Non-Reliance on Previous Financials, Audits or Interim Review
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. (a) On February 27, 2013, the Audit Committee of Spherix Incorporated (the "Company") re-assessed the equity versus liability categorization of the common stock warrants it has issued in its registered direct and private placement stock offerings from 2009 to date (the "Warrants") and concluded that the Warrants should have been classified as a liability upon issuance. The Warrants have been accounted for as equity. This classification change will affect both the balance sheets and statements of operations previously reported by the Company. This change will have no cash effect on the Company.
The Warrants contain provisions requiring net cash settlement in the event of certain fundamental transactions, some of which may be outside the control of the Company.
Accordingly, the Audit Committee of the Company has concluded that the financial statements since mid-November 2009 should no longer be relied upon. The Company is in the process of determining the impact on the affected periods.
The Audit Committee of the Company has discussed these matters with the Company's independent registered public accounting firm.
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