Filing summary
Entity and period: The supplied filing is a Form 10-Q for the quarter ended September 30, 2012, filed November 13, 2012. It identifies the registrant as Original Source Entertainment, Inc., a development-stage company planning to license songs for television and film—not NeuroOne Medical Technologies Corp. Verify that this is the intended filing.
Financial performance and condition
- Revenue and profit: Third-quarter 2012 royalty revenue was $23, down from $812 a year earlier; net loss was $4,780 versus $4,178. For the first nine months, revenue was $561 versus $5,101, and net loss was $12,535 versus $12,090.
- Expenses and margins: Third-quarter general and administrative expense was $4,754 (prior year $4,938); nine-month expense was $12,927 (prior year $17,071). Cost of sales was zero in both 2012 periods. The filing reports no tax provision. With minimal revenue, operating results remained loss-making.
- Cash flow: Net cash used in operating activities was $12,366 for the first nine months of 2012, compared with $11,970 used in the 2011 period. There were no investing or financing cash flows in the 2012 period. Cash fell from $13,851 at December 31, 2011 to $1,485 at September 30, 2012.
- Liquidity and debt: Current assets were $1,485 and current liabilities $4,797, a working-capital deficit of $3,312. Total liabilities were $17,297, including $16,000 of notes payable ($3,500 current and $12,500 noncurrent). Stockholders’ equity was negative $15,812.
- Other: The balance sheet reports 5,073,000 common shares outstanding; the statements use a 4,500,000 weighted-average share count for 2012. Basic and diluted loss per share is shown as $(0.00).
Changes and management commentary
Nine-month royalty revenue dropped substantially year over year, while general and administrative expense declined. The nine-month net loss nevertheless increased modestly. Management attributed the cash decrease primarily to general and administrative expenses and said it continued efforts to reduce those costs.
Outlook, risks, and unusual items
Management expects continued losses and negative operating cash flows for the foreseeable future and says additional debt or equity financing will be needed to sustain operations. It cannot assure that financing will be available on acceptable terms. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern; the financial statements include no adjustments for the possible outcome. Management gave no revenue or earnings guidance and said there were no material capital-expenditure commitments or known material operating trends. No off-balance-sheet arrangements, contractual obligations, or legal proceedings were reported. Management concluded disclosure controls were effective as of September 30, 2012 and reported no material changes in internal control over financial reporting.
Investor verification points
- Confirm the registrant: the filing names Original Source Entertainment, Inc., despite the request identifying NeuroOne Medical Technologies Corp.
- Reconcile the nine-month net loss of $12,535 with MD&A’s statement that losses were $12,366 and $4,220; $12,366 corresponds to 2012 operating cash used, and $4,220 does not match the statements’ 2011 net loss of $12,090.
- Check the share-count discrepancy between 5,073,000 shares outstanding and the 4,500,000 weighted-average shares reported for 2012.
- Verify the going-concern financing plan, debt terms and maturity schedule, and the company’s ability to fund operations with only $1,485 of cash.
- Clarify the inception-to-date period: the statements present figures through September 30, 2012, while MD&A describes one inception-to-date comparison as through June 30, 2012.