Business context and reporting period
This filing is Spatializer Audio Laboratories, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2014—not an Enveric Biosciences filing. Spatializer states that it discontinued its operating business in 2007, has no current operating activities, and is a shell company seeking an acquisition or merger partner.
Financial results and position
Amounts are in U.S. dollars. The company reported no revenue; therefore, operating margins are not meaningful.
| Metric | Q3 2014 / September 30, 2014 | Comparable 2013 / December 31, 2013 |
|---|---|---|
| Revenue | $0 for the first nine months | Not separately stated |
| Q3 net loss | $3,178 | $4,557 |
| Nine-month net loss | $22,947 | $13,147 |
| Cash and cash equivalents | $9,126 | $249 |
| Total current liabilities | $2,300 | $24,695 |
| Stockholders’ equity (deficit) | $6,826 | $(20,227) |
For the nine months ended September 30, 2014, operating cash outflow was $39,123, versus $21,197 in 2013. Financing provided $48,000, including $50,000 from a common-stock issuance and repayment of $2,000 in stockholder loans. No stockholder loans remained at quarter-end. The filing reports no other debt balance.
Changes, outlook, risks, and unusual items
- Q3 net loss narrowed year over year, but the nine-month net loss increased. Nine-month general and administrative expense rose to $22,414 from $13,147; management attributed the increase to higher legal expenses.
- Management says it is reducing expenses and seeking a merger or acquisition, but gives no financial guidance or assurance of completing a transaction.
- The filing raises substantial liquidity and going-concern uncertainty: the company may be unable to fund its search for a transaction and could be forced to liquidate or seek bankruptcy protection. Its financial statements include no adjustments for a possible inability to continue as a going concern.
- The company reported approximately $9.6 million of federal net operating loss carryforwards, subject to annual and ownership-change limitations. It reported no material subsequent events and no legal proceedings.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: the supplied filing identifies Spatializer Audio Laboratories, Inc. (OTCQB: SPZR), not Enveric Biosciences.
- Review the going-concern disclosure and the company’s ability to fund operations and pursue a transaction.
- Verify the January 2014 issuance of 3,267,974 shares for $50,000 and the reported outstanding share count. The balance sheet lists 15,409,999 shares outstanding but shows common-stock par value of $121,420, unchanged from year-end despite the increase in shares.
- Assess the company’s very limited cash, continuing operating cash outflows, and reliance on financing.