Why did North South take stock? My guess is they, just like any partner who takes stock, want in on any upside coming Spherix's way. They sure didn't take stock in anticipation of sharing any downside action.
Yes, in essence they sold them to North South for the patents they acquired. Technically the patents aren't owned until the deal closes and thus the shares aren't outstanding until that happens either.
Now here's the other trick, the North South was given several classes of shares and they convert at different ratios. Most of the stock was given in a form that converts to stock at a 1 to 10 share ratio. In other words for every share they have they get 10 shares when they convert it. And they don't pay money when they convert it.