Filing summary
Filing identity: The supplied filing is a Form 10-Q for Original Source Entertainment, Inc., not NeuroOne Medical Technologies Corp. It covers the quarter ended March 31, 2014; financial statements are unaudited. The company describes itself as a development-stage business seeking to license songs to television and music customers.
Financial results and liquidity
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $165 | $406 |
| Cost of revenue | $0 | $0 |
| Gross margin | $165 | $406 |
| Operating expenses | $4,063 | $3,391 |
| Operating loss | $(3,898) | $(2,985) |
| Interest and other expense | $(330) | $(323) |
| Net loss | $(4,228) | $(3,308) |
| Basic and diluted loss per share | $(0.00), loss under $0.01 | $(0.00), loss under $0.01 |
Operating expenses comprised $188 of general and administrative expense and $3,875 of professional fees in Q1 2014; the filing attributes the year-over-year increase in net loss mainly to legal expenses. Cash used in operations was $25, compared with $2,985 in the prior-year quarter. There was no investing or financing cash flow in Q1 2014. Cash ended at $500, down from $525 at December 31, 2013.
At March 31, 2014, total assets were $500, current liabilities were $3,875, and stockholders’ deficit was $3,375. The filing reports no debt balances at quarter-end, following related-party debt forgiveness. Accumulated losses were $85,169. No cash interest or income taxes were paid in either comparative quarter.
Material changes and notable events
- Revenue declined by $241 year over year, while net loss increased by $920.
- On March 5, 2014, a former director and another shareholder sold 3.5 million shares, about 69% of outstanding common stock, to Amer Samad. Samad became CEO; the former CEO resigned from officer roles and was to leave the board following the specified filing process.
- Related parties forgave $22,000 of notes payable plus $1,240 accrued interest, $6,000 of convertible notes plus $952 accrued interest, and $952 of related-party accounts payable. The filing recorded the $30,144 total as additional paid-in capital. These were noncash transactions.
- Outstanding shares were 5,073,000 at March 31 and May 20, 2014; no shares were issued during the quarter.
Outlook, risks, and controls
The filing provides no quantified forecast or formal guidance. Management said it expected future losses and planned to fund operating costs over the next 12 months with existing cash, director loans, and/or sales of shares or other securities; there is no assurance those funding efforts will succeed. The company disclosed substantial doubt about its ability to continue as a going concern, citing operating losses, negative operating cash flows, limited cash, and anticipated spending to develop and market its business.
Management reported no material capital-expenditure commitments, off-balance-sheet arrangements, pending or threatened legal proceedings known to the company, or material subsequent events through May 20, 2014. It stated disclosure controls were effective as of March 31 and that no material change in internal control over financial reporting occurred during the quarter. Forward-looking statements are subject to risks, including competition and industry consolidation.
Important facts to verify
- Confirm the filing belongs to the intended issuer: its face page and financial statements identify Original Source Entertainment, Inc., rather than NeuroOne Medical Technologies Corp.
- Review the March 5 control-change transaction, the buyer’s ownership, and the related director and officer transition.
- Verify the debt-forgiveness agreements and the accounting treatment as shareholder capital contributions rather than income.
- Assess the company’s ability to fund operations given $500 cash, $3,875 in current liabilities, and the stated going-concern uncertainty.
- Reconcile the expense presentation: the statements show $188 general and administrative expense plus $3,875 professional fees, while MD&A describes $4,063 as general and administrative expenses.