Enveric Biosciences, Inc. quarterly report, Q3 FY2014

Business context and reporting period

This filing is Spatializer Audio Laboratories, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2014—not an Enveric Biosciences filing. Spatializer states that it discontinued its operating business in 2007, has no current operating activities, and is a shell company seeking an acquisition or merger partner.

Financial results and position

Amounts are in U.S. dollars. The company reported no revenue; therefore, operating margins are not meaningful.

MetricQ3 2014 / September 30, 2014Comparable 2013 / December 31, 2013
Revenue$0 for the first nine monthsNot separately stated
Q3 net loss$3,178$4,557
Nine-month net loss$22,947$13,147
Cash and cash equivalents$9,126$249
Total current liabilities$2,300$24,695
Stockholders’ equity (deficit)$6,826$(20,227)

For the nine months ended September 30, 2014, operating cash outflow was $39,123, versus $21,197 in 2013. Financing provided $48,000, including $50,000 from a common-stock issuance and repayment of $2,000 in stockholder loans. No stockholder loans remained at quarter-end. The filing reports no other debt balance.

Changes, outlook, risks, and unusual items

  • Q3 net loss narrowed year over year, but the nine-month net loss increased. Nine-month general and administrative expense rose to $22,414 from $13,147; management attributed the increase to higher legal expenses.
  • Management says it is reducing expenses and seeking a merger or acquisition, but gives no financial guidance or assurance of completing a transaction.
  • The filing raises substantial liquidity and going-concern uncertainty: the company may be unable to fund its search for a transaction and could be forced to liquidate or seek bankruptcy protection. Its financial statements include no adjustments for a possible inability to continue as a going concern.
  • The company reported approximately $9.6 million of federal net operating loss carryforwards, subject to annual and ownership-change limitations. It reported no material subsequent events and no legal proceedings.
  • Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.

Important facts for investors to verify

  • Confirm the issuer: the supplied filing identifies Spatializer Audio Laboratories, Inc. (OTCQB: SPZR), not Enveric Biosciences.
  • Review the going-concern disclosure and the company’s ability to fund operations and pursue a transaction.
  • Verify the January 2014 issuance of 3,267,974 shares for $50,000 and the reported outstanding share count. The balance sheet lists 15,409,999 shares outstanding but shows common-stock par value of $121,420, unchanged from year-end despite the increase in shares.
  • Assess the company’s very limited cash, continuing operating cash outflows, and reliance on financing.