Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

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 June 30, 2015, and the condensed consolidated results of its operations for the three and six-month periods ended June 30, 2015 and 2014, and the condensed consolidated results of its cash flows for the six-month periods ended June 30, 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. Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

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. The realized gain and losses, dividend income and unrealized gain and losses on its investments in marketable securities are included in other income, net on the condensed consolidated statements of operations. During the three-month periods ended June 30, 2015, the Company incurred of realized losses, unrealized losses and dividend income of approximately $7,900, $12,000 and $15,000, respectively. During the six-month period ended June 30, 2015, the Company incurred of realized losses, unrealized gains and dividend income of approximately $60,800, $45,200 and $40,600, respectively. The Company reinvested dividend income into its marketable securities and at June 30, 2015, its holdings in marketable securities aggregated approximately $0.8 million. 

Impairment of Intangible Assets

The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. The Company determined it was necessary to test its intangible assets for impairment during the second quarter of 2015 (see Note 4).

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 June 30, 2015 and 2014 are as follows:

	As of June 30,
		2015	2014
Convertible preferred stock		5,044,821	5,834,881
Warrants to purchase common stock		769,803	775,021
Non-vested restricted stock awards		45,000	10,000
Options to purchase common stock		5,048,701	4,218,877
Total		10,908,325	10,838,779

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 in Note 9 below, there were no subsequent events or transactions that required recognition or disclosure in the condensed consolidated financial statements.