Filing summary
Important identity discrepancy: The request identifies Enveric Biosciences, Inc., but the supplied 10-Q is for Spatializer Audio Laboratories, Inc. It covers the quarter ended September 30, 2012, and is not identified in the filing as an Enveric filing. Confirm the issuer and filing before relying on these figures.
Business context and reporting period
Spatializer reported that it ceased commercial operations in 2006 and did not expect significant operations unless it completed a merger, acquisition, business combination, or other appropriate financial transaction. It described itself as seeking such opportunities and checked the shell-company box as “Yes.” The interim financial statements are unaudited.
Financial performance and position
- Revenue: $0 in both the third quarter and first nine months of 2012; the company also reported $0 for the comparable 2011 quarter.
- Third-quarter results: General and administrative expense and operating loss were $4,566; net loss was $4,866, versus a $3,687 net loss in Q3 2011. Basic and diluted loss per share was reported as $0.00, rounded.
- Nine-month results: Operating expenses were $12,693 and net loss was $12,993, versus operating expenses and net loss of $18,403 for the first nine months of 2011. The year-to-date loss narrowed by $5,410.
- Cash flow: Net cash used in operating activities was $21,082 for the first nine months of 2012, compared with $25,566 in 2011. Financing provided $5,000, consisting of a loan from an officer; cash fell by $16,082 to $2,149.
- Liquidity: At September 30, 2012, cash was $2,149, current assets were $6,368, and current liabilities were $14,806, producing negative working capital of $8,438. At December 31, 2011, cash was $18,231 and working capital was positive $4,555.
- Liabilities and equity: Current liabilities included $9,806 of accounts payable and accrued liabilities and $5,000 of shareholder loans. Stockholders’ equity was a deficit of $8,438, compared with equity of $4,555 at year-end 2011. No interest expense was reported.
- Margins: Not meaningful because the company reported no revenue.
Changes, outlook, risks, and unusual items
- Quarterly net loss increased by $1,179 year over year, while nine-month net loss improved by $5,410. Quarterly general and administrative expense rose to $4,566 from $3,687; nine-month expense declined to $12,693 from $18,403.
- Management said current cash reserves were not sufficient to meet operating obligations for more than three to six months without additional capital and that the company had no current source of future cash flow. Management believed liquidity could be maintained at a consistent level in the short term.
- 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 possible outcome of that uncertainty.
- In October 2012, President Jay Gottlieb provided an additional $3,000 interest-free loan for operating expenses. The filing reports no other material subsequent events requiring disclosure.
- The company reported approximately $9.5 million in federal net operating loss carryforwards, available through 2031, subject to an approximately $1 million annual limitation and possible ownership-change limitations.
- Management said disclosure controls were effective as of September 30, 2012, and reported no material changes to internal control over financial reporting during the quarter. The filing identifies potential stock illiquidity and volatility; it reports no legal proceedings expected to have a material adverse effect.
Most important facts to verify
- Whether this Spatializer 2012 filing is the intended document, given the Enveric Biosciences request.
- How the company planned to fund operations beyond the stated three-to-six-month period, and whether additional financing or a business combination occurred.
- The terms, repayment status, and completeness of shareholder and officer loans, including the October 2012 $3,000 loan.
- The status and realizability of the tax-loss carryforwards, including ownership-change limitations.