Filing summary
Identity alert: The supplied filing is Spatializer Audio Laboratories, Inc.’s Form 10-Q for the quarter ended September 30, 2011—not an Enveric Biosciences filing. Confirm the issuer and filing before relying on this summary.
Business context and reporting period
Spatializer reported as a shell company and said it had ceased commercial operations in 2006. It planned to remain a public company and seek a merger, acquisition, business combination, or other financial transaction; it expected no significant operations until a transaction was completed. The unaudited report covers the three and nine months ended September 30, 2011.
Financial results and liquidity
- Revenue: $0 for both the third quarter and first nine months of 2011, unchanged from the comparable 2010 periods.
- Net loss: $3,687 for Q3 2011 versus $5,613 in Q3 2010; $18,403 for the first nine months of 2011 versus $25,928 in 2010. Nine-month 2010 loss included $1,450 in income taxes; 2011 reported none.
- Expenses and margins: General and administrative expense was $3,687 in Q3 and $18,403 for the first nine months of 2011. With no revenue, operating margins are not meaningful.
- Cash flow: Net cash used in operations was $25,566 in the first nine months of 2011, compared with $37,632 in 2010. Financing provided $44,598 in 2011, including $20,000 from a stock issuance and $24,598 in shareholder loans; ending cash was $20,158, up from $1,126 at December 31, 2010.
- Balance sheet: At September 30, cash was $20,158 and total current assets were $24,377; current liabilities were $7,698, all reported as accounts payable. Working capital was $16,679, compared with negative $49,516 at year-end 2010. Shareholder loans and accrued professional fees were reported as zero at quarter-end. Total assets were $24,377 and shareholders’ equity was $16,679.
- Share count and financing: Common shares outstanding increased from 6,500,000 at December 31, 2010 to 12,142,000 at September 30, 2011. The company said 5,642,000 shares were issued during the quarter to convert $64,598 of director loans and raise $20,000 from a director, at $0.0155 per share.
Changes, outlook, and risks
Year-to-date losses and operating cash use improved versus 2010, but the company had no revenue or operating business. The director debt conversion and equity investment eliminated approximately $84,000 of debt and funding, according to the company, and restored positive book equity. Management said existing cash could support short-term liquidity but was insufficient to meet obligations beyond six to nine months without additional capital; it disclosed no current source of future cash flow.
The filing states that significant operating losses raise substantial doubt about the company’s ability to continue as a going concern. The financial statements include no adjustments for the outcome of that uncertainty. Other disclosed risks include potential stock illiquidity and volatility, and limitations on using approximately $9.5 million of federal net operating loss carryforwards, including an annual limitation of about $1 million and possible further restrictions following a change in ownership. The company reported no material subsequent events requiring disclosure and no legal proceedings expected to have a material adverse effect. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Key facts for investors to verify
- Verify the issuer: the filing identifies Spatializer Audio Laboratories, Inc., not Enveric Biosciences.
- Assess the going-concern warning, stated six-to-nine-month cash horizon, and availability of additional financing.
- Reconcile the quarter’s share issuances, director-related debt conversion and investment, and the cash-flow statement’s shareholder-loan activity.
- Confirm the current operating status and any subsequent merger, acquisition, or business-combination developments; this filing provides no transaction guidance.