Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

3. Summary of Significant Accounting Policies

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2014 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 30, 2015.

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 condensed consolidated financial position as of March 31, 2015, and the condensed consolidated results of its operations and cash flows for the three-month periods ended March 31, 2015 and 2014. 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, 2014.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Biospherics Incorporated, Nuta Technology Corp. (“Nuta”), Spherix Portfolio Acquisition I, Inc. (“SPXI”), Spherix Portfolio Acquisition II, Inc. (“SPXII”), Guidance IP, LLC (“Guidance”), CompuFill LLC (“CompuFill”) , Directional IP, LLC (“Directional”) and NNPT, LLC (“NNPT”).  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

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, 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.

Marketable Securities

Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of mutual funds which are valued at quoted market prices. The Company invested funds into highly liquid mutual funds in 2015.  During the three-month period ended March 31, 2015, the Company incurred realized losses and unrealized gain on its investments in marketable securities of $0.05 million and $0.06 million, respectively, which are included in other income, net on the condensed consolidated statements of operations.  In addition, during three-month period ended March 31, 2015, the Company earned dividend income of $0.03 million, which is included in other income, net on the condensed consolidated statement of operations.  The Company reinvested such dividend income into its marketable securities and at March 31, 2015, its holdings in marketable securities aggregated $2.9 million. 

Net Loss per Share

Basic loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would be anti-dilutive.

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at March 31, 2015 and 2014 are as follows:

	As of March 31,
	2015		2014
Convertible preferred stock		5,156,841		16,773,275
Warrants to purchase common stock		769,803		775,021
Non-vested restricted stock awards		-		10,000
Options to purchase common stock		5,298,877		3,323,876
Total		11,225,521		20,882,172

Subsequent Events

The Company has evaluated the period after the balance sheet date but prior to the issuance of the financial statement, and determined that other than noted below, there were no subsequent events or transactions that required recognition or disclosure in the condensed consolidated financial statements.