Business context and reporting period
Issuer mismatch: The provided filing is for Original Source Entertainment, Inc., a development-stage company planning to license music for television and film—not NeuroOne Medical Technologies Corp. The figures below describe the filing as supplied and should not be attributed to NeuroOne without verification. It is a Form 10-Q for the quarter ended June 30, 2013.
Financial results and position
Amounts are in dollars.
- Revenue: Royalty revenue was $451 for the quarter and $857 for the six months ended June 30, 2013; cost of sales was zero. Gross margin was therefore 100% on reported revenue.
- Loss: Quarterly net loss was $19,122, versus $2,351 a year earlier. Six-month net loss was $22,430, versus $7,925. Quarterly and six-month 2013 operating losses were $14,795 and $17,780, respectively.
- Expenses: G&A was $15,246 for the quarter and $18,637 year to date. Interest expense was $327 and $650, respectively; the 2013 periods also included $4,000 of interest expense attributed to a beneficial conversion feature.
- Cash flow: Six-month operating cash use was $17,780; financing provided $18,000 ($8,000 in note borrowings and $10,000 in paid-in capital), leaving cash up $220 to $1,338. There were no investing activities.
- Liquidity and debt: At June 30, cash and total current assets were $1,338, against current liabilities of $18,355, including $17,000 of current notes payable, $952 of related-party payables, and $403 of accrued interest. Working capital was negative $17,237. Stockholders’ equity was negative $17,237.
- Other: The balance sheet reported 5,073,000 common shares outstanding; the filing reports a weighted-average 4,500,000 shares for the periods presented.
Material changes versus prior comparable periods
Quarterly revenue increased $60 from $391, while six-month revenue increased $319 from $538. Quarterly G&A rose $12,569 from $2,677, which management attributed to costs of applying for and obtaining DTC eligibility. Six-month G&A increased to $18,637 from $8,343; however, the MD&A’s stated $55,730 increase conflicts with those reported amounts, which imply an increase of $10,294.
Quarterly net loss widened to $19,122 from $2,351; the six-month net loss widened to $22,430 from $7,925. The 2013 results include the $4,000 beneficial-conversion-feature expense.
Outlook, risks, and notable disclosures
Management said it expects continued losses and negative operating cash flows for the foreseeable future and will need additional debt or equity financing to sustain operations. It said financing may not be available on acceptable terms. The filing states that the working-capital deficiency raises substantial doubt about the company’s ability to continue as a going concern; the financial statements include no adjustments for the outcome of that uncertainty. No material capital-expenditure commitments, off-balance-sheet arrangements, or contractual obligations were reported. Management cited competition and industry consolidation as potential risks and provided no specific financial guidance.
The company reported disclosure controls as effective at June 30, 2013, and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: this filing identifies Original Source Entertainment, Inc., not NeuroOne Medical Technologies Corp.
- Reconcile the MD&A’s stated $55,730 six-month G&A increase with the financial statements, which show an increase of $10,294.
- Review the company’s near-term financing needs, note terms and maturities, and the going-concern uncertainty.
- Confirm the share-count figures and their respective dates and calculation bases.