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SPEX > SEC Filings for SPEX > Form 8-K on 4-Apr-2013All Recent SEC Filings

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Form 8-K for SPHERIX INC


4-Apr-2013

Entry into a Material Definitive Agreement, Other Events, Financial Statements and Ex


Item 1.01 Entry Into a Material Definitive Agreement.

On April 2, 2013, Spherix Incorporated, a Delaware corporation ("we" or 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") and 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 continue its operations 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, an aggregate of 500 issued and outstanding shares of North South's common 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 (the "Common Stock") and 500 shares of North South's Series A Preferred Stock and 128 shares of North South's Series B Preferred Stock issued and outstanding will be converted into the right to receive an aggregate of 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").

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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.

The foregoing description of the Merger and the Merger Agreement, the Series D Preferred Stock and related transactions does not purport to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is filed as Exhibit 10.1 hereto and the text of the Series D Preferred Stock Certificate of Designation, which is filed as Exhibit 3.1 hereto, each of which is incorporated herein by reference.

Changes to the Business. Following the closing of the Merger, through our wholly owned subsidiary, Nuta, as the owner of North South Intellectual Property, we intend to expand our activities constituting the commercialization and development of intellectual property assets. Our activities will generally include the acquisition and development of patents through internal or external research and development. In addition, we will seek to acquire existing rights to intellectual property through acquisitions of already issued patents and pending patent applications, both in the United States and abroad. We may alone or in conjunction with others develop products and processes associated with our intellectual property and license our intellectual property to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes.

Accounting Treatment. The Merger will being accounted for as an acquisition of assets rather than a business pursuant to Financial Accounting Standards Board Accounting Standards Codification 805-50-30 "Business Combinations". Accordingly, assets acquired through a transaction that is not a business combination shall be measured based on the cash consideration paid plus either the fair value of the non-cash consideration given or the fair value of the assets acquired, whichever is more clearly evident.

Following the Merger, we will continue to be a "smaller reporting company," as defined in Item 10(f)(1) of Regulation S-K, as promulgated by the SEC.

Description of North South

General - Business Strategy

North South is the owner or assignee of certain patents, licenses and applications, as further described herein (the "North South Intellectual Property"). Subsequent to the consummation of the Merger, and through Nuta, its wholly-owned subsidiary, the Company will engage in an additional line of business. Through Nuta, we intend to become engaged in the commercialization and development of intellectual property assets that are not related to our historical business of drug development and services, although the scope of our intellectual property procurement and development will continue to include pharmaceutical and drug patents. Our activities will generally include the acquisition and development of patents through internal or external research and development. In addition, we will seek to acquire existing rights to intellectual property through acquisition of already issued patents and pending patent applications, both in the United States and abroad. We may alone, or in conjunction with others, develop products and processes associated with our intellectual property and license our intellectual property to others seeking to develop products or processes or whose products or processes infringe our intellectual property rights through legal processes.

North South owns a patent portfolio consisting of approximately 222 patents in wireless communications technology and pharmaceutical technology.

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We will likely need to raise additional capital to pursue our strategy. There is no assurance that we will succeed in our strategy or commercialize or realize value from the North South Intellectual Property or any additional intellectual property.

Key Elements of Business Strategy

Our intellectual property acquisition, development and licensing business strategy will include the following key elements:

? Identify Emerging Growth Areas where Patented Technologies will Play a Vital Role

Certain technologies become core technologies in the way products and services are manufactured, sold and delivered by companies across a wide array of industries. In conjunction with our partners, patent attorneys, and other patent sourcing professionals, we will identify core, patented technologies that have been or are anticipated to be widely adopted by third parties in connection with the manufacture or sale of products and services.

? Contact and Form Alliances with Owners of Core, Patented Technologies

Often individual inventors and small companies have limited resources and/or expertise and are unable to effectively address the unauthorized use of their patented technologies. We will seek to enter into business agreements with owners of intellectual property that do not have experience or expertise in the areas of intellectual property licensing and enforcement, or that do not possess the in-house resources to devote to intellectual property licensing and enforcement activities, or that, for any number of strategic business reasons, desire to more efficiently and effectively outsource their intellectual property licensing and enforcement activities.

? Effectively and Efficiently Evaluate Patented Technologies for Acquisition, Licensing and Enforcement

Subtleties in the language of a patent, recorded interactions with the patent office, and the evaluation of prior art and literature can make a significant difference in the potential licensing and enforcement revenue derived from a patent or patent portfolio. It is important to identify potential problem areas, if any, and determine whether potential problem areas can be overcome, prior to acquiring a patent portfolio or launching an effective licensing program.

? Purchase or Acquire the Rights to Patented Technologies

After evaluation, we may elect to purchase the patented technology, or acquire the exclusive right to license the patented technology in all or in specific fields of use. The original owner of the patent or patent rights will typically receive an upfront acquisition payment, or retain the right to a portion of the gross revenues generated from a patent portfolio's licensing and enforcement program, or a combination of the two.

. . .



Item 8.01 Other Events.

On April 1, 2013, the board of directors of the Company approved the adoption of a 2013 Equity Incentive Plan (the "2013 Plan"). The purpose of the 2013 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. The 2013 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to the Company's employees, officers, directors and consultants. Pursuant to the terms of the 2013 Plan, either the board or a board committee is authorized to administer the plan, including by determining which eligible participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards. Up to 2,800,000 shares of common stock are issuable pursuant to awards under the 2013 Plan. Unless earlier terminated by the Board, the 2013 Plan shall terminate at the close of business on April 1, 2023.

The foregoing is a summary description of the terms and conditions of the 2013 Plan does not purport to be complete and is qualified in its entirety by reference to the 2013 Plan, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated by reference herein.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

Exhibit No. Description
3.1 Series D Convertible Preferred Stock Certificate of Designation
10.1 Agreement and Plan of Merger dated April 2, 2013
10.2 Spherix Incorporated 2013 Equity Incentive Plan

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