Filing summary
Important identity discrepancy: The request identifies NeuroOne Medical Technologies Corp., but the supplied Form 10-Q is for Original Source Entertainment, Inc., a development-stage company. The summary below reflects the supplied filing, not NeuroOne.
Business context and reporting period
The filing covers the quarter and six months ended June 30, 2012. Original Source says it plans to license songs for use in television and movies. The financial statements are unaudited.
Financial results and liquidity
| Metric | Three months ended June 30, 2012 | Six months ended June 30, 2012 |
|---|---|---|
| Royalty revenue | $391 | $538 |
| Gross profit | $391 | $538 |
| General and administrative expense | $2,677 | $8,343 |
| Interest expense | $65 | $120 |
| Net loss | $2,351 | $7,925 |
| Operating cash flow | Not separately presented | $(7,805) |
At June 30, cash was $6,046, down from $13,851 at December 31, 2011. Total liabilities were $17,128, including $16,000 of notes payable ($3,500 current and $12,500 noncurrent). Stockholders’ equity was negative $11,202. The filing reports no investing or financing cash flows in the first half of 2012.
Changes versus prior comparable periods
- Second-quarter royalty revenue fell to $391 from $1,218 in 2011; net loss widened to $2,351 from $1,220.
- First-half royalty revenue fell to $538 from $4,289. General and administrative expenses declined to $8,343 from $12,133, but net loss was roughly unchanged at $7,925 versus $7,912.
- First-half interest expense increased to $120 from $68. Cash declined by $7,805 in the first half of 2012; in the same period of 2011, the company reported $3,500 in note borrowings.
Outlook, risks, and other matters
Management expects continued losses and negative operating cash flows and says additional debt or equity financing will be needed. It cannot assure that financing will be available on acceptable terms or that its business plan will succeed. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. No material capital commitments, off-balance-sheet arrangements, contractual obligations, or legal proceedings were reported. Management said disclosure controls were effective and reported no material changes to internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Original Source Entertainment, Inc., not NeuroOne Medical Technologies Corp.
- Reconcile the filing’s assertion of a working-capital deficiency with its reported June 30 current assets of $6,046 and current liabilities of $4,628, which imply positive working capital.
- Assess the company’s ability to obtain financing and fund ongoing operations given its low cash balance, losses, and going-concern warning.
- Verify the sustainability and collectability of royalty revenue, which declined substantially year over year.