Business context and reporting period
Important identity mismatch: The request identifies Enveric Biosciences, Inc., but the supplied Form 10-Q is for Spatializer Audio Laboratories, Inc. (Commission File No. 000-26460), for the quarter ended June 30, 2014. This summary reflects the supplied filing, not an Enveric filing.
Spatializer says it discontinued its operating business in 2007 and is now a shell company seeking an acquisition or merger partner. Its financial statements are unaudited.
Financial results and condition
- Revenue: Zero for the three and six months ended June 30, 2014 and 2013.
- Net loss: $11,901 for Q2 2014 versus $3,892 in Q2 2013; $19,769 for the first half of 2014 versus $8,590 in the first half of 2013. Basic and diluted loss per share was reported as $0.00 in magnitude for each period.
- Expenses and margins: General and administrative expense was $11,716 for Q2 2014 and $19,302 for the first half, compared with $3,892 and $8,590, respectively, in 2013. With no revenue, the company had no operating margin.
- Cash flow: First-half operating cash use was $40,462, versus $15,953 in 2013. Financing provided $48,000, including $50,000 from common stock issuance and $2,000 of loan repayments. Cash increased by $7,538 to $7,787.
- Liquidity and liabilities: At June 30, 2014, current assets were $12,006, including $7,787 cash; current liabilities were $2,002, all reported as accounts payable and accrued liabilities. Stockholder loans were zero, compared with $2,000 at year-end 2013. Total stockholders’ equity was $10,004, versus a $20,227 deficit at year-end.
- Shares: 15,409,999 common shares were reported outstanding as of June 30 and July 20, 2014. The company issued 3,267,974 shares to an entity controlled by a former director and officer for $50,000 in January 2014.
Changes, outlook, and risks
- Higher legal expenses were cited as the reason for increased general and administrative costs. Management attributed higher first-half operating cash use to the larger net loss and a decrease in accounts payable and accrued liabilities.
- Management stated it was reducing expenses and seeking an acquisition or merger partner, but gave no transaction guidance or assurance of success.
- The filing raises substantial liquidity and going-concern uncertainty: the company has no operating activities and says it may be forced to liquidate or seek bankruptcy protection if it cannot complete a transaction or maintain sufficient liquidity. The statements contain no adjustments for a possible failure to continue as a going concern.
- Risks identified include insufficient working capital, inability to attract key personnel, and inability to identify or complete an acceptable merger or acquisition. Management reported disclosure controls were effective and no material changes to internal control over financial reporting.
- The company reported approximately $9.6 million of federal net operating loss carryforwards, subject to annual and ownership-change limitations. No material subsequent events or legal proceedings were reported.
Key facts to verify
- Confirm the filing’s issuer and period: the supplied document is Spatializer’s 2014 Q2 10-Q, not an Enveric Biosciences filing.
- Reconcile the balance sheet’s common-stock amount: it reports $121,420 at both dates despite an increase in shares outstanding from 12,142,025 to 15,409,999.
- Assess the company’s near-term ability to fund expenses and continue its search for a merger or acquisition given its cash balance and stated going-concern risk.
- Confirm the terms, related-party status, and use of proceeds of the January 2014 stock issuance.