Business context and reporting period
This filing is Spatializer Audio Laboratories, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2011—not an Enveric Biosciences filing. The company had ceased commercial operations and sold substantially all operating assets in 2007. It said it planned to seek a merger, acquisition, or other business combination and did not expect significant operations before one occurred.
Financial results and position
All amounts below are in dollars, as presented in the filing.
- Revenue: $0 for both the second quarter and first six months of 2011, unchanged from the comparable 2010 periods.
- Profit and expenses: Second-quarter net loss was $3,632 versus $4,477 in 2010; six-month net loss was $14,716 versus $20,315. Six-month general and administrative expense was $14,716 versus $18,865. No research and development or sales and marketing expense was reported.
- Margins: Not meaningful with no revenue; gross profit was $0.
- Cash flow: The cash flow statement reports a $2,720 increase in cash in the first six months, from $1,126 to $3,846, with officer loans and changes in payables contributing. Its line labeled “Net Cash Used In Operating Activities” shows positive $2,720.
- Liquidity: Cash was $3,846 at June 30, 2011. The filing reports negative working capital of $64,232, versus $49,516 at December 31, 2010. Management said current resources were insufficient to meet obligations for more than 3–6 months without additional capital.
- Liabilities and equity: Current liabilities were reported at $72,297, including accounts payable of $7,699 and officer loans of $64,598. Shareholders’ equity was negative $64,232. The filing reports 6.5 million common shares outstanding as of August 1, 2011.
- Debt: No conventional debt balance is separately identified; the company relied on advances from stockholders/officers.
Changes versus the prior comparable period
Revenue remained at zero. Second-quarter and six-month losses narrowed year over year, while six-month general and administrative costs declined. Cash increased from year-end, supported in part by additional officer loans; the reported working-capital deficit widened from year-end.
Outlook, risks, and unusual items
- Management disclosed 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.
- The company stated there was no current source of future cash flow and that additional capital would be needed to meet operating obligations beyond 3–6 months.
- Two stockholders who were also principal officers advanced funds. The notes report advances of $68,598 at June 30, 2011, while the balance sheet reports officer loans of $64,598; the filing does not reconcile the difference.
- The California State Controller demanded $7,204 over property purportedly abandoned in 1996. Management was investigating the claim and recorded the full amount as a liability.
- The company reported approximately $9.5 million of federal net operating loss carryforwards, subject to an annual limitation of approximately $1 million and potential ownership-change limitations.
- No material subsequent events requiring disclosure were reported. Management described disclosure controls as effective; market risk disclosures were marked not applicable.
Important facts to verify
- Confirm the filing identity and issuer: the supplied filing names Spatializer Audio Laboratories, Inc., despite request metadata naming Enveric Biosciences.
- Reconcile the balance-sheet presentation: cash of $3,846 plus other current assets of $4,219 equals total assets of $8,065, but the reported total current assets line is $3,061.
- Reconcile officer-loan balances of $64,598 on the balance sheet and $68,598 in the notes.
- Verify the cash-flow statement’s positive $2,720 amount labeled “Net Cash Used In Operating Activities” and its treatment of officer advances.
- Assess the company’s ability to secure financing or a business combination, and the status of the $7,204 state claim.