Business context and reporting period
This is the Form 10-K for the fiscal year ended December 31, 2016, signed April 17, 2017. Although the request identifies NeuroOne Medical Technologies Corp., the registrant named in the filing is Original Source Entertainment, Inc. The filing says Original Source spun off its operating subsidiary, Original Source Music, effective May 13, 2016, and thereafter had no operations and considered itself a blank-check company. It was negotiating a potential business combination with NeuroOne, Inc.; no definitive agreement had been reached.
Financial results and liquidity
| Metric | FY 2016 / Dec. 31, 2016 | FY 2015 / Dec. 31, 2015 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $32,611 | $30,915 |
| Loss from discontinued operations | $15,164 | $31,948 |
| Net loss | $47,775 | $62,863 |
| Net loss per share | $0.01 | $0.01 |
| Cash at year-end | $0 | $0 |
| Net cash used in operating activities | $21,106 | $30,229 |
| Current assets / current liabilities | $4,277 / $117,927 | $1,838 / $83,330 |
Margins are not meaningful because the company reported no revenue. At December 31, 2016, total liabilities were $117,927 and stockholders’ deficit was $113,650. Liabilities included $73,758 of non-interest-bearing, unsecured related-party advances due on demand, $22,362 of accounts payable, and $21,807 of liabilities from discontinued operations. Investing cash flow was zero; financing cash inflow consisted of $21,106 in related-party advances. The filing does not provide a clear separate debt total beyond these reported liabilities and advances.
Changes versus the prior year
Net loss narrowed by $15,088, primarily as the loss from discontinued operations fell by $15,784; this was partly offset by a $1,696 increase in general and administrative expense, primarily professional fees. Operating cash use declined, while related-party advances received also decreased. Current liabilities rose from $83,330 to $117,927.
Outlook, risks and unusual items
Management anticipated continued losses and negative operating cash flows and said additional debt or equity financing would be needed, with no assurance funding would be available on acceptable terms. The auditor highlighted 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.
The proposed NeuroOne transaction remained under negotiation and due diligence, with no assurance it would be completed or what its final terms would be. Subsequent-event disclosures say that on April 17, 2017 the board and majority stockholder authorized a proposed name change to NeuroOne Medical Technologies Corporation, increases in authorized shares, a conversion to Delaware, and a 2017 equity incentive plan. Certain actions could be contingent on completion of a business combination.
Disclosure controls and internal control over financial reporting were reported ineffective as of year-end. Management identified a material weakness involving limited resources and lack of segregation of duties, and planned to recruit experienced professionals if business conditions permitted. The filing also reports no trading market for the common stock and no dividends paid or expected in the foreseeable future.
Important facts for investors to verify
- Confirm the registrant’s identity and status: this 10-K is filed by Original Source Entertainment, not a company already operating as NeuroOne Medical Technologies.
- Check whether the proposed NeuroOne transaction closed, its final terms, and any resulting dilution or changes in authorized shares and corporate structure.
- Assess the company’s ability to obtain financing and address its zero cash, working-capital deficit, and demand related-party advances.
- Review subsequent filings for remediation of the disclosed material weakness and any changes to going-concern conditions.