Business Context and Reporting Period
This is Spatializer Audio Laboratories, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2013, filed November 6, 2013. The filing identifies the company as a former audio-technology developer and says it ceased commercial operations in 2006. It planned to pursue merger, acquisition, business-combination, or other financial opportunities and expected no significant operations until a transaction.
Entity mismatch: The request metadata names Enveric Biosciences, Inc., but the filing text is for Spatializer Audio Laboratories, Inc.
Financial Results and Condition
| Metric | Q3 2013 / Sep. 30, 2013 | Comparable period / prior balance-sheet date |
|---|---|---|
| Revenue | $0 | $0 in Q3 2012 |
| Net loss | $4,557 for Q3; $13,147 for nine months | $4,866 for Q3 2012; $12,993 for nine months 2012 |
| Operating expenses | $4,557 for Q3; $13,147 for nine months | $4,566 for Q3 2012; $12,693 for nine months 2012 |
| Cash and cash equivalents | $684 | $1,381 at Dec. 31, 2012 |
| Current assets | $4,903 | $5,600 at Dec. 31, 2012 |
| Current liabilities | $38,116 | $25,666 at Dec. 31, 2012 |
| Shareholder loans | $28,500 | $8,000 at Dec. 31, 2012 |
| Operating cash flow | $(21,197) for nine months | $(21,082) for nine months 2012 |
| Financing cash flow | $20,500 for nine months | $5,000 for nine months 2012 |
Negative working capital was $33,213 at September 30, 2013, versus $20,066 at December 31, 2012. Total stockholders’ deficit was $33,213. Basic and diluted loss per share was reported as $0.00, rounded. Margins are not meaningful given zero revenue. The filing reports no separate interest-bearing debt balance beyond shareholder loans.
Material Changes Versus Prior Period
- Nine-month net loss increased by $154 year over year as operating expenses rose by $454; the 2012 period included a $300 income-tax benefit.
- Cash declined by $697 from year-end 2012. Operating cash use was largely offset by $20,500 in officer loans.
- Shareholder loans rose by $20,500, while accounts payable and accrued liabilities fell to $9,616 from $17,666.
- Quarterly net loss improved by $309 versus Q3 2012, while quarterly operating expenses were nearly unchanged.
Outlook, Risks, and Other Matters
- Management said cash reserves were insufficient to meet operating obligations for more than two to three months without additional capital, and the company had no current source of future cash flow. It 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 contain no adjustments for the outcome of that uncertainty.
- Federal net operating loss carryforwards were approximately $9.6 million, potentially available through 2031, subject to an approximately $1 million annual limitation and possible ownership-change limitations.
- No material subsequent events were reported. The company reported no legal proceedings expected to have a material adverse effect, while noting litigation uncertainty; market risk disclosures were listed as not applicable.
- Management concluded disclosure controls were effective as of September 30, 2013 and reported no material change in internal control over financial reporting during the period.
Important Facts for Investors to Verify
- Confirm the issuer: the supplied filing is for Spatializer Audio Laboratories, Inc., not Enveric Biosciences, Inc.
- Assess the going-concern risk, very limited cash, and management’s estimate of only two to three months of operating capacity without new capital.
- Review the source, terms, and repayment obligations of the $28,500 in shareholder loans and the company’s ability to obtain additional financing.
- Verify the proposed business-combination strategy and whether any subsequent transaction or operating plan emerged after the reporting date.
- Check the effect of ownership changes and other restrictions on the use of the reported tax-loss carryforwards.