Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

12. Subsequent Events

The Company evaluated all events or transactions after March 31, 2013 through the date the condensed consolidated financial statements were issued.

Memorandum of Understanding with ChromaDex

On May 2, 2013, the Company entered into a memorandum of understanding with ChromaDex Corp. to extend the commercial market for D-tagatose, extend the structure function claims for the GRAS food ingredient, and to optimize a new system of D-tagatose production.

Merger Agreement

On April 2, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with its wholly owned subsidiary, Nuta Technology Corp., a Virginia corporation (“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"). Upon closing of the transaction contemplated under the Merger Agreement (the "Merger"), North South will merge with and into Nuta with Nuta as the surviving corporation.  Nuta will operate in the State of Virginia as the record owner of the North South Intellectual Property.  The closing of the Merger is subject to customary closing conditions, including the receipt of a fairness opinion that the Merger Consideration (as defined below) 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 of the Company to issue the Merger Consideration pursuant to NASDAQ listing standards.

Pursuant to the terms and conditions of the Merger, at the closing of the Merger, all issued and outstanding shares of North South’s capital stock will be converted into the right to receive an aggregate of 118,483 shares of the Company’s common stock, par value $0.0001 per share and 1,488,152 shares of the Company’s newly designated Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Stock”), which is convertible into shares of the Company’s Common Stock on a one-for-ten basis (collectively with the 118,483 shares of Common Stock, the “Merger Consideration”).  Each holder of Series D Preferred Stock is entitled to vote on all shareholder matters, equal to the number of shares of Common Stock such shares are convertible into at such time, unless the holder is precluded from affecting the conversion taking into account beneficial ownership limitations and conversion limits as set forth in the Certificate of Designation.

At the effective time of the Merger, from the Merger Consideration, 150,000 shares of the Series D Preferred Stock (the “Escrow Shares”) shall be delivered to an escrow agent and shall be held pursuant to an escrow agreement to secure the Company from certain claims that may arise with respect to the representations, warranties, covenants or indemnification obligations of the North South Shareholders for a period of twelve (12) months following the closing of the Merger.  The Escrow Shares are the sole remedy for indemnifiable losses payable under the Merger Agreement.

Option Grants

On April 1, 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 is subject to approval by the Company’s shareholders.

The 2013 Plan authorizes approximately 17% or our fully-diluted Common Stock (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 2,010,500 option shares to executives of the Company and certain outside consultants under the 2013 Plan, subject to shareholder approval of the 2013 Plan.  The total fair value of the options on the date of grant was approximately $11.2 million under the Black-Scholes model of valuing options.

Set forth below is information relating to the option grants under the 2013 Plan.

					Exercise
Name			Number of Options		Price		Experation
Harvey Kesner	(1	)		1,000,000	$	7.08	4/1/2023
Douglas Brown	(2	)		75,000	$	7.08	4/1/2023
Edward Karr	(2	)		75,000	$	7.08	4/1/2023
Robert Vander Zander	(2	)		75,000	$	7.08	4/1/2023
Robert Clayton	(3	)		5,000	$	7.08	4/1/2023
Executive Group				1,230,000
Consultant	(4	)		750,000	$	7.08	4/1/2023
Consultant	(5	)		25,000	$	7.08	4/1/2023
Consultant	(6	)		5,000	$	7.08	4/1/2023
Other staff				500	$	7.08	4/1/2023
Total				2,010,500

(1)	750,000 options vest in 4 equal semi-annual installments beginning on October 4, 2013 as long as the shareholders have approved the 2013 Plan.  Remaining 250,000 options are subject to certain performance conditions requiring the Company to achieve a VWAP of $12 per share for 30 out of 90 consecutive days prior to December 31, 2014 and provided Optionee remains a director.
(2)	Eligibility date of October 4, 2013, provided Optionee remains a director of Spherix through said date.

(3)	Eligibility effective immediately upon shareholder approval.
(4)	Eligibility upon the last to occur of (i) shareholder approval of Plan, (ii) closing of merger of North South Holdings, Inc. into Nuta Technology Corp, and (iii) Optionee’s employment as the Chief Executive Officer of Spherix.

(5)	Eligibility effective immediately upon shareholder approval.
(6)	Eligibility effective immediately upon shareholder approval.

Conversion of Preferred Stock

In May 2013, 6,805 shares of the Company’s Series C Convertible Preferred Stock were converted to 6,805 shares of Common Stock, par value $0.0001, leaving 229,337 shares of Series C Convertible Preferred Stock outstanding.