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Liquidity and Capital Resources

9 Months Ended

Sep. 30, 2011

2. Liquidity and Capital Resources

The Company’s working capital was $4.7 million as of September 30, 2011, compared to working capital of $4.9 million as of December 31, 2010. The change in working capital consisted principally of (i) $2.5 million received from the sale of equity in January 2011, (ii) $3.1 million used in support of the Company’s operations, and (iii) the relief of a $600,000 purchase obligation in the first quarter.

The Company has incurred substantial development costs in its efforts to explore whether D-tagatose is an effective treatment for Type 2 diabetes, including a completed Phase 3 clinical trial and a related Phase 2 Dose Range trial. We have funded these costs from the cash we received in the 2007 sale of InfoSpherix, and the net proceeds of our equity offerings.

Over the next 12 months, the Company expects that it will need to expend between $4 million and $6 million to support our currently planned development operations. This estimate assumes (i) continuing efforts to sell, license, or obtain a partner for the diabetes drug application, (ii) no further significant expenditures for developing D-tagatose as a drug for diabetes, (iii) continuing development of SPX-106T as a treatment for high triglycerides, (iv) ongoing operation of the Health Sciences segment at the current level of activity, and (v) that we raise additional funds to continue our development efforts beyond this 12-month period.

In October 2010, we obtained net proceeds of approximately $4.9 million in a registered offering. The common stock issued upon the conversion of the Series B convertible preferred stock and the common stock, which may be issued upon the exercise of warrants issued in the offering, have been registered under a Form S-1 registration statement declared effective by the Securities and Exchange Commission (“SEC”) in October 2010.

In January 2011, the Company obtained net proceeds of approximately $2.5 million in a registered direct offering. The common stock issued in the offering and the common stock that may be issued upon exercise of warrants issued in the offering have been registered under a Form S-3 registration statement declared effective by the SEC in October 2009.

In October 2011, the Company obtained net proceeds of approximately $1.15 million in a private placement. The Company has agreed to use its best efforts to register under a Form S-3 registration statement the common stock issued in the offering and the common stock that may be issued upon exercise of warrants issued in the offering for resale by the purchasing stockholders. See the subsequent event footnote, Note 13, for more information.

Due to the nature of our business, we will need to raise additional funds on a consistent basis to continue operations and to fully pursue the triglycerides opportunity. Fundraising will likely require the issuance of additional equity securities, and a purchaser of such securities will likely insist that such securities be registered securities. NASDAQ rules require stockholder approval for certain stock issuances constituting twenty percent (20%) or more of a company’s issued and outstanding stock.

Pursuant to SEC rules, the Company may not be in a position to issue additional shares of its common stock in another registered direct primary offering under a Form S-3 registration statement until February 2012. Thus, if the Company wishes to conduct another registered direct primary offering before February 2012, it will likely have to do so in whole or in part under a Form S-1 registration statement.

The Company cannot be assured that it will be able to attract a purchaser of securities to raise the additional funds it will likely require, that the Company will be able to obtain any required stockholder approval, or that the Company will be able to have additional registered direct primary offerings. 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 development activities and dissolve the Company. In such an event, we will need to satisfy various severance, lease termination and other dissolution-related obligations.