Business context and reporting period
Entity discrepancy: The supplied filing is Spherix Incorporated’s unaudited Form 10-Q, not a filing by Dominari Holdings Inc. It covers the quarter and nine months ended September 30, 2011; it was signed November 10, 2011.
Spherix operated Biospherics, a drug-development business, and Health Sciences, a consulting business. Biospherics focused on D-tagatose and SPX-106T, a candidate combination treatment for high triglycerides. Health Sciences provided technical and regulatory consulting.
Financial results and liquidity
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $198,464 | $368,838 | $690,817 | $1,028,268 |
| Operating loss | $913,913 | $2,140,497 | $3,048,595 | $6,850,200 |
| Net loss | $913,318 | $2,139,443 | $2,162,393 | $6,844,930 |
| Net loss per share, basic and diluted | $0.36 | $1.25 | $0.86 | $3.99 |
For the nine months, cash used in operations was $3.09 million; investing activities used $4,852, while financing provided $2.55 million from common-stock issuance. Cash fell $553,145 to $5.02 million. At September 30, current assets were $5.49 million and current liabilities $750,877, yielding reported working capital of $4.7 million. Total liabilities were $807,153; the filing presents no borrowings or debt balance.
Revenue came from Health Sciences; Biospherics reported none. No gross-margin figure is stated. Research and development expense was $1.13 million for nine months, and selling, general and administrative expense was $2.27 million.
Material changes versus prior period
- Revenue declined 46% in Q3 and 33% for the nine-month period, attributed primarily to lower effective contract rates and changing demand for consulting services.
- Research and development expense decreased 74% in both comparative periods after completion of the Phase 3 and Phase 2 D-tagatose diabetes trials in 2010 and a shift toward preclinical triglyceride research.
- SG&A expense decreased 30% in Q3 and 29% year to date, mainly due to reduced diabetes-related business-development activity.
- Nine-month results included $845,000 of gains from settlements: $600,000 from release of a supplier purchase obligation and $245,000 from settling continuing payment obligations to former employees. Other income of $53,007 included government research grants.
- Shares outstanding increased following a January 2011 offering. A one-for-ten reverse stock split effective May 6, 2011 was reflected retroactively in share and per-share figures.
Outlook, risks and unusual items
Management estimated spending of $4 million to $6 million over the next 12 months for planned operations, assuming ongoing Health Sciences activity, continued SPX-106T development, limited further diabetes-drug development spending, and additional fundraising beyond that period. Animal studies of SPX-106T were ongoing; management said an initial human efficacy study could begin in early to mid-2012. The company was seeking a pharmaceutical partner for diabetes development but gave no assurance one would be secured.
In October 2011, after quarter-end, Spherix raised approximately $1.15 million net in a private placement, issuing 532,559 shares and warrants for another 532,559 shares; it also issued placement-agent warrants. Management said ongoing operations and development require recurring fundraising, likely involving equity, and warned that inability to raise funds could force it to stop development and dissolve. Other risks include uncertain partnering and development outcomes, potential dilution and restrictions on further registered offerings. Management reported disclosure controls effective at a reasonable-assurance level and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: this document identifies Spherix Incorporated, despite the request metadata naming Dominari Holdings Inc.
- Review subsequent filings for the October financing, cash runway, and any further equity or warrant issuance.
- Check progress and costs for SPX-106T, the planned human study, and efforts to partner or license the diabetes program.
- Assess whether Health Sciences revenue and margins can support operations and whether the stated $4–$6 million spending plan was met.
- Review the 2010 Form 10-K risk factors referenced by the filing; the 10-Q does not reproduce them in detail.