Filing summary
Entity and period: The supplied filing is Original Source Entertainment, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2016—not a filing for NeuroOne Medical Technologies Corp. The company described a song-licensing business with limited activity and revenue. It completed the spin-off of its operating subsidiary on May 13, 2016; afterward, it stated it had no operations or assets and was a blank-check registrant without a specific business plan.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 or prior date |
|---|---|---|
| Revenue | $102 | $113 |
| Net loss | $8,959 | $11,583 |
| Operating cash used | $5,725 | $19,591 |
| Cash at period end | $1,816 | $1,838 at Dec. 31, 2015; $195 at Mar. 31, 2015 |
| Total assets | $1,816 | $1,838 at Dec. 31, 2015 |
| Current liabilities | $86,564 | $83,330 at Dec. 31, 2015 |
| Stockholders’ deficit | $84,748 | $81,492 at Dec. 31, 2015 |
Q1 2016 general and administrative expense was $4,811. The statements report interest expense of $4,250, including $4,015 of debt-discount accretion and, per MD&A, $235 of accrued interest. No income-tax provision, investing cash flow, or cash interest payment was reported. The filing gives no clear gross or operating margin measure. Working capital was negative by $84,748 at March 31, 2016.
Changes, outlook, and risks
- Net loss narrowed by $2,624 year over year, which management attributed primarily to lower general and administrative costs, especially legal fees. Revenue remained very small.
- Financing provided $5,703 in Q1 2016, from a related-party convertible note; operating outflows exceeded financing, reducing cash by $22. Cash remained dependent on related-party support.
- Related-party advances payable were $52,652, non-interest-bearing, unsecured, due on demand, and without a formal commitment for continued support. Convertible notes payable were $17,634 net of debt discount at quarter end.
- Management and the financial statements cited substantial doubt about the company’s ability to continue as a going concern. Management expected continuing losses and negative operating cash flows, planned to seek debt or equity financing, and could not assure availability on acceptable terms. The filing notes the auditors’ going-concern qualification in the 2015 annual report.
- The February 2016 related-party note of $5,703 was interest-free through Dec. 31, 2016, then bears 6% interest, matures March 31, 2017, and is convertible at the holder’s option into Original Source Music shares. The filing states no material capital-expenditure commitments, no off-balance-sheet arrangements, and no pending or threatened legal proceedings to management’s knowledge.
Important facts to verify
- Confirm the filing’s issuer: the document identifies Original Source Entertainment, Inc., not NeuroOne Medical Technologies Corp.
- Review the post-quarter spin-off terms and the company’s resulting status, assets, and plans.
- Assess the company’s ability to obtain financing and meet demand obligations, including related-party balances and note terms.
- Reconcile presentation differences in the filing: its statements show Q1 2015 total operating expenses of $9,754 while general and administrative expense is $9,687, and the associated line-item presentation is not fully clear in the supplied text.