Business context and reporting period
The supplied filing is Spherix Incorporated’s unaudited Form 10-Q for the quarter and six months ended June 30, 2019, filed August 14, 2019. This does not match the request metadata naming Dominari Holdings Inc.; investors should verify the issuer and filing before relying on this summary. Spherix described itself as a technology-development company, with biotechnology and blockchain interests as well as limited patent-monetization activity. Its shares traded as SPEX on Nasdaq. A 1-for-4.25 reverse stock split took effect May 10, 2019.
Financial results and liquidity
Amounts below are in thousands of dollars, except per-share data.
| Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
|---|---|---|---|---|
| Revenue | No revenue amount is reported in the statements; the filing describes revenue as limited or insufficient to cover expenses. | |||
| Operating expenses | $888 | $1,262 | $1,601 | $2,839 |
| Operating loss | $(888) | $(1,262) | $(1,601) | $(2,839) |
| Other income (expense), net | $244 | $864 | $(192) | $955 |
| Net loss | $(644) | $(398) | $(1,793) | $(1,884) |
| Basic and diluted loss per share | $(0.30) | $(0.20) | $(0.87) | $(1.06) |
No meaningful gross or operating margin is presented because the statements report no revenue. The company’s results included significant non-cash fair-value changes, including changes in Hoth, DatChat-related investments, and warrant liabilities.
At June 30, 2019, cash and cash equivalents were $564, marketable securities $817, and investments $10,565; total assets were $12,052. Current and total liabilities were $845, with no debt balance separately reported. Working capital was approximately $0.6 million. Cash was $17 at December 31, 2018, while marketable securities declined from $2,700. Stockholders’ equity was $11,207, down from $12,098.
For the first six months, operating cash use was $1,614, investing activities provided $1,374, and financing activities provided $787, including net proceeds from an equity offering. Cash increased by $547 to $564. The company reported recurring operating losses and operating cash deficits and stated that substantial doubt existed about its ability to continue as a going concern within one year of filing.
Material changes and transactions
- Quarterly operating loss narrowed to $888 from $1,262, largely because patent amortization ceased and compensation expense declined. Net loss nevertheless increased to $644 from $398, primarily because other income was lower.
- For the first half, operating loss improved to $1,601 from $2,839, but other income shifted to a $192 expense from $955 of income. Net loss was $1,793 versus $1,884.
- Hoth Therapeutics completed its IPO in February. Spherix held 1,735,714 Hoth shares, valued at $10,084 at June 30, based on a quoted price of $5.81 per share; the filing said Spherix and affiliates owned approximately 19% of Hoth.
- In May, Spherix acquired a 20% interest in CBM BioPharma and certain DatChat securities and rights for $350. It also replaced its proposed CBM merger with an asset-purchase agreement. The stated consideration was $7.0 million in stock and $1.0 million cash, subject to closing conditions and shareholder approvals. The cash is contingent on qualifying financing and specified proceeds are payable to CBM until the amount is satisfied.
- Spherix reported a May registered equity financing with approximately $800 of net proceeds, involving common shares and pre-funded warrants. Common shares outstanding were 2,321,088 at June 30; 2,354,421 were outstanding as of August 14.
- A subsequent event: on August 9, Spherix entered into an at-the-market agreement allowing sales of up to $1.2 million of common stock, with a 3% agent commission.
Outlook, risks, and unusual items
- Management said operations require additional capital and that future financing may not be available on favorable terms, or at all. The company expected to rely on existing liquidity, future securities sales or debt, and potential revenue from patents and new ventures.
- The CBM asset acquisition remained subject to approvals and other closing conditions. Failure to close could forfeit anticipated benefits, leave transaction costs, and potentially trigger a 250,000-share termination fee in specified circumstances. The filing gives inconsistent outside dates for satisfying closing conditions: September 30, 2019 in the financial-statement note and December 31, 2019 in the MD&A.
- The company said its board and management were reviewing strategic alternatives, with no assurance of a transaction or increased shareholder value. Risks include financing needs, dilution, acquisition integration, and the early-stage nature of the relevant businesses.
- Disclosure controls and procedures were deemed ineffective at June 30, 2019 because of material weaknesses, including insufficient segregation of duties and a lack of controls to ensure material transactions and developments were reflected in the financial statements.
- Management reported no known pending material legal claims and no pending counterclaims. The filing reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm that this Spherix/SPEX filing—not a Dominari Holdings filing—is the intended document.
- Check subsequent filings for the status and final terms of the CBM asset purchase, required approvals, financing-related cash payment, and any termination fee; reconcile the conflicting deadline dates.
- Review the company’s post-quarter financing, including whether and how much was raised under the $1.2 million ATM facility, and assess dilution and near-term cash needs.
- Verify the valuation and liquidity of the Hoth and other investments, and the status and carrying value of DatChat-related assets.
- Track remediation of the disclosed internal-control weaknesses and the company’s going-concern risk.