could result in a reduction in the total net operating losses and research credits available. | |||||||||
Reconciliation between actual tax benefits and taxes computed at the statutory Federal rate of 34 percent for 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
U.S. Federal income tax benefit at the statutory rate of 34% | $ | 982,000 | $ | (142,000 | ) | ||||
Effect of permanent differences | 4,000 | (9,000 | ) | ||||||
Effect of permanent differences - Government Grant | - | 4,000 | |||||||
Effect of permanent differences - Warrants | 114,000 | 1,184,000 | |||||||
State income taxes benefit, net of federal tax benefit | 99,000 | 251,000 | |||||||
Other | (1,000 | ) | (78,000 | ) | |||||
Change in valuation allowance | (1,198,000 | ) | (1,224,000 | ) | |||||
Income tax expense | $ | - | $ | (14,000 | ) | ||||
During 2010, the Company’s subsidiary, Biospherics Incorporated, received notice from the IRS that it had been awarded two grants under IRC Section 48D of the Internal Revenue Code’s “Qualifying Therapeutic Discovery Project.” The amount received pursuant to the QTDP Grant was $0.3 million of which $0.1 million related to the income tax benefit associated with the realization or “monetization” of prior-period tax attributes for which the Company had previously established a valuation allowance. | |||||||||
Tax Uncertainties | |||||||||
The Company recognizes a tax benefit associated with an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that it judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company has not recognized any such adjustments. At December 31, 2012 and 2011, the Company had no material unrecognized income tax benefits and recognized no interest or penalties on income tax liabilities. | |||||||||
The Company is subject to U.S. federal income tax and state and local income tax in multiple jurisdictions. The statute of limitations for the consolidated U.S. federal income tax return is closed for all tax years up to and including 2008, except for pre-2008 tax returns that generated net operating loss carry forwards that could be adjusted on audit. Currently, no federal or state and local income tax returns are under examination by the respective taxing authorities. |
Fair_Value_Measurement
Fair Value Measurement | 9 Months Ended | |||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||||||
Fair Value Measurement | ' | |||||||||||||||||
Fair Value of Financial Assets and Liabilities | ||||||||||||||||||
Financial liabilities measured at fair value on a recurring basis are summarized below: | ||||||||||||||||||
Fair value measurements at September 30, 2013 using | ||||||||||||||||||
30-Sep-13 | Quoted prices in | Significant | Significant | |||||||||||||||
active markets for identical assets | other | unobservable | ||||||||||||||||
(Level 1) | observable | inputs | ||||||||||||||||
inputs | (Level 3) | |||||||||||||||||
(Level 2) | ||||||||||||||||||
Liabilities: | ||||||||||||||||||
Fair value of warrant liabilities | $ | 39,923 | – | – | $ | 39,923 | ||||||||||||
Fair value measurements at December 31, 2012 using | ||||||||||||||||||
31-Dec-12 | Quoted prices in | Significant | Significant | |||||||||||||||
active markets for identical assets | other | unobservable | ||||||||||||||||
(Level 1) | observable | inputs | ||||||||||||||||
inputs | (Level 3) | |||||||||||||||||
(Level 2) | ||||||||||||||||||
Liabilities: | ||||||||||||||||||
Fair value of warrant liabilities | $ | 3,125,393 | – | – | $ | 3,125,393 | ||||||||||||
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Principal Accounting Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Principal Accounting Officer. | ||||||||||||||||||
Level 3 Valuation Techniques | ||||||||||||||||||
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. | ||||||||||||||||||
The Company uses the Black-Scholes option valuation model to value Level 3 financial liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. | ||||||||||||||||||
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 “Fair value adjustments for warrant liabilities” in the Company’s condensed consolidated statements of operations. | ||||||||||||||||||
As of September 30, 2013, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. | ||||||||||||||||||
Liabilities resulting from the Warrants issued in connection with the Company’s financing were valued using the Black-Scholes option valuation model and the following assumptions on the following: | ||||||||||||||||||
September 30, | December 31, | |||||||||||||||||
2013 | 2012 | |||||||||||||||||
Warrants: | ||||||||||||||||||
Risk-free interest rate | 0.04% - 1.42 | % | 0.16% - 0.72 | % | ||||||||||||||
Expected volatility | 55.12%-72.94 | % | 91.79% - 146.03 | % | ||||||||||||||
Expected life (in years) | 0.1-3.3 | 0.8 - 4.9 | ||||||||||||||||
Expected dividend yield | - | - | ||||||||||||||||
Number of warrants | 66,062 | 550,664 | ||||||||||||||||
Fair value | $ | 39,923 | $ | 3,125,393 | ||||||||||||||
The risk-free interest rate was based on rates established by the Federal Reserve. The expected volatility in the Black-Scholes model is based on the 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 fair value of these warrant liabilities was $3,125,393 at December 31, 2012. The net change in fair value during the nine months ended September 30, 2013 was $3,085,470, of which $2,610,465 is reported in our condensed consolidated statement of operations as fair value adjustments for warrant liabilities and $5,695,935 as a reclassification of the fair value of the warrant liabilities to stockholders’ equity in connection with the March 2013 exchange of 475,211 Series B Warrants for 229,337 shares of Series C Convertible Preferred Stock (see note 5 “Stockholders’ Equity”). The fair value of the warrant liabilities is re-measured at the end of every reporting period and upon the exercise and/or modification of warrants. The change in fair value is reported in the condensed consolidated statement of operations as fair value adjustments for warrant liabilities. | ||||||||||||||||||
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the nine months ended September 30: | ||||||||||||||||||
2013 | 2012 | |||||||||||||||||
Beginning balance | $ | 3,125,393 | $ | 916,621 | ||||||||||||||
Issuance of new warrants | - | 214,288 | ||||||||||||||||
Fair value adjustments for | ||||||||||||||||||
warrant liabilities | 2,610,465 | (740,605 | ) | |||||||||||||||
Reclassification to | ||||||||||||||||||
stockholders’ equity | (5,695,935 | ) | - | |||||||||||||||
Ending balance | $ | 39,923 | $ | 390,304 | ||||||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ' | ||||||||
Commitments and Contingencies | ' | ' | ||||||||
Leases | Purchase Commitments | |||||||||
The Company has commitments under an operating lease through March 31, 2018 relating to its administrative office in Bethesda, Maryland. In addition, the Company entered into a lease agreement in February 2013 to lease 837 square feet of office space in Tysons Corner, Virginia. The Virginia lease runs from March 1, 2013 through August 31, 2014. | During 2009, the Company entered into a purchase commitment with a supplier of the Company’s D-tagatose product. The agreement committed the Company to purchase 25 metric tons of D-Tagatose. The Company utilized the D-tagatose as a part of the Phase 2 and Phase 3 trials. This phase was necessary for the Company to be able to commercialize the product and as the products were not going to be available for sale, the Company wrote off the entire product value into Research and Development Costs. The amounts written off in 2009 from the agreement were $1.1 million. Of this amount $500,000 was paid in 2009 and the remaining balance of $600,000 was included in the Company’s accounts payable and accrued expenses at December 31, 2010. On March 16, 2011, both parties signed an agreement whereby Inalco agreed to supply Spherix with 8.5 metric tons of D-tagatose for amounts previously paid for and both parties agreed to release each other from any other obligations under the previous agreement. As a result, Spherix recognized a gain of $600,000 in 2011 on the release from its purchase obligation. | |||||||||
Future minimum rental payments required as of September 30, 2013, remaining under the non-cancelable leases are as follows: | Leases | |||||||||
Operating | The Company has commitments under an operating lease through 2018 relating to its administrative office in Bethesda, Maryland. In March 2012, the Company entered into an amendment to its office building lease, which extends the term of the lease five years. The lease as amended will expire on March 31, 2018. Commencing on April 1, 2012, the base annual rent shall be $152,500, with an increase of 3% annually. In addition, the Company subsequently entered into a new lease agreement in February 2013 for office space in Tysons Corner, Virginia (see subsequent event footnote 16). | |||||||||
Year Ending December 31, | Leases | |||||||||
Future minimum rental payments required as of December 31, 2012, under the non-cancelable lease are as follows: | ||||||||||
2013 | $ | 44,819 | ||||||||
2014 | 176,014 | Year Ending December 31, | Operating Lease | |||||||
2015 | 165,427 | |||||||||
2016 | 170,390 | 2013 | $ | 156,000 | ||||||
2017 | 175,502 | 2014 | 161,000 | |||||||
2018 | 44,197 | 2015 | 165,000 | |||||||
$ | 776,349 | 2016 | 170,000 | |||||||
2017 | 176,000 | |||||||||
The Bethesda, Maryland office lease contains step rent provisions, capital improvement funding, or other tenant allowances. The Tysons Corner, Virginia office lease contains step rent provision. Minimum rental payments including allowances on the leases are recognized on a straight-line basis over the term of the leases. The Company incurred net operating lease rental expenses of approximately $132,475 and $121,630 for the nine months ended September 30, 2013 and 2012, respectively. The Company has commenced a lawsuit against the landlord of the Bethesda, Maryland office claiming that the assignment of the lease to the purchaser of the Spherix Consulting business was permitted under the lease and seeking termination of the lease as a result of the landlord’s failure to consent to such assignment. The Bethesda, Maryland office is currently being offered for sublease at current market rents that are significantly lower than the fixed lease cost of such facility. | 2018 | 44,000 | ||||||||
$ | 872,000 | |||||||||
Employment Agreement | ||||||||||
The Company’s building lease contains step rent provisions, capital improvement funding, or other tenant allowances. Minimum rental payments including allowances on this lease are recognized on a straight-line basis over the term of the lease. The Company incurred net operating lease rental expenses of approximately $155,000 and $129,000 for the years 2012 and 2011, respectively. | ||||||||||
The Company entered into an employment agreement (“Employment Agreement”) with Anthony Hayes on September 10, 2013, for a period of two years. The Employment Agreement shall automatically be extended for additional one-year terms unless either party gives written notice of non-renewal to the other party no later than six months prior to the expiration of the term. | ||||||||||
Related Party Transactions | ||||||||||
Pursuant to the Employment Agreement, the Company is obligated to pay a base salary of $350,000 per annum, with bonus potential of 100% of the base salary. In addition, the Company paid a $100,000 signing bonus upon the execution of the Employment Agreement. | ||||||||||
At the end of December, 2012, the Company entered into a Consulting Agreement with an entity wholly-owned by Mr. Kesner, a director and interim Chief Executive Officer of the Company, pursuant to which the entity was issued 120,000 shares of common stock in exchange for its services. The shares will vest if prior to December 31, 2017, the Company: (i) closes an acquisition either approved by the stockholders or in excess of $25 million; (ii) closes a private or public financing of at least $7.5 million; (iii) sells all or substantially all of its assets; or (iv) otherwise suffers a change in control. In such an event, the affiliate shall also be entitled to a one-time payment of $250,000. | ||||||||||
Litigation | Mr. Kesner’s law firm has provided legal services to the company in late 2012 and invoiced the Company approximately $40,000 for these services and is included in accrued expenses at December 31, 2012. | |||||||||
During September 2013, the Company filed a lawsuit on its cordless handset patents acquired from Rockstar against Uniden Corporation (“Uniden”), for patent infringement in the Northern District of Texas. The patents at issue in the litigation were acquired in the Rockstar portfolio in July 2013, as successor to Nortel Networks (“Nortel”). The lawsuit asserts that from 2007 to present, Uniden’s cordless phones infringed one or more claims of one or more of the Company’s patents. Management is unable to predict an outcome in this matter at this time. | On November 30, 2012, but effective as of December 3, 2013, Dr. Claire L. Kruger resigned as the Chief Executive Officer/Chief Operating Officer of the Company. In connection with Dr. Kruger’s departure, the Company paid Dr. Kruger her 2012 bonus of $143,000 and a severance of $286,000, both of which were paid during 2012. For the other departing employees the Company agreed to pay a total of $82,000 in 2012 bonuses and approximately $211,000 in severances, which were also paid during 2012. | |||||||||
During September, 2013, the Company also filed a lawsuit against VTech Communications, Inc. (“VTech”) in the Northern District of Texas. The patents at issue in the litigation were acquired in the Rockstar portfolio in July 2013, as successor to Nortel. The lawsuit asserts that many cordless telephones manufactured by VTech, dating to 1993 infringed on one or more claims of the Company’s patents. Management is unable to predict an outcome in this matter at this time. | On December 12, 2012 the Company entered into a Retention Agreement with Mr. Clayton which provides that (i) Mr. Clayton will remain as CFO of the Company through March 31, 2013 and (ii) the Company will pay Mr. Clayton a severance of $212,180 as required by the terms of his prior employment agreement. | |||||||||
On August 1, 2013, the Company’s subsidiary Guidance filed a complaint against T-Mobile USA, Inc. (“T-Mobile”) in the Middle District of Florida. The patents at issue in the litigation were acquired from North South and constitute patents, acquired from Harris Corporation. The lawsuit asserts T-Mobile infringes United States Patent No. 5,719,584 entitled “System and Method for Determining the Geolocation of a Transmitter” in the geolocation of cell phones on the T-Mobile cell phone network. | Under employment agreements with Dr. Gilbert V. Levin and Mrs. M. Karen Levin, the Company’s founders, the Company agreed to provide Dr. and Mrs. Levin each with lifetime payments of $12,500 each quarter and to fund long-term lifetime healthcare and health insurance policies following their retirements from the Company on August 14, 2008 and January 4, 2006, respectively. At January 1, 2011, the Company’s liability for both Dr. and Mrs. Levin was estimated to be $450,000 for the lifetime payments and $245,000 for funding the long-term lifetime healthcare and health insurance policies based on actuarially determined amounts. The non-current portion of these amounts was reported on the accompanying balance sheet as deferred compensation at January 1, 2011. During 2011, the Company paid Dr. and Mrs. Levin a combined total of $24,000 in post-retirement benefits under the above agreements. | |||||||||
In January 2011, the Company entered into a Letter Agreement with Gilbert V. Levin and M. Karen Levin pursuant to which the Company agreed to make a one-time lump sum payment of $450,000 to the Levins in full satisfaction of the Company’s obligation to make a series of continuing payments to the Levins relating to their prior employment by the Company. The Company’s estimated liability to the Levins at January 1, 2011, and prior to the above agreement, was approximately $695,000. The $450,000 lump sum payment was made on January 31, 2011, and the Company recognized a gain of $245,000 in 2011. Per the terms of the agreement, Gilbert V. Levin resigned as a member of the Board of Directors of the Company on January 13, 2011. |
Employee_Benefit_Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2012 | |
Notes to Financial Statements | ' |
14. Employee Benefit Plans | ' |
The Spherix Incorporated 401(k) Retirement Plan (the “Plan”) is a discretionary defined contribution plan and covers substantially all employees who have attained the age of 21, have completed one year of service, and have worked a minimum of 1,000 hours in the past Plan or anniversary year. | |
Under provisions of the Plan, the Company, for any plan year, has contributed an amount equal to 50% of the participant’s contribution or 2.5 of the participant’s eligible compensation, whichever is less. The Company may, at its own discretion, make additional matching contributions to participants. Company contributions, net of forfeitures, amounted to $31,000 and $23,000 in each of the years 2012 and 2011, respectively. | |
The Plan was terminated in December 2012. |
Information_by_Business_Segmen
Information by Business Segment | 12 Months Ended |
Dec. 31, 2012 | |
Notes to Financial Statements | ' |
15. Information by Business Segment | ' |
As a result of the sale of the Spherix Consulting subsidiary, the Company now has only one operating segment, Biospherics. |
Subsequent_Events
Subsequent Events | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Subsequent Events [Abstract] | ' | ' |
Subsequent Events | ' | ' |
The Company evaluated all events or transactions after September 30, 2013 through the date the condensed consolidated financial statements were issued. | The Company evaluated all events or transactions after December 31, 2012 through the date the financial statements were issued. | |
On October 7, 2013, the Company received notice of a complaint filed in the Circuit Court of Montgomery County, Maryland in the matter of LegalLink Inc. vs. Spherix Incorporated. LegalLink, Inc., a Merrill Communications Company alleges that the Company failed to honor their contract regarding services provided by LegalLink, Inc. LegalLink, Inc. alleges that the Company owes them $47,309 for services rendered to the Company, that have gone unpaid. The Company’s legal counsel is reviewing this lawsuit and is assessing the likelihood of an unfavorable outcome at this time. As of September 30, 2013, the past due balance of $47,409 has been included in accounts payable and accrued expenses on the condensed consolidated financial statements. | Appointment of Interim Chief Executive Officer | |
On October 11, 2013, the Company appointed Michael Pollack as its interim Chief Financial Officer. In connection with his appointment, the Company and Mr. Pollack entered into an Indemnification Agreement. | On February 27, 2013, Harvey J. Kesner, age 55, was appointed interim Chief Executive Officer of Spherix Incorporated (the “Company”). Mr. Kesner currently serves as a member of the Board of Directors of the Company. | |
On October 15, 2013, the Board approved the Company’s Amended and Restated Bylaws in order to update the Company’s bylaws in various respects. | Nuta Technology Corp. | |
On October 15, 2013, the Board approved the amendment and restatement of the Company’s Certificate of Incorporation, as amended, to, among other things, increase the number of authorized shares from 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock to 200,000,000 shares and 50,000,000 shares respectively. The amendment and restatement of the Company’s Certificate of Incorporation is being submitted for stockholder approval at the Company’s 2013 Annual Stockholder meeting. | In early 2013 the Company created a new wholly-owned subsidiary, Nuta Technology Corp. (“Nuta”), organized under the laws of the state of Virginia with its principal offices in Tysons Corner, Virginia. | |
On October 28, 2013, the Board appointed Alexander Poltorak to the Company’s Board of Directors. In connection with his appointment, the Company and Mr. Poltorak entered into an Indemnification Agreement. | Office Lease Agreement | |
On November 6, 2013, the Company sold an aggregate of 304,250 shares of its newly designated Series F Preferred Stock and 48,438 shares of common stock to five accredited investors for gross proceeds to the Company of $2,235,000 pursuant to subscription agreements. The purchase price per share of Common Stock was $6.40 for $1,310,000 of such investment and $6.25 for $925,000 of such investment. No broker was utilized in connection with the sale. In accordance with the requirement of NASDAQ, each share of Series F Preferred Stock shall be entitled to .91 times the vote attributable to the shares of common stock. The Company anticipates correcting the Certificate of Designation; Rights and Preferences of the Series F Preferred Stock shall be entitled to 91% of one vote, subject to the beneficial ownership limitation covering the shares. In connection with the foregoing private placement, the Company agreed to file a “resale” registration statement with the SEC covering all shares of Common Stock and shares of Common Stock underlying the Series F Preferred Stock within 91 days of the final closing date and to maintain the effectiveness of the registration statement until all securities have been sold or are otherwise able to be sold pursuant to Rule 144. The Company has agreed to use its reasonable best efforts to have the registration statement declared effective within 180 days of the final closing. | In February 2013, the Company entered into a Lease Agreement to lease 837 square feet of office space in Tysons Corner, Virginia. The lease runs from March 1, 2013 through August 31, 2014. | |
The Company is obligated to pay to investors a fee of one (1%) per month in cash for every thirty day period up to a maximum of six (6%) percent, (i) that the registration statement has not been filed after the required filing date, and (ii) following the required date of effectiveness that the registration statement has not been declared effective; provided, however, that the Company shall not be obligated to pay any such liquidated damages if the Company is unable to fulfill its registration obligations as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to “Rule 415”, provided the Company registers at such time the maximum number of shares of Common Stock permissible upon consultation with the staff of the SEC. | Letter of Intent | |
The Company also entered into a Lockup Agreement with certain investors which provides for restrictions on the resale of shares for a period of 180 days from the closing of the Private Placement held by certain investors through December 31, 2014, which in certain circumstances is subject to extension. The Lockup Agreement provides that additional 180 day restrictions shall commence without further action of the Company upon the sale of $15 million or greater gross proceeds of securities and upon a material acquisition. | On February 15, 2013, our wholly-owned subsidiary Nuta, entered into a Letter of Intent (the “LOI”) with North South Holdings, Inc. (“North South”), the owner of patents and licenses covering various aspects of wireless communications. Pursuant to the LOI, at closing, Nuta would acquire 100% of the issued and outstanding capital stock of North South in consideration for the issuance of capital stock of the Company equal to 12,000,000 shares of the Company’s common stock. Pursuant to the LOI, Nuta will be capitalized with a minimum of $2,000,000 cash at closing and will have engaged management familiar with commercialization of intellectual property assets. | |
The LOI has certain binding and non-binding obligations, including the acquisition consideration which is not subject to adjustment. However, the transaction is subject to various conditions to closing, including satisfactory completion of due diligence, approval of the Company’s shareholders and definitive documentation. Upon completion Nuta may seek to engage in commercialization activities related to the inventions that are the subject of the patents acquired, although there can be no assurance that such efforts would be successful. | ||
There can be no assurance that the transactions contemplated by the LOI will be consummated. | ||
Warrant Exchange Agreement | ||
On March 6, 2013, the Company, and certain investors that participated in the November 2012 private placement transaction (“Investors”), entered into separate Warrant Exchange Agreements pursuant to which the Investors exchanged common stock purchase warrants acquired in the private placement transaction for shares of the Company’s Series C Convertible Preferred Stock. Each share of Series C Convertible Preferred Stock is convertible into one (1) share of Common Stock at the option of the holder, subject to certain limitations on conversions that would result in the Investors acquiring more than 4.99%/9.99% of the outstanding voting stock of the Company. The Series C Convertible Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (“Certificate of Designation”). | ||
Warrants were issued in November 2012 and were convertible for an aggregate of 483,657 shares of Common Stock. The Warrants were exercisable through November 7, 2017 at an exercise price of $6.53 per share. | ||
Pursuant to the Warrant Exchange Agreements, the Investors received in exchange for their warrants an aggregate of 229,337 shares of the Series C Convertible Preferred Stock, convertible into one share of Common Stock for each share of Series C Convertible Preferred Stock. The number of shares of common stock underlying the Series C Convertible Preferred stock is the same number as would have been-issued upon a “cashless exercise” of the exchanged Warrants under the terms of the Warrants based on the one-day volume weighted average price of the Company’s Common Stock on February 28, 2013, which was $12.6439 per share, as reported by Bloomberg. The Company has agreed to register the shares of Common Stock issuable upon conversion of the Series C Convertible Preferred Stock on the same basis as the shares of Common Stock issued in the November 2012 private placement transaction. Currently the Company is not obligated to file any registration statement for the Common Stock, or shares of Common Stock underlying the Warrants, until requested by a majority of the Investors. | ||
Rights Agreement | ||
Effective January 1, 2013, the Company and Equity Stock Transfer, LLC, as Rights Agent, entered into a Rights Agreement which continues through December 31, 2017. The Rights Agreement provides each Stockholder of record a dividend distribution of one “right” for each outstanding share of Common Stock. Rights become exercisable at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of our Common Stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning 10% or more of our outstanding Common Stock. All rights held by an acquirer or offeror expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2017, subject to further extension. Each right entitles a Stockholder to acquire, at a stated purchase price, 1/100 of a share of our preferred stock, which carries voting and dividend rights similar to one share of our Common Stock. Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of our Common Stock at a price per share equal to one-half of the average market price for a specified period. In lieu of the stated purchase price, a right holder may elect to acquire one-half of the Common Stock available under the second option. The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board and within a specified time period, we may redeem all of the rights at a price of $0.001 per right. The Board may also amend any provisions of the Agreement prior to exercise. | ||
Retention Agreement | ||
In January 2013, the Company entered into a Retention Agreement with Mr. Lodder which provides that (i) Mr. Lodder will remain with the Company as an executive officer through June 30, 2013 and receive compensation at the rate previously provided to him and (ii) the Company will pay Mr. Lodder a severance of $233,398 as had been provided under the terms of his Employment Agreement, which was terminated under the terms of his Retention Agreement. |
Additional_Events_Occurring_Su
Additional Events Occurring Subsequent to the Date the Condensed Consolidated Financial Statements were Available Unaudited | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Additional Events Occurring Subsequent to the Date the Condensed Consolidated Financial Statements were Available Unaudited | ' |
On November 22, 2013, the Company established a series of preferred stock as Series D-1 Convertible Preferred Stock by the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series D-1 Convertible Preferred Stock in the State of Delaware. Each share of Series D-1 Preferred Stock is convertible into ten (10) shares of the Company’s common stock. The Company is prohibited from effecting the conversion of the Series D-1 Convertible Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series D-1 Convertible Preferred Stock. | |
On November 26, 2013, the Company entered into an Amendment and Exchange Agreements (each, a “Series F Exchange Agreement”) with the holders of the Company’s outstanding shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock” and each holder, a “Series F Holder”) pursuant to which the Series F Holders agreed to return their shares of Series F Preferred Stock to the Company for cancellation in consideration for which the Company issued such Series F Holder an equal number of shares of Series F-1 Convertible Preferred Stock, $0.0001 par value per share (the “Series F-1 Preferred Stock” and the transaction, the “Series F Exchange”). Each share of Series F-1 Preferred Stock is entitled to 91% of one vote per share (subject to beneficial ownership limitations described below) and shall vote together with holders of the Company’s common stock. Each share of Series F-1 Preferred Stock is convertible into one share of the Company’s common stock and has a stated value of $0.0001. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series F-1 Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series F-1 Preferred Stock. The shares of Series F-1 Preferred Stock are subject to the same registration rights as the Series F Preferred Stock. The Series F-1 Convertible Preferred Stock was established on November 22, 2013 by the filing of a Certificate of Designation of Preferences, Rights and Limitations of Series F-1 Convertible Preferred Stock (“Series F-1 Certificate of Designation”) in the State of Delaware. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | ' | ||||||||||||||||||||||||||||||
Basis of presentation | ' | ' | ||||||||||||||||||||||||||||||
Basis of Presentation and Principles of Consolidation | The Company previously operated via two principal segments, Biospherics, our biotechnology research and development business, and Health Sciences, a technical and regulatory consulting business. The Health Sciences business provided technical and regulatory consulting services to biotechnology and pharmaceutical companies, as well as providing technical support for the Company’s own R&D activities. The Company generally provided its consulting services on either a fixed price basis or on a “time and expenses” basis, charging hourly rates for each staff member involved in a project, based on his or her skills and experience. | |||||||||||||||||||||||||||||||
The accompanying condensed consolidated financial statements of the Company are unaudited and do not include all of the information and disclosures generally required for annual financial statements. In the opinion of management, the statements contain all material adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s consolidated financial position as of September 30, 2013, the consolidated results of its operations for the three-and nine-month periods ended September 30, 2013 and 2012, and the consolidated results of its cash flows for the nine-month periods ended September 30, 2013 and 2012. This report should be read in conjunction with the Company’s Annual Report on Form 10-K, which does contain the complete information and disclosure, for the year ended December 31, 2012. | During the years covered by this report, the Company had two wholly-owned subsidiaries, Biospherics Incorporated and Spherix Consulting, Inc., for its two operating segments. The Company’s Health Sciences contracts are in the name of Spherix Consulting, Inc. and the Company’s patents are in the name of Biospherics Incorporated. Spherix Incorporated provides management, strategic guidance, business development, marketing and other services to its subsidiaries. The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale of the subsidiary. Certain assets of Spherix Consulting, Inc. were retained by the Company but are presented as assets held for sale in the consolidated balance sheet at December 31, 2012 as they relate to the discontinued operations. | |||||||||||||||||||||||||||||||
The accompanying condensed consolidated financial statements include the accounts of Spherix Incorporated and its wholly-owned subsidiaries, Biospherics Incorporated and Nuta Technology Corp. Prior to the Merger with Nuta, North South formed two Delaware limited liability corporations on July 26, 2013, Guidance IP, LLC (“Guidance”) and Directional IP, LLC. (“Directional”). All significant intercompany balances and transactions have been eliminated in consolidation. | On May 6, 2011, the Company effected a one-for-ten reverse split of its common stock. The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on November 17, 2009. The reverse stock split reduced the number of outstanding shares of Common Stock from 25,624,872 shares to 2,562,488 shares at that time. | |||||||||||||||||||||||||||||||
On September 21, 2012, the Company effected a one-for-twenty reverse split of its common stock. The Company implemented the reverse stock split under the authority granted to the Board of Directors by the Company's stockholders at the annual meeting of stockholders held on August 14, 2012. The reverse stock split reduced the number of outstanding shares of Common Stock from 4,159,777 shares to 207,806 shares. All per share amounts and outstanding shares, including all Common Stock equivalents, stock options, equity compensation plans, and warrants, have been retroactively adjusted in the Financial Statements and in the Notes to the Financial Statements for all periods presented to reflect the reverse stock split. | ||||||||||||||||||||||||||||||||
The consolidated financial statements include the accounts of Spherix Incorporated and Biospherics Incorporated. All intercompany balances and transactions have been eliminated in consolidation. | ||||||||||||||||||||||||||||||||
Use of Estimates | ' | ' | ||||||||||||||||||||||||||||||
Use of Estimates | The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Significant estimates include the fair value of warrants, the valuation allowance on deferred tax assets, stock compensation expense, amortization and depreciation. Accordingly, actual results could differ from those estimates and assumptions. | |||||||||||||||||||||||||||||||
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, valuation of warrants, the valuation of assets acquired and common and preferred stock issued in the acquisition of North South and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions. | ||||||||||||||||||||||||||||||||
Concentration of Cash | ' | ' | ||||||||||||||||||||||||||||||
Concentration of Cash | The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. The Company maintains cash balances at several banks. Interest bearing accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At December 31, 2012, the Company’s interest bearing deposits in excess of the FDIC limits was $4.5 million. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. | |||||||||||||||||||||||||||||||
The Company maintains cash balances at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2013, the Company’s cash and cash equivalents in excess of the FDIC limits were $1,932,739. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks. | ||||||||||||||||||||||||||||||||
Accounts Receivable | ' | ' | ||||||||||||||||||||||||||||||
Accounts Receivable | ||||||||||||||||||||||||||||||||
Credit is extended to customers based on an evaluation of a customer’s financial condition and, in general, collateral is not required. Management regularly reviews accounts receivable for uncollectible and potentially uncollectible accounts, and when necessary establishes an allowance for doubtful accounts. Balances that are outstanding after management has used reasonable collection efforts are written-off through a reduction in the allowance for doubtful accounts and a credit to accounts receivable. | ||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | ' | ' | ||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | We group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: | |||||||||||||||||||||||||||||||
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 1 | Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from available pricing sources for market transactions involving identical assets or liabilities. | ||||||||||||||||||||||||||||||
The Company uses three levels of inputs that may be used to measure fair value: | Level 2 | Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||||||||||||||||||||||||||||||
Level 1 — quoted prices in active markets for identical assets or liabilities | Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||||||||||||||||||||||||||||||
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 estimated fair value of the Company’s warrants was determined by the use of unobservable Level 3 inputs. The warrants are measured at estimated fair value using the Black-Scholes valuation model, which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of issuance, and at each subsequent reporting period, based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our historical rate. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates. However these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. | |||||||||||||||||||||||||||||||
At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively (see note 9 – Warrant Liability). The Company’s other financial instruments, which consist only of cash and cash equivalents approximate their carrying value given their short maturities. | ||||||||||||||||||||||||||||||||
The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the year ended December 31, 2012: | ||||||||||||||||||||||||||||||||
Fair Value Measurements of Warrants Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 3,125,000 | ||||||||||||||||||||||||||||||
Change in fair value of Warrant Liability | (2,208,000 | ) | ||||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 917,000 | ||||||||||||||||||||||||||||||
Revenue Recognition | ' | ' | ||||||||||||||||||||||||||||||
Revenue Recognition | Revenue is recognized when persuasive evidence of an arrangement exists, services have been rendered, the contract price is fixed or determinable and collectability is reasonably assured. On time and expense contracts revenue is recognized at contractually agreed-upon rates based upon direct labor hours expended and other direct costs incurred. Revenue for fixed-price contracts is recognized under the proportional performance method based upon labor charged in relation to total expected labor charges. Losses, if any, on contracts are recorded during the period when first determined. | |||||||||||||||||||||||||||||||
The Company currently derives its revenues from past production payments. Past production payment revenues are royalty payments for the use of the Company’s intellectual property and where payments are made as part of a settlement of a patent infringement dispute. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability is reasonably assured. Based on the criteria enumerated in Accounting Standards Codification (“ASC”) 605, the Company records its revenues and costs associated with its patent enforcement activities gross on the consolidated statement of operations. | ||||||||||||||||||||||||||||||||
Cost of Revenues | ' | ' | ||||||||||||||||||||||||||||||
Cost of Revenues | ||||||||||||||||||||||||||||||||
Cost of revenues include the costs and expenses incurred in connection with the Company’s patent enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third parties and the amortization of patent-related acquisition costs. | ||||||||||||||||||||||||||||||||
Inventor Royalties and Contingent Legal Expenses | ' | ' | ||||||||||||||||||||||||||||||
Inventor Royalties and Contingent Legal Expenses | ||||||||||||||||||||||||||||||||
Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense. | ||||||||||||||||||||||||||||||||
Contingent legal fees are expensed in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Legal fees advanced by contingent law firms that are required to be paid in the event that no license recoveries are obtained are expensed as incurred. | ||||||||||||||||||||||||||||||||
Intangible Assets - Patent Portfolios | ' | ' | ||||||||||||||||||||||||||||||
Intangible Assets – Patent Portfolios | ||||||||||||||||||||||||||||||||
Intangible assets include the Company’s patent portfolios with original estimated useful lives ranging from 6 months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. As disclosed in Note 1, the Company acquired certain patent portfolios in the third quarter of 2013. The weighted average remaining amortization period of the Company’s patents is approximately 8.5 years. Future amortization of all patents is as follows: | ||||||||||||||||||||||||||||||||
For the Years Ending | Harris | CompuFill | Rockstar | |||||||||||||||||||||||||||||
31-Dec | Patent Portfolio | Patent Portfolio | Patent Portfolio | Total | ||||||||||||||||||||||||||||
Other Costs | Amortization | |||||||||||||||||||||||||||||||
2013 | * | $ | 11,765 | $ | 10,294 | $ | 247,001 | $ | 10,344 | $ | 279,404 | |||||||||||||||||||||
2014 | 47,059 | 41,176 | 795,348 | 41,376 | 924,959 | |||||||||||||||||||||||||||
2015 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||||||||||||
2016 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||||||||||||
2017 | 47,059 | 41,176 | 433,918 | 41,376 | 563,529 | |||||||||||||||||||||||||||
Thereafter | 196,077 | 171,571 | 1,056,112 | 172,417 | 1,596,177 | |||||||||||||||||||||||||||
Total | $ | 396,078 | $ | 346,569 | $ | 3,876,999 | $ | 348,265 | $ | 4,967,911 | ||||||||||||||||||||||
* Represents three months remaining for 2013 | ||||||||||||||||||||||||||||||||
Amortization of the intangible assets for the three and nine months ended September 30, 2013 was $133,785. There was no amortization prior to July 24, 2013 as the first assets were placed into service on July 24, 2013. | ||||||||||||||||||||||||||||||||
Impairment of Long-lived Assets | ' | ' | ||||||||||||||||||||||||||||||
Impairment of Long-lived Assets | Whenever events or changes in circumstances indicate that the carrying amount of long-lived assets, including patents and property and equipment, may not be fully recoverable, the Company evaluates the probability that the future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. If any impairment is indicated as a result of this review, the Company would recognize a loss based on the amount by which the carrying amount exceeds the estimated fair value, determined based on the discounted future cash flows. In 2012 and 2011, no such impairment was noted. | |||||||||||||||||||||||||||||||
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The Company has not identified any such impairment losses. | ||||||||||||||||||||||||||||||||
Reclassifications | ' | ' | ||||||||||||||||||||||||||||||
Reclassifications | ||||||||||||||||||||||||||||||||
The Company has reclassified certain amounts from its previously reported consolidated financial statements for comparative purposes to conform to the fiscal 2013 presentation. These reclassifications had no impact on the Company’s previously reported consolidated operations or cash flows. | ||||||||||||||||||||||||||||||||
Goodwill | ' | ' | ||||||||||||||||||||||||||||||
Goodwill | ||||||||||||||||||||||||||||||||
Under ASC No. 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise. | ||||||||||||||||||||||||||||||||
Goodwill impairment is tested at least annually or when factors indicate potential impairment using a two-step process that begins with an estimation of the fair value of each reporting unit. Step 1 is a screen for potential impairment pursuant to which the estimated fair value of each reporting unit is compared to its carrying value. | ||||||||||||||||||||||||||||||||
The Company estimates the fair values of each reporting unit by a combination of (i) estimation of the discounted cash flows of each of the reporting units based on projected earnings in the future (the income approach) and (ii) a comparative analysis of revenue and margins multiples of public companies in similar markets (the market approach). If there is a deficiency (the estimated fair value of a reporting unit is less than its carrying value), a Step 2 test is required. | ||||||||||||||||||||||||||||||||
Income Taxes | ' | ' | ||||||||||||||||||||||||||||||
Income Taxes | Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established based upon periodic assessments made by management to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the current tax provision for the period and the change during the period in deferred tax assets and liabilities. | |||||||||||||||||||||||||||||||
The Company adopted the provisions of ASC 740-10, which prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. | The Company’s policy is to recognize interest and penalties on tax liabilities as interest expense. At December 31, 2012 and 2011, the Company had no unrecognized income tax benefits and recognized no interest or penalties on income tax liabilities. | |||||||||||||||||||||||||||||||
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of September 30, 2013. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. | ||||||||||||||||||||||||||||||||
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations. | ||||||||||||||||||||||||||||||||
Net Loss Per Share | ' | ' | ||||||||||||||||||||||||||||||
Net Loss Per Share | Basic net (loss) income per common share has been computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the year. Diluted net income per common share has been computed by dividing net income by the weighted-average number of common shares outstanding plus an assumed increase in common shares outstanding for common stock equivalents. At December 31, 2012, the exercise price of 1,151 of the Company’s 7,163 outstanding options and 483,657 of the Company’s 550,664 warrants was below the average market price of the Company’s common stock for the period, however these were excluded from the dilutive calculation as their inclusion would have been anti-dilutive. At December 31, 2011, the exercise price of 293 shares of the Company’s 2,425 outstanding options and 27,427 shares of the Company’s 55,391 warrants was below the average market price of the Company’s common stock for the period. | |||||||||||||||||||||||||||||||
Basic earnings and loss per share are computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. 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 antidilutive. | Diluted earnings per share Calculation | 31-Dec-12 | 31-Dec-11 | |||||||||||||||||||||||||||||
Net (loss) income | $ | (3,857,024 | ) | $ | 19,585 | |||||||||||||||||||||||||||
Securities that could potentially dilute earnings per share in the future that were not included in the computation of diluted loss per share at September 30, 2013 and 2012 are as follows: | Less other income from change in fair value of warrants assumed exercised | -- | (730,862 | ) | ||||||||||||||||||||||||||||
Adjusted net loss | $ | (3,857,024 | ) | $ | (711,277 | ) | ||||||||||||||||||||||||||
30-Sep-13 | 30-Sep-12 | |||||||||||||||||||||||||||||||
Convertible preferred stock | 13,796,852 | 4 | Diluted shares outstanding | |||||||||||||||||||||||||||||
Warrants to purchase common stock | 66,062 | 67,637 | Weighted average shares outstanding, | 273,567 | 131,285 | |||||||||||||||||||||||||||
Non-vested restricted stock awards | 250 | - | Shares assumed exercised | -- | 7,061 | |||||||||||||||||||||||||||
Options to purchase common stock | 2,012,163 | 2,425 | Diluted shares outstanding | 273,567 | 138,346 | |||||||||||||||||||||||||||
Total | 15,875,327 | 70,066 | ||||||||||||||||||||||||||||||
Net loss per share, diluted | $ | (14.10 | ) | $ | (5.14 | ) | ||||||||||||||||||||||||||
Stock-based Compensation | ' | ' | ||||||||||||||||||||||||||||||
Stock-based Compensation | The Company applies the fair value method, which requires that the fair value measurement of all employee share-based payments to employees, including grants of employee stock options, be expensed over their requisite service period based on their value at the grant date using their fair value, determined using a prescribed option-pricing model. The Company uses a Black-Scholes option valuation method to value stock options. For the years ended December 31, 2012 and 2011, the Company recognized $56,000 and $36,000, respectively, in stock based compensation expense relating to the issuance of 2,250 stock options awarded in November 2011, the issuance of 1,333 stock options awarded in April 2010 and the issuance of 2,950 stock options awarded in February 2006 (see Note 9, “Stockholders’ Equity”). | |||||||||||||||||||||||||||||||
The Company accounts for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a four- to ten-year period. | ||||||||||||||||||||||||||||||||
The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant. The expected volatility assumption is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns. | ||||||||||||||||||||||||||||||||
The Company’s model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Company’s model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions. | ||||||||||||||||||||||||||||||||
The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company’s estimate of pre-vesting forfeitures is primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the options vest. | ||||||||||||||||||||||||||||||||
Segment Reporting | ' | ' | ||||||||||||||||||||||||||||||
Segment Reporting | ||||||||||||||||||||||||||||||||
The Company follows the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. As of September 30, 2013 and for the nine months ended September 30, 2013, the Company operates in two segments. The segments are as follows: biotechnology and patent monetization. The Company’s biotechnology segment is minimal in 2013 and represented 100% of the Company in 2012. Since the acquisition of the Rockstar patent portfolio and merger with North South, the Company is primarily a patent monetization company and a majority of the Company’s operations and assets are in the patent monetization segment. | ||||||||||||||||||||||||||||||||
The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company’s chief operating decision-maker is considered to be the Company’s chief executive officer. | ||||||||||||||||||||||||||||||||
Recently Issued Accounting Pronouncements | ' | ' | ||||||||||||||||||||||||||||||
Recently Issued Accounting Pronouncements | In June 2011, the FASB issued a new accounting standard on the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new standard was effective for fiscal years beginning after December 15, 2011 with retrospective application. The adoption of the new standard had no impact on the Company’s financial statements as the Company has no items which would be included in comprehensive income other than net income (loss). The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB deferred the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income, while still requiring entities to adopt the other requirements. We adopted the new standard on January 1, 2012. The adoption of this standard had no impact on our consolidated financial statements. In February of 2013, the FASB issued a new accounting standard to improve the transparency of reporting reclassifications out of accumulated other comprehensive income by requiring entities to present in one place information about significant amounts reclassified and, in some cases, to provide cross-references to related footnotes. We are required to adopt this standard as of the beginning of 2013. We do not expect this adoption to have a material impact on our financial statements. | |||||||||||||||||||||||||||||||
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU state that an unrecognized tax benefit , or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. | In May 2011, the FASB issued a new accounting standard which was an amendment to achieve common fair value measurement and disclosure requirements in GAAP and international financial reporting standards (“IFRS”). The amendments explain how to measure fair value and will improve the comparability of fair value measurement presented and disclosed in financial statements prepared in accordance with GAAP and IFRS. The standard requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as transfers between Level 1 and Level 2 of the fair value hierarchy. This authoritative guidance is to be applied prospectively. The standard was effective and adopted by the Company during 2012. | |||||||||||||||||||||||||||||||
For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations. | ||||||||||||||||||||||||||||||||
Property and Equipment and Depreciation | ' | ' | ||||||||||||||||||||||||||||||
Property and equipment are stated at cost and consist of office furniture and equipment, computer hardware and software, and leasehold improvements. The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets: | ||||||||||||||||||||||||||||||||
Office furniture and equipment | ||||||||||||||||||||||||||||||||
3 to 10 years | ||||||||||||||||||||||||||||||||
Computer hardware and software | ||||||||||||||||||||||||||||||||
3 to 5 years | ||||||||||||||||||||||||||||||||
Leasehold improvements are depreciated or amortized over the shorter of the term of the related lease or the estimated useful lives of the assets (generally 5 to 10 years). Major additions, improvements and renewals are capitalized at cost and ordinary repairs, maintenance, and renewals are expensed in the year incurred. Gains or losses from the sale or retirement of property and equipment result from the difference between sales proceeds (if any) and the assets’ net book value, and are recorded in the consolidated Statements of Operations. | ||||||||||||||||||||||||||||||||
Treasury Stock | ' | ' | ||||||||||||||||||||||||||||||
The Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders’ equity. | ||||||||||||||||||||||||||||||||
Common Stock Purchase Warrants | ' | ' | ||||||||||||||||||||||||||||||
The Company accounts for the issuance of Common Stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). | ||||||||||||||||||||||||||||||||
See Note 2 related to the restatement for the accounting for stock purchase warrants. | ||||||||||||||||||||||||||||||||
Preferred Stock | ' | ' | ||||||||||||||||||||||||||||||
Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Accordingly the Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares as a component of stockholders’ equity. | ||||||||||||||||||||||||||||||||
The Company’s Series B Convertible Preferred Stock does not feature any redemption rights within the holders’ control or conditional redemption features not solely within the Company’s control as of December 31, 2012. Accordingly, the Series B Convertible Preferred Stock is presented as a component of stockholders’ equity. | ||||||||||||||||||||||||||||||||
Research and Development Costs | ' | ' | ||||||||||||||||||||||||||||||
Research and development costs are charged to operations as incurred. | ||||||||||||||||||||||||||||||||
Selling, General and Administrative Expense | ' | ' | ||||||||||||||||||||||||||||||
The Company’s selling, general and administrative expenses consist primarily of executive management salaries and fringe benefits, sales and marketing costs, finance and accounting, human resources, as well as general corporate costs and costs related to being a public company. | ||||||||||||||||||||||||||||||||
Other Income from Change in Fair Value of Warrants | ' | ' | ||||||||||||||||||||||||||||||
The fair value of warrants is measured each quarter and the change in fair value between periods is recognized as other income or expense in the respective periods. | ||||||||||||||||||||||||||||||||
Loss on Issuance of Warrants | ' | ' | ||||||||||||||||||||||||||||||
The loss on issuance of warrants reflects the difference in the fair market value of the warrants as determined using the Black-Scholes option valuation method and the proceeds received. The proceeds received from Warrants issued with other instruments (such as common stock or preferred stock) are determined based upon the fair value of liability classified warrants with the residual allocated to the other instruments. | ||||||||||||||||||||||||||||||||
Other Income | ' | ' | ||||||||||||||||||||||||||||||
Other income consists of two grants from the U.S. Government awarded in October 2010 in support of the Company’s diabetes and triglyceride research. As a result, in 2011 the Company recognized $51,000 in other income and a related tax expense of $14,000. No grant awards were recognized in 2012. | ||||||||||||||||||||||||||||||||
Discontinued operations | ' | ' | ||||||||||||||||||||||||||||||
The operations of Spherix Consulting, Inc. have been retroactively adjusted as discontinued operations as a result of the December 3, 2012 sale. The Spherix Consulting segment generated nearly all of the Company’s revenue and provided technical support for the Company’s Biospherics segment. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | ' | ||||||||||||||||||||||||||||||
Future amortization expense of patents | ' | ' | ||||||||||||||||||||||||||||||
For the Years Ending | Harris | CompuFill | Rockstar | |||||||||||||||||||||||||||||
31-Dec | Patent Portfolio | Patent Portfolio | Patent Portfolio | Total | ||||||||||||||||||||||||||||
Other Costs | Amortization | |||||||||||||||||||||||||||||||
2013 | * | $ | 11,765 | $ | 10,294 | $ | 247,001 | $ | 10,344 | $ | 279,404 | |||||||||||||||||||||
2014 | 47,059 | 41,176 | 795,348 | 41,376 | 924,959 | |||||||||||||||||||||||||||
2015 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||||||||||||
2016 | 47,059 | 41,176 | 672,310 | 41,376 | 801,921 | |||||||||||||||||||||||||||
2017 | 47,059 | 41,176 | 433,918 | 41,376 | 563,529 | |||||||||||||||||||||||||||
Thereafter | 196,077 | 171,571 | 1,056,112 | 172,417 | 1,596,177 | |||||||||||||||||||||||||||
Total | $ | 396,078 | $ | 346,569 | $ | 3,876,999 | $ | 348,265 | $ | 4,967,911 | ||||||||||||||||||||||
Antidilutive securities excluded from computation of earnings per share | ' | ' | ||||||||||||||||||||||||||||||
30-Sep-13 | 30-Sep-12 | |||||||||||||||||||||||||||||||
Convertible preferred stock | 13,796,852 | 4 | ||||||||||||||||||||||||||||||
Warrants to purchase common stock | 66,062 | 67,637 | ||||||||||||||||||||||||||||||
Non-vested restricted stock awards | 250 | - | ||||||||||||||||||||||||||||||
Options to purchase common stock | 2,012,163 | 2,425 | ||||||||||||||||||||||||||||||
Total | 15,875,327 | 70,066 | ||||||||||||||||||||||||||||||
Discontinued operations | ' | ' | ||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
Revenue | $ | 728,312 | $ | 820,925 | ||||||||||||||||||||||||||||
Direct cost and operating expense | -417,428 | -388,065 | ||||||||||||||||||||||||||||||
Selling, general and administrative expense | -1,279,875 | -816,389 | ||||||||||||||||||||||||||||||
Loss from discontinued operations before taxes | $ | -968,991 | $ | -383,529 | ||||||||||||||||||||||||||||
Change in level 3 fair value | ' | ' | ||||||||||||||||||||||||||||||
The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the year ended December 31, 2012: | ||||||||||||||||||||||||||||||||
Fair Value Measurements of Warrants Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 3,125,000 | ||||||||||||||||||||||||||||||
Change in fair value of Warrant Liability | (2,208,000 | ) | ||||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 917,000 | ||||||||||||||||||||||||||||||
Diluted earning per share Calculation | ' | ' | ||||||||||||||||||||||||||||||
Diluted earnings per share Calculation | 31-Dec-12 | 31-Dec-11 | ||||||||||||||||||||||||||||||
Net (loss) income | $ | -3,857,024 | $ | 19,585 | ||||||||||||||||||||||||||||
Less other income from change in fair value of warrants assumed exercised | -- | -730,862 | ||||||||||||||||||||||||||||||
Adjusted net loss | $ | -3,857,024 | $ | -711,277 | ||||||||||||||||||||||||||||
Diluted shares outstanding | ||||||||||||||||||||||||||||||||
Weighted average shares outstanding, | 273,567 | 131,285 | ||||||||||||||||||||||||||||||
Shares assumed exercised | -- | 7,061 | ||||||||||||||||||||||||||||||
Diluted shares outstanding | 273,567 | 138,346 | ||||||||||||||||||||||||||||||
Net loss per share, diluted | $ | -14.1 | $ | -5.14 | ||||||||||||||||||||||||||||
Accounts_Receivable_Tables
Accounts Receivable (Tables) | 12 Months Ended | ||||
Dec. 31, 2012 | |||||
Accounts Receivable Tables | ' | ||||
Allowance for doubtful accounts | ' | ||||
At December 31, 2012 and 2011, the allowance for doubtful accounts was $0 and $8,000, respectively. | |||||
Balance, January 1, 2011 | $ | - | |||
Provision for doubtful accounts | 8,000 | ||||
Balance December 31, 2011 | 8,000 | ||||
Bad debt recovery | -8,000 | ||||
Balance December 31, 2012 | $ | - | |||
Property_and_Equipment_Tables
Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Property And Equipment Tables | ' | ||||||||
Property and equipment | ' | ||||||||
The components of property and equipment as of December 31, at cost are: | |||||||||
2012 | 2011 | ||||||||
Computers | $ | 9,000 | $ | 7,000 | |||||
Office furniture and equipment | 94,000 | 94,000 | |||||||
Leasehold improvements | 229,000 | 229,000 | |||||||
Total cost | 332,000 | 330,000 | |||||||
Accumulated depreciation and amortization | -308,000 | -245,000 | |||||||
Property and equipment, net | $ | 24,000 | $ | 85,000 | |||||
Accounts_Payable_and_Accrued_E1
Accounts Payable and Accrued Expenses (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Accounts Payable And Accrued Expenses Tables | ' | ||||||||
Accounts payable and accrued expenses | ' | ||||||||
Accounts payable and accrued expenses consisted of the following at December 31: | |||||||||
2012 | 2011 | ||||||||
Accounts payable | $ | 210,000 | $ | 106,000 | |||||
Accrued expenses | 218,000 | 164,000 | |||||||
$ | 428,000 | $ | 270,000 | ||||||
Acquisition_of_North_South_Tab
Acquisition of North South (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||
Purchase Price Allocation | ' | ||||||||||||||||
Purchase Consideration: | |||||||||||||||||
Value of common stock and convertible preferred stock issued to sellers | $ | 5,510,749 | |||||||||||||||
Tangible assets acquired: | |||||||||||||||||
Cash | 2,684,363 | ||||||||||||||||
Prepaid expenses | 14,503 | ||||||||||||||||
Net tangible assets acquired | 2,698,866 | ||||||||||||||||
Purchase consideration in excess of fair value of net tangible assets | 2,811,883 | ||||||||||||||||
Allocated to: | |||||||||||||||||
Patent portfolios | 1,100,000 | ||||||||||||||||
Goodwill | 1,711,883 | ||||||||||||||||
$ | - | ||||||||||||||||
The purchase price allocation was based, in part, on management’s knowledge of North South’s business and the results of a third party appraisal commissioned by management. | |||||||||||||||||
For the nine months ended September 30, 2013 | For the nine months ended September 30, 2012 | For the three months ended September 30, 2013 | For the three | ||||||||||||||
months | |||||||||||||||||
ended | |||||||||||||||||
September | |||||||||||||||||
30, 2012 | |||||||||||||||||
Revenues | $ | 101,811 | $ | 16,710 | $ | 95,837 | $ | 16,710 | |||||||||
Net loss | $ | (14,214,571 | ) | $ | (1,720,160 | ) | $ | (9,421,574 | ) | $ | (606,755 | ) | |||||
Loss per share- basic and diluted | $ | (6.84 | ) | $ | (1.23 | ) | $ | (4.08 | ) | $ | (0.43 | ) |
Accrued_Salaries_and_Benefits_
Accrued Salaries and Benefits (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Accrued Salaries And Benefits Tables | ' | ||||||||
Accrued salaries and benefits | ' | ||||||||
Accrued salaries and benefits consisted of the following at December 31: | |||||||||
2012 | 2011 | ||||||||
Accrued Payroll | $ | 21,000 | $ | 29,000 | |||||
Accrued annual bonuses | 173,000 | 176,000 | |||||||
Accrued severance | 40,000 | - | |||||||
Accrued vacation | 42,000 | 38,000 | |||||||
Other | 4,000 | - | |||||||
$ | 280,000 | $ | 243,000 | ||||||
Warrant_Liability_Tables
Warrant Liability (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||||||||||
Warrant Liability Tables | ' | ||||||||||||||||||||||||
Change in fair value of warrants | ' | ||||||||||||||||||||||||
At December 31, 2012 and 2011, the Company had approximately $3.1 million and $0.9 million of warrant liabilities, respectively, and recognized $1.2 million and $3.7 million in other income from change in fair value of warrants, respectively. | |||||||||||||||||||||||||
Warrant | Exercise | Estimated fair value | Change in estimated fair value | ||||||||||||||||||||||
Date | Shares | Price | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
11/16/09 | 5,522 | $ | 650 | $ | - | $ | 41,000 | $ | -40,000 | $ | -524,000 | ||||||||||||||
11/16/09 | 414 | $ | 575 | - | - | - | -1,000 | ||||||||||||||||||
10/7/10 | 10,500 | $ | 300 | 3,000 | 157,000 | -154,000 | -1,069,000 | ||||||||||||||||||
10/7/10 | 630 | $ | 312.5 | - | - | - | -50,000 | ||||||||||||||||||
1/19/11 | 10,673 | $ | 160 | 7,000 | 184,000 | -177,000 | -1,277,000 | ||||||||||||||||||
1/19/11 | 640 | $ | 162.5 | - | 1,000 | -1,000 | -65,000 | ||||||||||||||||||
10/25/11 | 26,628 | $ | 44.8 | 106,000 | 528,000 | -422,000 | -709,000 | ||||||||||||||||||
10/25/11 | 799 | $ | 59.13 | - | 6,000 | -6,000 | -22,000 | ||||||||||||||||||
2/2/12 | 10,648 | $ | 28 | 49,000 | - | -144,000 | - | ||||||||||||||||||
2/2/12 | 1,597 | $ | 27 | - | - | -21,000 | - | ||||||||||||||||||
11/8/12 | 483,657 | $ | 6.53 | 2,960,000 | - | -237,000 | - | ||||||||||||||||||
3,125,000 | $ | 917,000 | $ | -1,202,000 | $ | -3,717,000 | |||||||||||||||||||
Fair value of warrants | ' | ||||||||||||||||||||||||
The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of warrants at December 31, 2011 and 2012 (as retroactively adjusted for the 2012 and 2011 reverse stock splits). | |||||||||||||||||||||||||
As of December 31, 2011 | |||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/7/10 | 1/19/11 | 10/25/11 | |||||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | |||||||||||||||||||||
Stock price | $ | 23.4 | $ | 23.4 | $ | 23.4 | $ | 23.4 | |||||||||||||||||
Exercise price | $ | 650 | $ | 300 | $ | 160 | $ | 44.8 | |||||||||||||||||
Expected terms (yrs) | 2.9 | 3.8 | 4.1 | 4.8 | |||||||||||||||||||||
Risk-free interest rate | 0.36 | % | 0.6 | % | 0.6 | % | 0.83 | % | |||||||||||||||||
Estimated volatility | 144.55 | % | 156.71 | % | 156.71 | % | 143.85 | % | |||||||||||||||||
As of December 31, 2012 | |||||||||||||||||||||||||
Grant Date | 11/16/09 | 10/7/10 | 1/19/11 | 10/25/11 | 2/2/12 | 11/8/12 | |||||||||||||||||||
Shares | 5,522 | 10,500 | 10,673 | 26,628 | 10,648 | 483,657 | |||||||||||||||||||
Stock price | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | $ | 6.83 | |||||||||||||
Exercise price | $ | 650 | $ | 300 | $ | 160 | $ | 44.8 | $ | 28 | $ | 6.53 | |||||||||||||
Expected terms (yrs) | 1.9 | 2.8 | 3.1 | 3.8 | 4.1 | 4.9 | |||||||||||||||||||
Risk-free interest rate | 0.25 | % | 0.36 | % | 0.36 | % | 0.54 | % | 0.54 | % | 0.72 | % | |||||||||||||
Estimated volatility | 110.99 | % | 101.94 | % | 101.94 | % | 133.28 | % | 133.28 | % | 146.03 | % | |||||||||||||
As of the date of issuance for warrants issued in 2011 and 2012 | |||||||||||||||||||||||||
Grant Date | 1/19/11 | 10/25/11 | 2/2/12 | 11/8/12 | |||||||||||||||||||||
Shares | 10,673 | 26,628 | 10,648 | 483,657 | |||||||||||||||||||||
Stock price | $ | 155 | $ | 51.4 | $ | 20.6 | $ | 7.31 | |||||||||||||||||
Exercise price | $ | 160 | $ | 44.8 | $ | 28 | $ | 6.53 | |||||||||||||||||
Expected terms (yrs) | 5 | 5 | 5 | 5 | |||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 1.01 | % | 0.71 | % | 0.65 | % | |||||||||||||||||
Estimated volatility | 138.7 | % | 144.6 | % | 144.7 | % | 146 | % | |||||||||||||||||
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||||||||||||
Stockholders Equity Tables | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Preferred stock | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Number of Shares Issued | Conversion to Common Stock | |||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Par Value | |||||||||||||||||||||||||||||||||||||||||
Series “A" (1) | 0 | $ | 0.0001 | N/A | ||||||||||||||||||||||||||||||||||||||
Series “B" (2) | 1 | $ | 0.0001 | 1:01 | ||||||||||||||||||||||||||||||||||||||
Series “C" (3) | 1 | $ | 0.0001 | 1:01 | ||||||||||||||||||||||||||||||||||||||
Series “D” (4) | 1,379,685 | $ | 0.0001 | 10:01 | ||||||||||||||||||||||||||||||||||||||
Series “E” (5) | 0 | $ | 0.0001 | 1:01 | ||||||||||||||||||||||||||||||||||||||
A summary of option activity | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Options | Shares | Weighted- | Weighted- | Aggregate | Activity for the two years ended December 31, 2012, for all option grants is shown below: | |||||||||||||||||||||||||||||||||||||
Average | Average | Intrinsic | ||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Value | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
Price | Contractual | Shares | Weighted | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Shares | Weighted | |||||||||||||||||||||||||||||||||||
Term | Average | Average | ||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2012 | 7,163 | $ | 22.34 | 4.4 | Exercise | Exercise | ||||||||||||||||||||||||||||||||||||
Granted | 2,005,500 | $ | 7.08 | 9.5 | Price | Price | ||||||||||||||||||||||||||||||||||||
Exercised | - | $ | - | Outstanding at beginning of year | 2,426 | $ | 53.6 | 316 | $ | 322 | ||||||||||||||||||||||||||||||||
Expired or forfeited | (500 | ) | $ | (25.00 | ) | Granted | 5,487 | $ | 10.93 | 2,250 | $ | 40 | ||||||||||||||||||||||||||||||
Outstanding at September 30, 2013 | 2,012,163 | $ | 7.13 | 9.5 | $ | 1,724,730 | Exercised | - | $ | - | - | $ | - | |||||||||||||||||||||||||||||
Options exercisable at September 30, 2013 | 36,663 | $ | 7.43 | 9.5 | $ | 25,800 | Expired or forfeited | -750 | $ | 40 | -140 | $ | 440 | |||||||||||||||||||||||||||||
Outstanding at end of year | 7,163 | $ | 22.34 | 4.4 | $ | - | 2,426 | $ | 53.6 | |||||||||||||||||||||||||||||||||
Exercisable at end of year | 6,788 | $ | 21.36 | 4.5 | $ | - | 1,176 | |||||||||||||||||||||||||||||||||||
Weighted-average fair value of | ||||||||||||||||||||||||||||||||||||||||||
options granted during the year | $ | 8.44 | $ | 34.2 | ||||||||||||||||||||||||||||||||||||||
Price range of options | ||||||||||||||||||||||||||||||||||||||||||
Outstanding | $ | 9.80-$228.00 | $ | 40.00-$228.00 | ||||||||||||||||||||||||||||||||||||||
Exercised | $ | - | $ | - | ||||||||||||||||||||||||||||||||||||||
Expired or forfeited | $ | 40 | $ | 440 | ||||||||||||||||||||||||||||||||||||||
A summary of the restricted stock award activity | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Number of | Weighted | |||||||||||||||||||||||||||||||||||||||||
Units | Average | |||||||||||||||||||||||||||||||||||||||||
Grant | ||||||||||||||||||||||||||||||||||||||||||
Date Fair | ||||||||||||||||||||||||||||||||||||||||||
Value | ||||||||||||||||||||||||||||||||||||||||||
Nonvested at January 1, 2013 | 122,500 | $6.83 | ||||||||||||||||||||||||||||||||||||||||
Granted | - | |||||||||||||||||||||||||||||||||||||||||
Vested | (120,250) | ($6.80) | ||||||||||||||||||||||||||||||||||||||||
Forfeited | -2,000 | ($6.83) | ||||||||||||||||||||||||||||||||||||||||
Nonvested at September 30, 2013 | 250 | $6.83 | ||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | ' | ' | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
Stock Options with: | ||||||||||||||||||||||||||||||||||||||||||
Service conditions only | $ | 4,716,070 | $ | - | $ | 4,718,214 | $ | 40,000 | ||||||||||||||||||||||||||||||||||
Combined market and service conditions | 306,250 | - | 306,250 | - | ||||||||||||||||||||||||||||||||||||||
Combined market and performance conditions | 1,555,535 | - | 1,555,535 | - | ||||||||||||||||||||||||||||||||||||||
Restrcited stock | 816,000 | - | 822,486 | - | ||||||||||||||||||||||||||||||||||||||
$ | 7,393,855 | $ | - | $ | 7,402,485 | $ | 40,000 | |||||||||||||||||||||||||||||||||||
Fair value of stock-based compensation | ' | ' | ||||||||||||||||||||||||||||||||||||||||
The Company used the following assumptions in the Black-Scholes calculation used to measure the fair value of stock-based compensation in accordance with ASC 718 for stock options granted in 2012 and 2011. | ||||||||||||||||||||||||||||||||||||||||||
11/16/12 | 8/14/12 | 5/15/12 | 11/15/11 | |||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.62 | % | 0.75 | % | 0.74 | % | 0.93 | % | ||||||||||||||||||||||||||||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||
Expected life (years) | 5 | 5 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||
Volatility | 91.3 | % | 111.8 | % | 122.7 | % | 130 | % | ||||||||||||||||||||||||||||||||||
Stock options outstanding | ' | ' | ||||||||||||||||||||||||||||||||||||||||
The following table summarizes information with respect to stock options outstanding at December 31, 2012: | ||||||||||||||||||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||||||||||||
Range of Exercise | Number of | Weighted Average | Weighted Average Remaining Contractual Life | Number of | Weighted Average Exercise | |||||||||||||||||||||||||||||||||||||
Price | Options | Exercise Price | Options | Price | ||||||||||||||||||||||||||||||||||||||
$ | 9.80-$15.20 | 5,488 | $ | 10.93 | 4.7 | 5,488 | $ | 10.93 | ||||||||||||||||||||||||||||||||||
$ | 40 | 1,500 | $ | 40 | 3.9 | 1,125 | $ | 40 | ||||||||||||||||||||||||||||||||||
$ | 228 | 175 | $ | 228 | 2.4 | 175 | $ | 228 | ||||||||||||||||||||||||||||||||||
7,163 | 6,788 | |||||||||||||||||||||||||||||||||||||||||
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Income Taxes Tables | ' | ||||||||
Income tax from continuing operations | ' | ||||||||
Income tax from continuing operations for 2012 and 2011 was as follows: | |||||||||
2012 | 2011 | ||||||||
U.S. Federal income tax expense | $ | - | $ | -13,000 | |||||
State and local income tax expense | $ | - | $ | -1,000 | |||||
Total income tax expense | $ | - | $ | -14,000 | |||||
2012 | 2011 | ||||||||
Current income tax expense | $ | - | $ | -14,000 | |||||
Deferred income tax expense | $ | - | $ | - | |||||
Total income tax expense | $ | - | $ | -14,000 | |||||
Deferred tax assets | ' | ||||||||
The tax effects of significant temporary differences representing deferred tax assets as of December 31, 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets | |||||||||
Deferred rent | $ | 17,000 | $ | 19,000 | |||||
Accrued vacation | 16,000 | 15,000 | |||||||
Tax credit/grants | 82,000 | 82,000 | |||||||
Deferred compensation | 16,000 | - | |||||||
Net operating loss carryforward | 16,852,000 | 15,467,000 | |||||||
Accrued bonus | 68,000 | 68,000 | |||||||
Stock based compensation | 45,000 | 25,000 | |||||||
Accrued expenses | 38,000 | 38,000 | |||||||
Property and equipment | 19,000 | - | |||||||
Warrants | 3,683,000 | 2,813,000 | |||||||
Other | 1,000 | 5,000 | |||||||
Total deferred tax asset | 20,837,000 | 18,532,000 | |||||||
Deferred tax liabilities | |||||||||
Property and equipment | - | (3,000 | ) | ||||||
Change in accounting method - accrued bonus | - | (20,000 | ) | ||||||
- | (23,000 | ) | |||||||
Valuation allowance | (20,837,000 | ) | (18,509,000 | ) | |||||
Net deferred tax asset | $ | - | $ | - | |||||
Reconciliation between actual tax benefits and taxes computed at the statutory Federal rate | ' | ||||||||
Reconciliation between actual tax benefits and taxes computed at the statutory Federal rate of 34 percent for 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
U.S. Federal income tax benefit at the statutory rate of 34% | $ | 982,000 | $ | (142,000 | ) | ||||
Effect of permanent differences | 4,000 | (9,000 | ) | ||||||
Effect of permanent differences - Government Grant | - | 4,000 | |||||||
Effect of permanent differences - Warrants | 114,000 | 1,184,000 | |||||||
State income taxes benefit, net of federal tax benefit | 99,000 | 251,000 | |||||||
Other | (1,000 | ) | (78,000 | ) | |||||
Change in valuation allowance | (1,198,000 | ) | (1,224,000 | ) | |||||
Income tax expense | $ | - | $ | (14,000 | ) | ||||
Fair_Value_Measurement_Tables
Fair Value Measurement (Tables) | 9 Months Ended | |||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||
Fair Value Measurement Tables | ' | |||||||||||||||||
Financial liabilities measured at fair value | ' | |||||||||||||||||
Fair value measurements at September 30, 2013 using | ||||||||||||||||||
30-Sep-13 | Quoted prices in | Significant | Significant | |||||||||||||||
active markets for identical assets | other | unobservable | ||||||||||||||||
(Level 1) | observable | inputs | ||||||||||||||||
inputs | (Level 3) | |||||||||||||||||
(Level 2) | ||||||||||||||||||
Liabilities: | ||||||||||||||||||
Fair value of warrant liabilities | $ | 39,923 | – | – | $ | 39,923 | ||||||||||||
Fair value measurements at December 31, 2012 using | ||||||||||||||||||
31-Dec-12 | Quoted prices in | Significant | Significant | |||||||||||||||
active markets for identical assets | other | unobservable | ||||||||||||||||
(Level 1) | observable | inputs | ||||||||||||||||
inputs | (Level 3) | |||||||||||||||||
(Level 2) | ||||||||||||||||||
Liabilities: | ||||||||||||||||||
Fair value of warrant liabilities | $ | 3,125,393 | – | – | $ | 3,125,393 | ||||||||||||
Liabilities resulting from the Series B Warrants | ' | |||||||||||||||||
September 30, | December 31, | |||||||||||||||||
2013 | 2012 | |||||||||||||||||
Warrants: | ||||||||||||||||||
Risk-free interest rate | 0.04% - 1.42 | % | 0.16% - 0.72 | % | ||||||||||||||
Expected volatility | 55.12%-72.94 | % | 91.79% - 146.03 | % | ||||||||||||||
Expected life (in years) | 0.1-3.3 | 0.8 - 4.9 | ||||||||||||||||
Expected dividend yield | - | - | ||||||||||||||||
Number of warrants | 66,062 | 550,664 | ||||||||||||||||
Fair value | $ | 39,923 | $ | 3,125,393 | ||||||||||||||
Changes in company's Level 3 liabilities | ' | |||||||||||||||||
2013 | 2012 | |||||||||||||||||
Beginning balance | $ | 3,125,393 | $ | 916,621 | ||||||||||||||
Issuance of new warrants | - | 214,288 | ||||||||||||||||
Fair value adjustments for | ||||||||||||||||||
warrant liabilities | 2,610,465 | (740,605 | ) | |||||||||||||||
Reclassification to | ||||||||||||||||||
stockholders’ equity | (5,695,935 | ) | - | |||||||||||||||
Ending balance | $ | 39,923 | $ | 390,304 |
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Commitments And Contingencies Tables | ' | ' | ||||||||
Future minimum rental payments | ' | ' | ||||||||
Future minimum rental payments required as of December 31, 2012, under the non-cancelable lease are as follows: | ||||||||||
Operating | ||||||||||
Year Ending December 31, | Leases | Year Ending December 31, | Operating Lease | |||||||
2013 | $ | 44,819 | 2013 | $ | 156,000 | |||||
2014 | 176,014 | 2014 | 161,000 | |||||||
2015 | 165,427 | 2015 | 165,000 | |||||||
2016 | 170,390 | 2016 | 170,000 | |||||||
2017 | 175,502 | 2017 | 176,000 | |||||||
2018 | 44,197 | 2018 | 44,000 | |||||||
$ | 776,349 | $ | 872,000 | |||||||
Business_Merger_and_Basis_of_P1
Business, Merger and Basis of Presentation (Details Narrative) (USD $) | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Common stock, par value (in dollars per share) | $0.00 | ' | $0.00 | $0.00 |
Preferred stock, series D shares issued | 1,379,685 | ' | ' | ' |
Preferred stock, series D shares outstanding | 1,379,685 | ' | ' | ' |
Series D, par value | $0.00 | ' | $0.00 | $0.00 |
Accrued patent costs | $1,000,000 | ' | ' | ' |
North South [Member] | ' | ' | ' | ' |
Acquired company's shares converted to common stock | 5,213 | ' | ' | ' |
Common stock from acquired company's shares | 1,203,153 | ' | ' | ' |
Common stock, par value (in dollars per share) | $0.00 | ' | ' | ' |
Series A issued and outstanding | 491 | ' | ' | ' |
Preferred stock, series D shares issued | 1,379,685 | ' | ' | ' |
Preferred stock, series D shares outstanding | 1,379,685 | ' | ' | ' |
Series D, par value | $0.00 | ' | ' | ' |
Series D conversion feature | 'one-for-ten | ' | ' | ' |
Rockstar [Member] | ' | ' | ' | ' |
Patent purchase | 4,000,000 | ' | ' | ' |
Patent purchase, cash paid | 2,000,000 | ' | ' | ' |
Patent purchase, shares issued | 176,991 | ' | ' | ' |
Patent purchase, shares issued, value | 1,000,000 | ' | ' | ' |
Patent purchase, shares issued, per share price | $5.65 | ' | ' | ' |
Accrued patent costs | $1,000,000 | ' | ' | ' |
Liquidity_and_Capital_Resource1
Liquidity and Capital Resources (Details Narrative) (USD $) | 1 Months Ended | |||
Nov. 06, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Working capital | ' | $1,055,625 | $3,975,324 | $4,600,000 |
Cash on hand | ' | 2,541,743 | 4,498,237 | 4,900,000 |
Private placement proceeds | 2,235,000 | ' | ' | ' |
Private placement, per share price range | '6.25-6.40 | ' | ' | ' |
Common Stock Shares [Member] | ' | ' | ' | ' |
Private placement proceeds | 310,000 | ' | ' | ' |
Private placement, shares issued | 48,438 | ' | ' | ' |
Private placement, per share price | $6.40 | ' | ' | ' |
Series F Preferred Stock 2 [Member] | ' | ' | ' | ' |
Private placement proceeds | 925,000 | ' | ' | ' |
Private placement, shares issued | 148,000 | ' | ' | ' |
Private placement, per share price | $6.25 | ' | ' | ' |
Series F Preferred Stock 3 [Member] | ' | ' | ' | ' |
Private placement proceeds | 1,000,000 | ' | ' | ' |
Private placement, shares issued | 156,250 | ' | ' | ' |
Private placement, per share price | $6.40 | ' | ' | ' |
North South [Member] | ' | ' | ' | ' |
Cash on hand | ' | $2,684,363 | ' | ' |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | Sep. 30, 2013 |
2013 | $279,404 |
2014 | 924,959 |
2015 | 801,921 |
2016 | 801,921 |
2017 | 563,529 |
Thereafter | 1,596,177 |
Total | 4,967,911 |
Other Costs [Member] | ' |
2013 | 10,344 |
2014 | 41,376 |
2015 | 41,376 |
2016 | 41,376 |
2017 | 41,376 |
Thereafter | 172,417 |
Total | 348,265 |
Harris [Member] | ' |
2013 | 11,765 |
2014 | 47,059 |
2015 | 47,059 |
2016 | 47,059 |
2017 | 47,059 |
Thereafter | 196,077 |
Total | 396,078 |
Compufill [Member] | ' |
2013 | 10,294 |
2014 | 41,176 |
2015 | 41,176 |
2016 | 41,176 |
2017 | 41,176 |
Thereafter | 171,571 |
Total | 346,569 |
Rockstar [Member] | ' |
2013 | 247,001 |
2014 | 795,348 |
2015 | 672,310 |
2016 | 672,310 |
2017 | 433,918 |
Thereafter | 1,056,112 |
Total | $3,876,999 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 1) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Convertible preferred stock | 13,796,852 | ' | 4 | ' | ' |
Warrants to purchase common stock | 66,062 | ' | 67,637 | ' | ' |
Non-vested restricted stock awards | 250 | ' | ' | ' | ' |
Options to purchase common stock | 2,012,163 | 7,163 | 2,425 | 2,426 | 316 |
Total | 15,875,327 | ' | 70,066 | ' | ' |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' | ' | ' | ' | ' |
Revenue | ' | ' | ' | ' | $728,312 | $820,925 |
Direct cost and operating expense | ' | ' | ' | ' | -417,428 | -388,065 |
Selling, general and administrative expense | ' | ' | ' | ' | -1,279,875 | -816,389 |
Loss from discontinued operations before taxes | ' | ($133,148) | ' | ($323,423) | ($968,991) | ($383,529) |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' | ' | ' | ' | ' |
Net (loss) income | ($9,279,983) | ($707,550) | ($13,783,660) | ($1,946,524) | ($3,857,024) | $19,585 |
Less other income from change in fair value of warrants assumed exercised | ' | ' | ' | ' | ' | -730,862 |
Adjusted net loss | ' | ' | ' | ' | ($3,857,024) | ($711,277) |
Diluted shares outstanding | ' | ' | ' | ' | ' | ' |
Weighted average shares outstanding, | 1,339,300 | 207,806 | 955,292 | 200,547 | 273,567 | 131,285 |
Share assumed exercised | ' | ' | ' | ' | ' | 7,061 |
Diluted shares outstanding | 1,339,300 | 207,806 | 955,292 | 200,547 | 273,567 | 138,346 |
Net loss per share, diluted | ($6.93) | ($3.40) | ($14.43) | ($9.70) | ($14.10) | ($5.14) |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Cash FDIC Insured Amount | $250,000 | $250,000 |
Cash in excess of FDIC limit | 1,932,739 | 1,932,739 |
Weighted average useful life | ' | '8 years 6 months |
Amortization of intangible assets | $133,785 | $133,785 |
UsefulLife Low [Member] | ' | ' |
Weighted average useful life | ' | '6 months |
UsefulLife High[Member] | ' | ' |
Weighted average useful life | ' | '12 years |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Details Narrative 1) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2010 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Minimum [Member] | Minimum [Member] | Minimum [Member] | Maximum [Member] | Maximum [Member] | Maximum [Member] | Warrant [Member] | Warrant [Member] | ||||||||
Office Furniture And Equipment [Member] | Computer Hardware And Software [Member] | Leasehold Improvements [Member] | Office Furniture And Equipment [Member] | Computer Hardware And Software [Member] | Leasehold Improvements [Member] | ||||||||||
Interest bearing deposits in excess of the FDIC limits | ' | ' | ' | ' | ' | $4,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated useful lives of assets | ' | ' | ' | ' | ' | ' | ' | '3 years | '3 years | '5 years | '10 years | '5 years | '10 years | ' | ' |
Other Income | ' | ' | ' | ' | 51,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tax Expense | ' | ' | ' | ' | 14,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrant liabilities | ' | ' | ' | ' | 900,000 | 3,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock based compensation expense recognized | $7,393,855 | ' | $40,000 | $7,402,485 | $36,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercise price | ($7.13) | ' | ($7.13) | ' | ($53.60) | ($22.34) | $322 | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding | 2,012,163 | 2,425 | 2,012,163 | 2,425 | 2,426 | 7,163 | 316 | ' | ' | ' | ' | ' | ' | 550,664 | 55,391 |
Accounts_Receivable_Details
Accounts Receivable (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' |
Beggining Balance | $8,000 | ' |
Provision for doubtful accounts | ' | 8,000 |
Bad debt recovery | -8,000 | ' |
Ending Balance | ' | $8,000 |
Accounts_Receivable_Details_Na
Accounts Receivable (Details Narrative) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Notes to Financial Statements | ' | ' |
Allowance for doubtful accounts | $0 | $8,000 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Notes to Financial Statements | ' | ' | ' |
Computers | ' | $9,000 | $7,000 |
Office furniture and equipment | ' | 94,000 | 94,000 |
Leasehold improvements | ' | 229,000 | 229,000 |
Total cost | ' | 332,000 | 330,000 |
Accumulated depreciation and amortization | ' | -308,000 | -245,000 |
Property and equipment, net | ' | $24,009 | $85,374 |
Property_and_Equipment_Details1
Property and Equipment (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Risks and Uncertainties [Abstract] | ' | ' | ' | ' | ' | ' |
Depreciation expense | $2,519 | $16,993 | $24,009 | $50,936 | ' | ' |
Accounts_Payable_and_Accrued_E2
Accounts Payable and Accrued Expenses (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Notes to Financial Statements | ' | ' |
Accounts payable | $210,000 | $106,000 |
Accrued expenses | 218,000 | 164,000 |
Accounts payable and accrued expenses | $428,000 | $270,000 |
Acquisition_of_North_South_Det
Acquisition of North South (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Business Combinations [Abstract] | ' | ' | ' | ' |
Value of common stock and convertible preferred stock issued to sellers | $5,510,749 | ' | $5,510,749 | ' |
Tangible assets acquired: | ' | ' | ' | ' |
Cash | 2,684,363 | ' | 2,684,363 | ' |
Prepaid expenses | 14,503 | ' | 14,503 | ' |
Net tangible assets acquired | 2,698,866 | ' | 2,698,866 | ' |
Purchase consideration in excess of fair value of net tangible assets | 2,811,883 | ' | 2,811,883 | ' |
Allocated to: | ' | ' | ' | ' |
Patent portfolios | 1,100,000 | ' | 1,100,000 | ' |
Goodwill | 1,711,883 | ' | 1,711,883 | ' |
Pro Forma Revenues | 95,837 | 16,710 | 101,811 | 16,710 |
Pro Forma Net loss | ($9,421,574) | ($606,755) | ($14,214,571) | ($1,720,160) |
Pro Forma Loss per share- basic and diluted | ($4.08) | ($0.43) | ($6.84) | ($1.23) |
Acquisition_of_North_South_Det1
Acquisition of North South (Details Narrative) (North South [Member], USD $) | 9 Months Ended |
Sep. 30, 2013 | |
North South [Member] | ' |
Promissory note issued | $500,000 |
Proceeds from issuance of note | $500,000 |
Note interest rate | 0.25% |
Maturity date | '24 months |
Accrued_Salaries_and_Benefits_1
Accrued Salaries and Benefits (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Notes to Financial Statements | ' | ' |
Accrued Payroll | $21,000 | $29,000 |
Accrued annual bonuses | 173,000 | 176,000 |
Accrued severance | 40,000 | ' |
Accrued vacation | 42,000 | 38,000 |
Other | 4,000 | ' |
Accrued Salaries and Benefits | $280,000 | $243,000 |
Warrant_Liability_Details_1
Warrant Liability (Details 1) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Grant Date 11/16/09 [Member] | ' | ' |
Shares | 5,522 | 5,522 |
Stock price | $6.83 | $23.40 |
Exercise price | $650 | $650 |
Expected terms (yrs) | '1 year 10 months 24 days | '2 years 10 months 24 days |
Risk-free interest rate | 0.25% | 0.36% |
Estimated volatility | 110.99% | 144.55% |
Grant Date 10/07/10 [Member] | ' | ' |
Shares | 10,500 | 10,500 |
Stock price | $6.83 | $23.40 |
Exercise price | $300 | $300 |
Expected terms (yrs) | '2 years 9 months 18 days | '3 years 9 months 18 days |
Risk-free interest rate | 0.36% | 0.60% |
Estimated volatility | 101.94% | 156.71% |
Grant Date 01/19/11 [Member] | ' | ' |
Shares | 10,673 | 10,673 |
Stock price | $6.83 | $23.40 |
Exercise price | $160 | $160 |
Expected terms (yrs) | '3 years 1 month 6 days | '4 years 1 month 6 days |
Risk-free interest rate | 0.36% | 0.60% |
Estimated volatility | 101.94% | 156.71% |
Grant Date 10/25/11 [Member] | ' | ' |
Shares | 26,628 | 26,628 |
Stock price | $6.83 | $23.40 |
Exercise price | $44.80 | $44.80 |
Expected terms (yrs) | '3 years 9 months 18 days | '4 years 9 months 18 days |
Risk-free interest rate | 0.54% | 0.83% |
Estimated volatility | 133.28% | 143.85% |
Grant Date 02/02/12 [Member] | ' | ' |
Shares | 10,648 | ' |
Stock price | $6.83 | ' |
Exercise price | $28 | ' |
Expected terms (yrs) | '4 years 1 month 6 days | ' |
Risk-free interest rate | 0.54% | ' |
Estimated volatility | 133.28% | ' |
Grant Date 11/08/12 [Member] | ' | ' |
Shares | 483,657 | ' |
Stock price | $6.83 | ' |
Exercise price | $6.53 | ' |
Expected terms (yrs) | '4 years 10 months 24 days | ' |
Risk-free interest rate | 0.72% | ' |
Estimated volatility | 146.03% | ' |
Grant date of issuance for warrants 01/19/11 [Member] | ' | ' |
Shares | ' | 10,673 |
Stock price | ' | $155 |
Exercise price | ' | $160 |
Expected terms (yrs) | ' | '5 years |
Risk-free interest rate | ' | 1.95% |
Estimated volatility | ' | 138.70% |
Grant date of issuance for warrants 10/25/11 [Member] | ' | ' |
Shares | ' | 26,628 |
Stock price | ' | $51.40 |
Exercise price | ' | $44.80 |
Expected terms (yrs) | ' | '5 years |
Risk-free interest rate | ' | 1.01% |
Estimated volatility | ' | 144.60% |
Grant date of issuance for warrants 02/02/12 [Member] | ' | ' |
Shares | 10,648 | ' |
Stock price | $20.60 | ' |
Exercise price | $28 | ' |
Expected terms (yrs) | '5 years | ' |
Risk-free interest rate | 0.71% | ' |
Estimated volatility | 144.70% | ' |
Grant date of issuance for warrants 11/08/12 [Member] | ' | ' |
Shares | 483,657 | ' |
Stock price | $7.31 | ' |
Exercise price | $6.53 | ' |
Expected terms (yrs) | '5 years | ' |
Risk-free interest rate | 0.65% | ' |
Estimated volatility | 146.00% | ' |
Warrant_Liability_Details_Narr
Warrant Liability (Details Narrative) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Notes to Financial Statements | ' | ' |
Warrant liabilities | $3,100,000 | $900,000 |
Income from change in fair value of warrants | $1,200,000 | $3,700,000 |
Stockholders_Equity_Details
Stockholders' Equity (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Shares issued | 1 | 5,250 | 5,250 |
Par value | $0.00 | $0.00 | $0.00 |
Series A Preferred Stock [Member] | ' | ' | ' |
Shares issued | 0 | ' | ' |
Par value | $0.00 | ' | ' |
Conversion to common stock | 'N/A | ' | ' |
Series B Preferred Stock [Member] | ' | ' | ' |
Shares issued | 1 | ' | ' |
Par value | $0.00 | ' | ' |
Conversion to common stock | '1:1 | ' | ' |
Series C Preferred Stock [Member] | ' | ' | ' |
Shares issued | 1 | ' | ' |
Par value | $0.00 | ' | ' |
Conversion to common stock | '1:1 | ' | ' |
Series D Preferred Stock [Member] | ' | ' | ' |
Shares issued | 1,379,685 | ' | ' |
Par value | $0.00 | ' | ' |
Conversion to common stock | '10:1 | ' | ' |
Series E Preferred Stock [Member] | ' | ' | ' |
Shares issued | 0 | ' | ' |
Par value | $0.00 | ' | ' |
Conversion to common stock | '1:1 | ' | ' |
Stockholders_Equity_Details_1
Stockholders' Equity (Details 1) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2012 | |
Options | ' | ' | ' | ' |
Outstanding at beginning of period | 7,163 | 2,426 | 316 | 2,425 |
Granted | 2,005,500 | ' | 2,250 | ' |
Exercised | ' | ' | ' | ' |
Expired or forfeited | -500 | -750 | -140 | ' |
Outstanding at end of period | 2,012,163 | 7,163 | 2,426 | 2,425 |
Exercisable at end of period | 6,663 | 6,788 | 1,176 | ' |
Weighted Average Exercise Price | ' | ' | ' | ' |
Outstanding at beginning of period | ($22.34) | ($53.60) | $322 | ' |
Granted | $7.08 | $10.93 | $40 | ' |
Exercised | ' | ' | ' | ' |
Expired or forfeited | ($25) | $40 | $440 | ' |
Outstanding at end of period | $7.13 | $22.34 | $53.60 | ' |
Exercisable at end of period | $7.43 | $21.36 | $53.60 | ' |
Weighted Average Remaining Contractual Term | ' | ' | ' | ' |
Outstanding at beginning of period | '4 years 4 months 24 days | ' | ' | ' |
Granted | '9 years 6 months 0 days | ' | ' | ' |
Outstanding at end of period | '9 years 6 months 0 days | '4 years 4 months 24 days | ' | ' |
Exercisable at end of period | '9 years 6 months 0 days | '4 years 6 months | ' | ' |
Outstanding at end of period | $1,724,730 | $0 | ' | ' |
Exercisable at end of period | $25,800 | $0 | ' | ' |
Stockholders_Equity_Details_2
Stockholders' Equity (Details 2) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2012 | |
Shares | ' | ' | ' | ' |
Outstanding at beginning of period | 7,163 | 2,426 | 316 | 2,425 |
Granted | 2,005,500 | ' | 2,250 | ' |
Forfeited | 500 | 750 | 140 | ' |
Outstanding at end of period | 2,012,163 | 7,163 | 2,426 | 2,425 |
Restricted Stock [Member] | ' | ' | ' | ' |
Shares | ' | ' | ' | ' |
Outstanding at beginning of period | 122,500 | ' | ' | ' |
Granted | ' | ' | ' | ' |
Vested | -120,250 | ' | ' | ' |
Forfeited | -2,000 | ' | ' | ' |
Outstanding at end of period | 250 | ' | ' | ' |
Weighted average grant date fair value | ' | ' | ' | ' |
Nonvested | 6.83 | ' | ' | ' |
Vested | -6.8 | ' | ' | ' |
Forfeited | -6.83 | ' | ' | ' |
Nonvested | 6.83 | ' | ' | ' |
Stockholders_Equity_Details_3
Stockholders' Equity (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2011 | |
Stock based compensation expense, stock options with: | ' | ' | ' | ' | ' |
Service conditions only | $4,716,070 | ' | $40,000 | $4,718,214 | ' |
Combined market and service conditions | 306,250 | ' | ' | 306,250 | ' |
Combined market and performance conditions | 1,555,535 | ' | ' | 1,555,535 | ' |
Restricted stock | 816,000 | ' | ' | 722,486 | ' |
Total | $7,393,855 | ' | $40,000 | $7,402,485 | $36,000 |
Stockholders_Equity_Details_4
Stockholders Equity (Details 4) | 12 Months Ended | |||
Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2011 | |
Date 11-16-2012 [Member] | Date 8-14-2012 [Member] | Date 5-15-2012 [Member] | Date 11-15-2011 [Member] | |
Risk-free interest rate | 0.62% | 0.75% | 0.74% | 0.93% |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Expected life (years) | '5 years | '5 years | '5 years | '5 years |
Volatility | 9.13% | 111.80% | 122.70% | 1.30% |
Stockholders_Equity_Details_5
Stockholders Equity (Details 5) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Options Outstanding Number of options | 2,012,163 | 7,163 | 2,425 | 2,426 | 316 |
Weighted Average price | ($7.13) | ($22.34) | ' | ($53.60) | $322 |
Number of Options Exercisable | 6,663 | 6,788 | ' | 1,176 | ' |
Weighted Average Exercise Price Exercisable | $7.43 | $21.36 | ' | $53.60 | ' |
Exercise Price Range One [Member] | ' | ' | ' | ' | ' |
Range of exercise price minimum | ' | $9.80 | ' | ' | ' |
Range of exercise price maximum | ' | $15.20 | ' | ' | ' |
Options Outstanding Number of options | ' | 5,488 | ' | ' | ' |
Weighted Average price | ' | $10.93 | ' | ' | ' |
Weighted Average Remaining Contractual Life | ' | '4 years 8 months 12 days | ' | ' | ' |
Number of Options Exercisable | ' | 5,488 | ' | ' | ' |
Weighted Average Exercise Price Exercisable | ' | $10.93 | ' | ' | ' |
Exercise Price Range Two [Member] | ' | ' | ' | ' | ' |
Range of exercise price | ' | $40 | ' | ' | ' |
Options Outstanding Number of options | ' | 1,500 | ' | ' | ' |
Weighted Average price | ' | $40 | ' | ' | ' |
Weighted Average Remaining Contractual Life | ' | '3 years 10 months 24 days | ' | ' | ' |
Number of Options Exercisable | ' | 1,125 | ' | ' | ' |
Weighted Average Exercise Price Exercisable | ' | $40 | ' | ' | ' |
Exercise Price Range Three [Member] | ' | ' | ' | ' | ' |
Range of exercise price | ' | $228 | ' | ' | ' |
Options Outstanding Number of options | ' | 175 | ' | ' | ' |
Weighted Average price | ' | $228 | ' | ' | ' |
Weighted Average Remaining Contractual Life | ' | '2 years 12 months 24 days | ' | ' | ' |
Number of Options Exercisable | ' | 175 | ' | ' | ' |
Weighted Average Exercise Price Exercisable | ' | $228 | ' | ' | ' |
Stockholders_Equity_Details_Na
Stockholders Equity (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Restricted stock issued | ' | 2,250 | ' |
Options granted to officers | 2,005,500 | ' | 2,250 |
Vested options | ' | 6,789 | ' |
Unrecognized stock compensation expense | ' | $12,000 | ' |
Unrecognized stock compensation expense term in years | ' | '2 years 10 months 24 days | ' |
Board of Directors [Member] | ' | ' | ' |
Options granted to officers | ' | 5,487 | ' |
Officer [Member] | ' | ' | ' |
Options granted to officers | ' | 2,250 | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' |
U.S. Federal income tax expense | ' | ($13,000) |
State and local income tax expense | ' | -1,000 |
Total income tax expense | ' | -14,000 |
Current income tax expense | ' | -14,000 |
Deferred income tax expense | ' | ' |
Total income tax expense | ' | ($14,000) |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Deferred tax assets | ' | ' |
Deferred rent | $17,000 | $19,000 |
Accrued vacation | 16,000 | 15,000 |
Tax credit/grants | 82,000 | 82,000 |
Deferred compensation | 16,000 | ' |
Net operating loss carryforward | 16,852,000 | 15,467,000 |
Accrued bonus | 68,000 | 68,000 |
Stock based compensation | 45,000 | 25,000 |
Accrued expenses | 38,000 | 38,000 |
Property and equipment | 19,000 | ' |
Warrants | 3,683,000 | 2,813,000 |
Other | 1,000 | 5,000 |
Total deferred tax asset | 20,837,000 | 18,532,000 |
Deferred tax liabilities | ' | ' |
Property and equipment | ' | -3,000 |
Change in accounting method - accrued bonus | ' | -20,000 |
DeferredIncomeTaxLiabilities | ' | -23,000 |
Valuation allowance | -20,837,000 | -18,509,000 |
Net deferred tax asset | ' | ' |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Income Taxes Details 2 | ' | ' |
U.S. Federal income tax benefit at the statutory rate of 34% | $982,000 | ($142,000) |
Effect of permanent differences | 4,000 | -9,000 |
Effect of permanent differences - Government Grant | ' | 4,000 |
Effect of permanent differences - Warrants | 114,000 | 1,184,000 |
State income taxes benefit, net of federal tax benefit | 99,000 | 251,000 |
Other | -1,000 | -78,000 |
Change in valuation allowance | -1,198,000 | -1,224,000 |
Income tax expense | ' | ($14,000) |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
In Millions, unless otherwise specified | ||
Notes to Financial Statements | ' | ' |
Gross operating loss carryforwards for U.S. federal income tax purposes | $41 | $38 |
Expiry year for U.S. federal income tax purposes | '2019 | ' |
Operating loss carryforwards for state income tax purposes | $52 | $49 |
Expiry year for state income tax purposes | '2018 | ' |
Fair_Value_Measurement_Details
Fair Value Measurement (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Fair value of warrant liabilities | $39,923 | $3,125,393 |
Fair Value, Inputs, Level 1 [Member] | ' | ' |
Fair value of warrant liabilities | ' | ' |
Fair Value, Inputs, Level 2 [Member] | ' | ' |
Fair value of warrant liabilities | ' | ' |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Fair value of warrant liabilities | $39,923 | $3,125,393 |
Fair_Value_Measurement_Details1
Fair Value Measurement (Details 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Expected dividend yield | ' | ' |
Number of warrants | 66,062 | 550,664 |
Fair value | $39,923 | $3,125,393 |
Minimum [Member] | ' | ' |
Risk-free interest rate | 0.04% | 0.16% |
Expected volatility | 55.12% | 91.79% |
Expected life (in years) | '1 month 8 days | '9 months 2 days |
Maximum [Member] | ' | ' |
Risk-free interest rate | 1.42% | 0.72% |
Expected volatility | 79.29% | 146.03% |
Expected life (in years) | '3 years 4 months | '4 years 11 months 3 days |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Fair value adjustments for warrant liabilities | $36,583 | $58,413 | ($2,610,465) | $740,605 |
Fair Value, Inputs, Level 3 [Member] | ' | ' | ' | ' |
Beginning balance | ' | ' | 3,125,393 | 916,621 |
Issuance of new warrants | ' | ' | ' | 214,288 |
Fair value adjustments for warrant liabilities | ' | ' | 2,610,465 | -740,605 |
Reclassification to stockholder's equity | ' | ' | -5,695,935 | ' |
Ending balance | $39,923 | $390,304 | $39,923 | $390,304 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Future minimum rental payments | ' | ' |
2013 | $44,819 | $156,000 |
2014 | 176,014 | 161,000 |
2015 | 165,427 | 165,000 |
2016 | 170,390 | 170,000 |
2017 | 175,502 | 176,000 |
2018 | 44,197 | 44,000 |
Total | $776,349 | $872,000 |
Commitment_and_Contingencies_D
Commitment and Contingencies (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' | ' | ' |
Net operating lease rental expenses | $132,475 | $121,630 | $155,000 | $129,000 |
Employment agreement base salary | 350,000 | ' | ' | ' |
Bonus percentage of salary | 10.00% | ' | ' | ' |
Signing bonus paid | 100,000 | ' | ' | ' |
Legal services | ' | ' | $40,000 | ' |
Employee_Benefit_Plans_Details
Employee Benefit Plans (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Notes to Financial Statements | ' | ' |
Employee contributions, net of forfeitures | $31,000 | $23,000 |
Subsequent_Events_Details_Narr
Subsequent Events (Details Narrative) (USD $) | 1 Months Ended |
Nov. 06, 2013 | |
Subsequent Events Details Narrative | ' |
Plaintiff amount | $47,309 |
Past due balance | 47,409 |
Private placement proceeds | $2,235,000 |
Private placement, per share price | '6.25-6.40 |
Subsequent_Events_Details_Narr1
Subsequent Events (Details Narrative 1) (USD $) | Mar. 18, 2013 |
Notes to Financial Statements | ' |
Nuta issued and oustanding capital stock acquisition | 100.00% |
Closing cash requirement | $2,000,000 |
Series C Preferred Stock conversion rate | -1 |
Warrants issued and convertible | 483,657 |
Warrant exercise price | $6.53 |
Series C issued in exchange of warrants | 229,337 |
Weighted average price | $12.64 |
Redemption rate | $0.00 |
Agreed severance | $233,398 |