SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) | |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OFAnnual Report Pursuant to Section 13 or 15 (d)of the Securities Exchange Act of 1934 |
For the period ended: December 31, 2012OR
oFor the Fiscal Year Ended December 31, 2013 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | Commission File Number 000 26460 |
Commission File Number: 000-26460
SPATIALIZER AUDIO LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | | 95-4484725 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.)Number) |
410 Park Avenue--15th Floor New York, New York 10022
(Address of principal corporate53 Forest Avenue, First Floor Old Greenwich, Connecticut | | 06870 |
(Address of principal executive offices) | | (Zip Code) |
Telephone Number: (212) 231-8359(203) 542-0235
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x NoYES [ ] NO [X]
Indicate by check mark ifwhether the registrantissuer is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o Yes x NoYES [ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No oninety days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitionthe definitions of “large accelerated filer,” “accelerated filed”filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).Act.
Large accelerated filer | o[ ] | Accelerated filer | o[ ] |
Non-accelerated filer | o[ ] | Smaller reporting company | x[X] |
(Do not check if a smaller reporting company) | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212(b)-2 of the Exchange Act). x Yes No oYES [X] NO [ ]
State issuer’s revenues for its most recent fiscal year: $0
The aggregate market value of the voting stockand non-voting common equity held by non-affiliates of the registrantnon-affiliates; computed by reference to the June 30, 2013 closing price at which the common equity was last sold asof $0.01: $121,420
Number of shares outstanding of the last business day of the registrant’s most recently completed second quarter (June 30, 2012) was approximately $100,700.
Asissuer’s Common Stock as of February 28, 2013 there were 12,142,000 shares of the Registrant’s Common Stock outstanding.2014: 15,409,999
DOCUMENTS INCORPORATED BY REFERENCE: NoneDocuments Incorporated by Reference
Form 8-K filed with the Securities and Exchange Commission on December 3, 2013
SPATIALIZER AUDIO LABORATORIES, INC.
Form 10-K
TABLE OF CONTENTS
December 31, 2013
PART I | |
| |
| | | |
Item 1. | Description of Business | | | 42 | |
Item 1A. | Risk FactorsFactors. | | | 52 | |
Item 1B. | Unresolved Staff Comments. | | | 2 | |
Item 2. | Description of Properties | | | 53 | |
Item 3. | Legal Proceedings | | | 53 | |
Item 4. | Mine Safety Disclosures | | | 53 | |
| | | | | |
PART II | | | | |
| | | | | |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | | 63 | |
Item 6. | Selected Financial Data | | | 63 | |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | 74 | |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | | | 95 | |
Item 8. | Financial Statements | | | 9 | |
| Report Of Independent Registered Public Accounting Firm | | | 10 | |
| Balance sheets | | | 11 | |
| Statements of operations | | | 12 | |
| Statements of stockholders’ equity (deficit) | | | 13 | |
| Statements of cash flows | | | 14 | |
| Notes to financial statements | | | 15 | |
| | | | 5 | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | | 175 | |
Item 9A(T).9A. | Controls and Procedures | | | 175 | |
Item 9B. | Other Information | | | 176 | |
| | | | | |
PART III | | | | |
| | | | | |
Item 10. | Directors, Executive Officers, and Corporate Governance | | | 186 | |
Item 11. | Executive Compensation | | | 197 | |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | | 208 | |
Item 13. | Certain Relationships and Related Transactions and Director Independence | | | 218 | |
Item 14. | Principal AccountantAccountant’s Fees and Services | | | 21 | |
| | | | | |
PART IV | | | | |
| | | | 9 | |
Item 15. | Exhibits and Financial Statements | | | 2210 | |
Signatures | | | | | |
SIGNATURES | | | 2412 | |
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, reflecting management’s current expectations. Examples of such forward-looking statements include our expectations with respect to our strategy. Although we believe that our expectations are based upon reasonable assumptions, there can be no assurances that our financial goals or that any potential transactions herein described will be realized or consummated. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Numerous factors may affect our actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of our company. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. The important factors discussed under Item 1A, Risk Factors, among other factors, could cause actual results to differ materially from those indicated by forward-looking statements made herein and represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. We assume no obligation to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.
OverviewTHE COMPANY
Until 2007, Spatializer Audio Laboratories, Inc. (“Spatializer” or the “Company”) was incorporated under the laws of Delaware in 1994, Until 2007, the Company was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. Our corporate officeThe principal business of the Company was closed down in 2007, and the Company has no further operating activities and is located at 410 Park Avenue – 15th Floor, New York, New York 10022.now a shell company.
The Company has concluded that it should look for acquisitions or identify a merger partner. There can be no assurances that the Company will be successful in completing such a transaction or be able to maintain sufficient liquidity over a period of time that will allow it to carry out this action.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
Copies of this Annual Report, including our financial statements, and our quarterly reports on Form 10-Q as well as other corporate information, including press releases, of interest to our stockholders are available by writing us at 410 Park53 Forest Avenue --15 th–First Floor, New York, New York 10022.Old Greenwich, Connecticut 06870.
Available sources of liquidity at December 31, 2013 include cash and cash equivalents of less than $1,000.
The Company’s financial statements have been prepared assuming that it would continue as a going concern. However, substantially all of the Company’s assets were sold during 2007, and it has been a shell company since then. The Company has no plans to dissolve. However, it has been dependent upon sales of common stock and loans from two stockholder/officers to pay its ongoing general and administrative expenses.EMPLOYEES
Employees
The Company has no employees. It is managed by two stockholder/directors/officers, with assistance from a contract bookkeeper.
Item 1A. Risk Factors
The Company Has No Means to Generate Revenue
We have no source of revenue. Our cash balance has been diminished by general and administrative expenses.
The Market For Our Stock Is Not Liquid And The Stock Price Is Subject To Volatility
Our stock is quoted on the OTCQB of the OTC Marketplace under the symbol of "SPZR"“SPZR”, where low trading volume and high volatility is often experienced. While a few firms make a market in our stock, the historically low trading volume and relatively few market makers of our stock make it more likely that a severe fluctuation in volume, either up or down, will significantly impact the stock price. There can be no assurance that these market makers will continue to quote our stock and a reduction in such market makers would negatively impact trading liquidity. Further, with our constrained resources and increased cost and time associated with implementation of Sarbanes-Oxley, it may not be possible for us to remain listed on the OTC Bulletin Board in the future as a fully reporting company. Lastly, the uncertainty of the future of the Company may limit the liquidity of our stock. This and the existing limited market and volume in the trading of our stock, may result in our stockholders having difficulty selling our common stock. The trading price of our common stock has been, and will likely continue to be, subject to wide fluctuations due to the uncertainty regardingof the future of the Company, general market fluctuations and other events and factors, some of which may be beyond our control.
Item 2. Properties
We have no leased facilities as of December 31, 2012.
Item 3. Legal Proceedings
As of the date of this Form 10-K Annual Report, we are not involved in any legal proceedings.
Item 4. Mine Safety DisclosuresItem 1B. | Unresolved Staff Comments. |
Not applicable.
| Description of Properties. |
None.
None.
Not applicable.
| Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
The Company’s common stock trades in the over-the-counter bulletin board market under the symbol SPZR. The high and low sale prices for 2012 and 2013 are set forth below.
| | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | |
2012 | | | | | | | | | | | | |
High | | $ | .027 | | | $ | .025 | | | $ | .025 | | | $ | .055 | |
Low | | | .010 | | | | .020 | | | | .010 | | | | .004 | |
| | | | | | | | | | | | | | | | |
2013 | | | | | | | | | | | | | | | | |
High | | $ | .028 | | | $ | .023 | | | $ | .045 | | | $ | .150 | |
Low | | | .005 | | | | .015 | | | | .010 | | | | .013 | |
The Company paid no cash dividends in 2012 or 2013 and had 190 shareholders of record as of February 28, 2014, not counting the shareholders who hold the Company stock in street name.
The Company has no equity compensation plan in place.
Period | | Total Number of shares purchased (a) | | | Average price paid per share (b) | | | Total number of shares purchased as part of publicly announced plans or programs (c) | | | Maximum number of share that may yet be purchased under the plans or programs (d) | |
| | | | | | | | | | | | |
October 1, 2013 | | | 6,515,912 | (1) | | $ | 0.0153 | | | | 0 | | | | 0 | |
______
(1) | As disclosed pursuant to the Current Report on Form 8-K filed on December 3, 2013 and incorporated by reference herein (the “December 8-K”), on November 27, 2013 the Company repurchased a total of 6,515,912 shares of the Company’s common stock for an aggregate purchase price of $100,000, or $0.0153 per share. The repurchases were made pursuant to those certain Stock Redemption Agreements filed as exhibits to the December 8-K. |
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Our stock is quoted on the OTCQBManagement’s discussion and analysis of the OTC Marketplace under the symbol of "SPZR", where low trading volume and high volatility is often experienced. While a few firms make a market in our stock, the historically low trading volume and relatively few market makers of our stock make it more likely that a severe fluctuation in volume, either up or down, will significantly impact the stock price. There can be no assurance that these market makers will continue to quote our stock and a reduction in such market makers would negatively impact trading liquidity.. The following table sets forth the high and low bid price of our common stock as reported on the OTCQB of the OTC Marketplace for fiscal years 2012 and 2011. The quotations listed below reflect interim dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.
Period: | | High (U.S. $) | | | Low (U.S. $) | |
2011 | | | | | | |
First Quarter | | $ | 0.08 | | | $ | 0.01 | |
Second Quarter | | $ | 0.10 | | | $ | 0.02 | |
Third Quarter | | $ | 0.10 | | | $ | 0.01 | |
Fourth Quarter | | $ | 0. 095 | | | $ | 0.025 | |
| | | | | | | | |
2012 | | | | | | | | |
First Quarter | | $ | 0.025 | | | $ | 0.01 | |
Second Quarter | | $ | 0.025 | | | $ | 0.02 | |
Third Quarter | | $ | 0.025 | | | $ | 0.01 | |
Fourth Quarter | | $ | 0.015 | | | $ | 0.005 | |
Stockholders are urged to obtain current market prices for our common stock. Corporate Stock Transfer is our transfer agent and registrar. To our knowledge, because most shares are held in street name, there were approximately 200 holders of record of the stock of the Company. Our transfer agent has indicated that beneficial ownership is believed to be in excess of 2,000 stockholders.
We have no present intention of paying any dividends. Our current policy is to retain earnings, if any, for operations in connection with maintaining our status as a reporting company and selling the Company as a shell corporation and/or merging the Company successfully into a new operating business. Our future dividend policy will be determined from time to time by the Board of Directors.
The Company did not repurchase any equity securities fiscal year ended December 31, 2012.
Item 6. Selected Financial Data
Not Applicable
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
There was no revenue for the years ended December 31, 2012 and December 31, 2011 As we sold all of our operating assets in 2007, we have no means to generate new revenues.
Net loss was $24,621 for the year ended December 31, 2012 compared to net loss of $33,380 for the year ended December 31, 2011.
At December 31, 2012, we had $1,381 in cash and cash equivalents, as compared to $18,231 at December 31, 2011. We had negative working capital of $20,066 at December 31, 2012 as compared to working capital of $4,555 at December 31, 2011.
Approach to Management’s Discussion and Analysis (MD&A)
The purpose of MD&A is to provide our shareholders and other interested parties with information necessary to gain an understanding of our financial condition, changes inits financial condition and results of operations. As such, we seekoperations is based on the Company’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to satisfy three principal objectives:
| • | to provide a narrative explanation of the Company’s financial statements “in plain English” that enables the average investor to see the Company through the eyes of management; |
| | |
| • | to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and |
| | |
| • | to provide information about the quality of, and potential variability of, the Company’s earnings and cash flow, so that investors can ascertain the likelihood and relationship of past performance being indicative of future performance. |
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities, if any exist. The Company evaluates its estimates on an on-going basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values and disclosure of amounts recorded or disclosed in the financial statements of the Company.
We believe the best way to achieve this is to give the reader:
| • | An understanding of our operating environment and its risks; |
| | |
| • | An outline of our critical accounting policies; |
| | |
| • | A review of our corporate governance structure; |
| | |
| • | A review of the key components of the financial statements and our cash position and capital resources; |
| | |
| • | A review of the important trends in the financial statements and our cash flow; and |
| | |
| • | Disclosure on our internal controls and procedures. |
Operating Environment
We have had no source of revenue since the beginning of third quarter 2007. Based on current and projected operating levels, we do not believe that we can maintain our liquidity position at a consistent level, on a short-term or long-term basis, without a new business model and outside funding, or continued funding from our stockholder/officers.
Critical Accounting PoliciesCRITICAL ACCOUNTING POLICIES
This discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Our audited financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s current circumstances raise substantial doubt about the likelihood that the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Key ComponentsFORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis and other parts of this report contain forward-looking statements that involve risks and uncertainties, as well as current expectations and assumptions. From time to time, the Company may publish forward-looking statements, including those that are contained in this report, relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the Financial Statementssafe harbor, the Company notes that a variety of factors could cause the Company’s actual results and Important Trends
experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company’s business include, but are not limited to, its ability to maintain sufficient working capital, adverse changes in the economy, the ability to attract and maintain key personnel, its ability to identify or complete an acceptable merger or acquisition, and future results related to acquisition, merger or investment activities. The Company’s financialactual results could differ materially from those anticipated in these forward-looking statements, including the Balance Sheets, the Statements of Operations, the Statements of Cash Flows and the Statements of Stockholders’ Equity (Deficit), should be read in conjunction with the notes thereto includedthose set forth elsewhere in this report. MD&A explainsThe Company assumes no obligation to update any such forward-looking statements.
ANALYSIS OF FINANCIAL CONDITION
Net cash used in operating activities for the key componentsyear ended December 31, 2013 was $(21,632) compared to $(24,850) in 2012. In 2013, the principal items contributing to the usage of each$21,632 were a loss of these$(27,211) coupled with a gain on debt forgiveness of $28,500, offset by an increase in accounts payable and accrued liabilities and advances of $7,029. In 2012, the usage of cash was attributable to the net loss, which in turn resulted from general and administrative expenses.
Financing activities provided cash flows of $8,000 in 2012 and $20,500 in 2013.
The Company is now a shell corporation. The accompanying financial statements key trendsdo not include any adjustments to reflect the possible future effects on the recoverability and reasons for reporting period-to-period fluctuations.
The Balance Sheet provides a snapshot viewclassification of our financial condition atassets or the endamounts and classifications of our latest fiscal year. A balance sheet helps management and our stockholders understandliabilities that may result from the financial strength and capabilities of our business. Balance sheets can help identify and analyze trends, particularly in the area of receivables and payables. A review of cash balances compared to the prior years and in relation to ongoing profit or loss can show the abilitypossible inability of the Company to withstand business variations. The difference between Current Assets and Current Liabilities is referred tocontinue as Working Capital and measures how much in liquid assets a company has available to build its business. This is addressed further in MD&A under Liquidity and Capital Resources.going concern.
The Statement of Operations tells the reader whether the Company had a profit or loss. It shows key sources of revenue and major expense categories. It is important to note period-to-period comparisons of each line item of this statement, reasons for any fluctuation and how costs are managed in relation to the overall revenue trend of the business. These statements are prepared using accrual accounting under generally accepted accounting principles in the United States. This is addressed further in MD&A under Revenues and Expenses.
The Statement of Cash Flows explains the actual sources and uses of cash. Some expenses of the Company, such as depreciation and amortization, do not result in a cash outflow in the current period, since the underlying expenditure or asset purchase was made years earlier. New capital expenditures, on the other hand, result in a disbursement of cash, but will be expensed in the Statement of Operations over their useful lives. Fluctuations in receivables and payables also explain why the net change in cash is not equal to the net loss reported on the Statement of Operations. Therefore, it is possible that the impact of a net loss on cash is less or more than the actual amount of the loss. This is discussed further in MD&A under Liquidity and Capital Resources.
The Statement of Stockholders’ Equity (Deficit) shows the impactBased upon its current financial position, and an evaluation of the operating results on the Company’s equity. In addition, this statement shows new equity brought intoprospects for continuing to operate, the Company through stock sales. This is discussed further in MD&A under Liquidity and Capital Resources.
Results of Operations
The following discussion and analysis relates to our results of operations for the year ended December 31, 2012 compared to the year ended December 31, 2011. The following discussionhas concluded that it should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this report.
Continuing Operations
For the Year Ended December 31, 2012, Compared to the Year Ended December 31, 2011
Revenues
There were no revenues for the years ended December 31, 2012 and December 31, 2011.
Operating Expenses
Operating expenses for the year ended December 31, 2012 decreased to $23,000 from $31,000 for the year ended December 31, 2011. The decrease in operating expenses resulted from a decrease in general and administrative expenses.
Net Loss
The net loss was $25,000 for the year ended December 31, 2012, compared to a net loss of $33,000 for the year ended December 31, 2011.
Liquidity and Capital Resources
At December 31, 2012, we had $1,381 in cash and cash equivalents as compared to $18,231 at December 31, 2011. We had negative working capital of $20,066 at December 31, 2012 as compared with working capital of $4,555 at December 31, 2011.
The Company's two stockholder/officers have been advancing cash tosell the Company to pay for ongoing expenses.or identify a merger partner. There were $8,000 of outstanding loans at December 31, 2012.
Net Operating Loss Carryforwards
At December 31, 2012, we had net operating loss carryforwards for Federal income tax purposes of approximately $9,600,000 which maycan be available to offset future Federal taxable income, if any, through 2031. These net operating loss carryforwards are subject to an annual limitation of approximately $1,000,000. Utilization of these loss carryforwards is subject to further limitation as a result of change in ownership of the Company, as defined by Federal tax law.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are not exposed to material future earnings or cash flow fluctuations from changes in interest rates . We have not entered into any derivative financial instruments to manage interest rate risk or for speculative purposes and we are not currently evaluating the future use of such financial instruments.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Spatializer Audio Laboratories, Inc.:
We have audited the accompanying balance sheets of Spatializer Audio Laboratories, Inc. (Company) as of December 31, 2012 and 2011 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended then. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spatializer Audio Laboratories, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assumingassurances that the Company will continue asbe successful in completing such a going concern. As discussedtransaction or be able to maintain sufficient liquidity over a period of time that will allow it to carry out this action, in Note 1 to the financial statements,which case the Company sold substantially all of its assets in 2007. It is now a shell company and its future plans are uncertain. These factors raise substantial doubt about its abilitymight be forced to continue as a going concern. The financial statements do not include any adjustments that might result fromdissolve or seek protection under the outcome of this uncertainty.Federal bankruptcy statutes, or both.
/s/ RAMIREZ JIMENEZ INTERNATIONAL CPAs
Irvine, California
February 26, 2013
SPATIALIZER AUDIO LABORATORIES, INC.
BALANCE SHEETS
| | December 31, | | December 31, |
| | 2012 | | 2011 |
ASSETS |
Current Assets: | | | | | | | | |
Cash and Cash Equivalents | | $ | 1,381 | | | $ | 18,231 | |
| | | | | | | | |
Other Current Assets | | | 4,219 | | | | 4,219 | |
| | | | | | | | |
Total Current Assets | | | 5,600 | | | | 22,450 | |
| | | | | | | | |
Total Assets | | $ | 5,600 | | | $ | 22,450 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
Current Liabilities: | | | | | | | | |
Accounts Payable and Accrued Liabilities | | $ | 17,666 | | | $ | 17,895 | |
| | | | | | | | |
Loans from Stockholders | | | 8,000 | | | | - | |
| | | | | | | | |
Total Current Liabilities | | | 25,666 | | | | 17,895 | |
| | | | | | | | |
Stockholders’ Equity (Deficit): | | | | | | | | |
Preferred shares, $.01 par value, 1,000,000 shares authorized, none issued and outstanding | | | - | | | | - | |
Common shares, $.01 par value, 300,000,000 shares authorized, 12,142,000 shares issued and outstanding | | | 121,420 | | | | 121,420 | |
Additional Paid-In Capital | | | 47,250,887 | | | | 47,250,887 | |
Accumulated Deficit | | | (47,392,373 | ) | | | (47,367,752 | ) |
Total Stockholders’ Equity (Deficit) | | | (20,066 | ) | | | 4,555 | |
Total Liabilities and Stockholders’ Equity (Deficit) | | $ | 5,600 | | | $ | 22,450 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTSRESULTS OF OPERATIONS
| | Year Ended December 31, | |
| | 2012 | | | 2011 | |
| | | | | | |
Operating Expenses: | | | | | | |
General and Administrative | | $ | 22,690 | | | $ | 31,395 | |
| | | | | | | | |
Operating Loss | | $ | (22,690 | ) | | $ | (31,395 | ) |
| | | | | | | | |
Loss before income taxes | | $ | (22,690 | ) | | $ | (31,395 | ) |
Income Taxes | | | (1,931 | ) | | | (1,985 | ) |
| | | | | | | | |
Net Loss | | $ | (24,621 | ) | | $ | (33,380 | ) |
| | | | | | | | |
Basic and Diluted Loss per Share | | $ | (.00 | ) | | $ | (.00 | ) |
Weighted-Average Shares Outstanding | | | 12,142,000 | | | | 8,463,416 | |
Net Revenues and Gross Profit
The accompanying notesRevenues and gross profit for 2013 and 2012 are an integral part of these statements.reported as zero for both years, as all operations were discontinued and substantially all assets were sold in 2007.
General and Administrative
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| | Common Shares | | | Additional | | | | | | Total | |
| | Number of Shares | | | Amount | | | Paid-In Capital | | | | | | Stockholders’ Equity (Deficit) | |
| | | | | | | | | | | | | | | |
Balance, December 31, 2010 | | | 6,500,000 | | | $ | 65,000 | | | $ | 47,219,856 | | | $ | (47,334,372 | ) | | $ | (49,516 | ) |
| | | | | | | | | | | | | | | | | | | | |
Issuance of Common Stock | | | 5,642,000 | | | | 56,420 | | | $ | 31,031 | | | | | | | | 87,451 | |
| | | | | | | | | | | | | | | | | | | | |
Net Loss | | | | | | | | | | | | | | | (33,380 | ) | | | (33,380 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2011 | | | 12,142,000 | | | $ | 121,420 | | | $ | 47,250,887 | | | $ | (47,367,752 | ) | | $ | 4,555 | |
| | | | | | | | | | | | | | | | | | | | |
Net Loss | | | | | | | | | | | | | | | (24,621 | ) | | | (24,621 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 | | | 12,142,000 | | | $ | 121,420 | | | $ | 47,250,887 | | | $ | (47,392,373 | ) | | $ | (20,066 | ) |
General and administrative (“G&A”) expenses primarily consist of legal, accounting and other professional services.
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
| | Year Ended December 31, | |
| | 2012 | | | 2011 | |
Cash Flows from Operating Activities: | | | | | | |
Net Loss | | $ | (24,621 | ) | | $ | (33,380 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Net Change in Assets and Liabilities: | | | | | | | | |
Other Current Assets | | | - | | | | (4,219 | ) |
Accounts Payable and Accrued Liabilities | | | (229 | ) | | | 7,253 | |
| | | | | | | | |
Net Cash Used In Operating Activities | | | (24,850 | ) | | | (30,346 | ) |
Cash Flows From Financing Activities: | | | | | | | | |
Issuance of Common Stock | | | - | | | | 20,000 | |
Loans From Stockholders | | | 8,000 | | | | 27,451 | |
Net Cash Provided by Financing Activities | | | 8,000 | | | | 47,451 | |
Increase (decrease) in Cash and Cash Equivalents | | | (16,850 | ) | | | 17,105 | |
Cash and Cash Equivalents, Beginning of Period | | | 18,231 | | | | 1,126 | |
Cash and Cash Equivalents, End of Period | | $ | 1,381 | | | $ | 18,231 | |
Supplemental Disclosure of Cash Flow Information: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest | | $ | - | | | $ | - | |
Income Taxes | | $ | 1,931 | | | $ | 2,116 | |
| | | | | | | | |
Supplemental disclosure of non-cash financing activity: | | | | | | | | |
Repayment of loans from stockholders through issuance of common stock | | $ | - | | | | 67,451 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) AbilityG&A expenses increased from approximately $22,690 in 2012 to Continue as a Going Concern; Sale of Substantially All Assetsapproximately $27,211 in 2013.
Until 2007, Spatializer Audio Laboratories, Inc. (Company) was a developer, licensor and marketer of next generation technologiesProvision for the consumer electronics, personal computing, entertainment and cellular telephone markets.
The foregoing financial statements have been prepared assuming that the Company will continue as a going concern. The Company is now a shell company and its future plans are uncertain. These circumstances raise substantial doubt about the likelihood that the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company's two stockholder/officers have been advancing cash to the Company on a short-term non-interest bearing basis to pay for ongoing general and administrative expenses.
(2) Significant Accounting Policies
Basis of Presentation — The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Cash and Cash Equivalents — Cash equivalents consist of highly liquid investments with original maturities of three months or less.
Earnings Per Share —Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the Company generated net losses in 2012 and 2011, outstanding stock options would have been anti-dilutive and were not applicable to these calculations.
Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Use of Estimates — Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles in the United States. Actual results could differ from those estimates.
Fair Value of Financial Instruments — The carrying values of cash equivalents, accounts payable and accrued liabilities, and loans from stockholders at December 31, 2012 and 2011 approximated fair value due to their short maturity or nature.
(3) Stockholders’ Equity
On August 25, 2011, the Company converted $67,451 of debt owed to two of the Company’s stockholder/officers (Jay Gottlieb and Gregg Schneider) to shares of common stock based upon the August 19, 2011 closing price of $0.0155 per share. In addition, an investment of $20,000 at the same price was made by Mr. Schneider. The aggregate effect of these transactions resulted in the issuance of 5,642,000 shares of common stock.
(4) Income Taxes
IncomeThe Company recorded no provision or benefit for Federal income taxes in 2012 or 2013. Benefits from the tax expense for the years ended December 31, 2012 and 2011 consisted of the following:loss carryforwards have been fully offset by valuation allowances since realization cannot be assured.
| | 2012 | | | 2011 | |
| | | | | | | | |
State franchise taxes | | $ | 1,931 | | | $ | 1,985 | |
Federal taxes | | | 0 | | | | 0 | |
| | | | | | | | |
Total | | $ | 1,931 | | | $ | 1,985 | |
OFF-BALANCE SHEET ARRANGEMENTSNone.
| Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
The tax effects of temporary differences that give rise to significant portionsfinancial statements of the deferred tax assets is composed primarilyCompany and the related report of the net loss carry forwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periodsCompany’s independent registered public accounting firm thereon are included in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, management believes it is more likely than not the Company will not realize the benefits of these deductible differences and has established a valuation allowance to fully reserve the deferred tax assets at December 31, 2012 and 2011. Additionally, the ultimate realizability of net operating losses may be limited by change of control provisions under Section 382 of the Internal Revenue Code. The Company’s income tax returns remain subject to examination for the years 2009report on pages 13 through 2012 for federal and state purposes.20.
(5) Subsequent Events | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
In January, 2013 Jay Gottlieb, the Company’s President, loaned $12,000 to the Company on an interest-free basis to assist in funding its operating expenses. No other material subsequent events have occurred since December 31, 2012 that require recognition or disclosure in the financial statements.None.
Item 9A. | Controls and Procedures. |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A(T). Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Principal Executive Officer and Principal Financial Officer to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes ofin accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
The Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012.2013. In making this assessment, the Principal Executive Officer and Principal Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of December 31, 2012,2013, internal control over financial reporting was effective.
The financial statements of the Company for 2012 and 2013 have been audited by the independent registered public accounting firm of Ramirez Jimenez International CPAs who were given unrestricted access to all financial records and related data, including minutes of all meetings of stockholders and the Board of Directors. This annual report does not include an attestation report from the Company’sindependent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’sindependent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
(b) Changes in Internal Control over Financial Reporting. There were no changes in the Company’s internal controls over financial reporting, known to the Principal Executive Officer and Principal Financial Officer, that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. | Other Information |
None.
| Directors, Executive Officers, and Corporate Governance. |
Not applicable.The following table sets forth the name, age and position with the Company of (i) each of the persons currently appointed to the Company's Board of Directors and (ii) each of the persons currently appointed as Executive Officer(s) of the Company. The information is current as of February 28, 2014.
NAME | | AGE | | PRINCIPAL POSITION |
| | | | |
Jeffrey E. Eberwein | | 43 | | Chairman of the Board of Directors, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer |
Kyle Hartley | | 45 | | Director |
Below is the biography of the members of the Board of Directors as of February 28, 2014:
Jeffrey E. Eberwein has 20 years of Wall Street experience and is the Founder and CEO of Lone Star Value Management, LLC, an investment firm. Prior to founding Lone Star Value Management, LLC in January 2013, Mr. Eberwein was a Portfolio Manager at Soros Fund Management from January 2009 to December 2011 and Viking Global Investors from March 2005 to September 2008. Mr. Eberwein is Chairman of the Board of Digirad Corporation, a medical imaging company; Chairman of the Board of Crossroads Systems, Inc., a data storage company; and Chairman of the Board of Aetrium Incorporated, a semiconductor company. Mr. Eberwein also serves on the Boards of NTS, Inc. and On Track Innovations Ltd. Mr. Eberwein served on the Board of The Goldfield Corporation from May 2012 until May 2013. Mr. Eberwein is the Treasurer and serves on the Executive
Item 10. Director, Executive Officers and Corporate Governance
Directors and Officers
Michael Pearce, age 51, has been ChairmanCommittee of the Board of Pernix Theraputics, Inc. since March 2010 and Chief Executive Officer and PresidentHope for New York, a 501(c)3 organization dedicated to serving the poor in New York City. Mr. Eberwein earned an MBA from The Wharton School, University of Golf Trust of America, Inc. since November 8, 2007. Mr. Pearce has been a private investor in various companies since 2002, with emphasis in distressed securities of publicly traded entities. From late 1999 through 2001, he served as Chief Executive Officer of iEntertainment Network. From 1996 to 1998, he served as Senior Vice President of Sales and Marketing of publicly traded VocalTec Communications, later returning in 1999 in a consulting capacity to its Chairman on matters pertaining to strategic alternatives, business development and mergers and acquisitions. From 1983 to 1996, he was employed in various technology industry management positions, including Senior Vice President of Sales and Marketing at Ventana Communications, a subsidiary of Thomson Corporation; Vice President of Sales at Librex Computer Systems, a subsidiary of Nippon Steel; and National Sales Manager at Hyundai Electronics America. From 1979 to 1983, he attended Southern Methodist University.
Joshua Krom, age 36, is the President of Realty Asset Management, LLC, a full service real estate company which has specialized in acquiring and rapidly repositioning distressed properties with the goal of maximize its investors’ returns. Mr. Krom has significant experience in the financial analysis of residential portfolios, retail, industrial and apartment buildings. Prior to forming Realty Asset Management, LLC, Mr. Krom practiced real estate and corporate law. He is a licensed attorney and real estate broker in CaliforniaPennsylvania and a licensed real estate broker in Nevada. Mr. Krom received his Juris Doctorate degree from Emory University School of Law where he was a Dean’s Honors recipient. He graduatedBBA with High Honors from theThe University of California, Santa Barbara where he received a BachelorTexas at Austin.
Kyle Hartley is the chief operating officer of Arts Degree in Communications.
Gregg Schneider, age 36, is a private investor who specializes in undervalued publicly traded securities. During the past fourteen years,Lone Star Value Management, LLC. Mr. SchneiderHartley has been an active dealer in numismatic items, specializing in U.S. rare coins and currency. Mr. Schneider attended twoover 15 years of coursesexperience in the investment industry, including more than 12 years in senior management positions at UCLAalternative investment firms. Prior to joining Lone Star Value Management, LLC in May 2013, Mr. Hartley was the CFO/COO of Greenheart Capital Partners, a global emerging market long/short equity hedge fund firm spun out of Shumway Capital. From March 2008 through November 2011, Mr. Hartley was the CFO/COO/CCO of Apis Capital Advisors, a $750 million (peak AUM) global long/short equity hedge fund firm investing primarily in small cap value equities. From April 2006 through March 2008, Mr. Hartley served as the head of Marketing and is involved in several charitable organizations.
Jay Gottlieb, age 68, has beenClient Services at Mercury Partners, a director since May 2007.$1 billion+ global long/short equity hedge fund firm focused on the real estate sector. From June 2004 to March 2006, Mr. Gottlieb has beenHartley was a private investor in various companies since 1998. He is involved in analysisManaging Director, the head of operational due diligence and investment in undervalued special situations and shell corporations. He presently owns between 5% and 25% of several public companies and is a member of the BoardInvestment Committee of DirectorsTaylor Investment Advisors, a hedge fund investment firm founded by the late Tommy Taylor. Mr Hartley’s initial position in the hedge fund industry was as the CFO/COO of CQ Capital, a long/short equity, technology-media- telecom sector hedge fund firm from 2002 to 2004. Prior to CQ Capital, Mr. Hartley served as a Director of Business Development at Greenwich Associates, a financial industry market-research and consulting firm, and as a Vice President in the Company. FromInvestment Banking division of Forum Capital Markets prior to its acquisition by First Union Securities. Mr. Hartley started his career at Clarion Marketing and Communications where he earned four promotions to Account Supervisor from 1992 to 1998 he was the editor of1997. Mr. Hartley earned an investment service that analyzed and published extensive data on companies planning initial public offerings. From 1977 to 1991, Mr. Gottlieb was the President and Chairman of the Board of The Computer Factory, Inc. (NYSE), a nationwide organization involved in retail and direct sales, servicing and leasing of personal computers. From 1969 to 1988, he was President of National Corporate Sciences, Inc., a registered investment advisory service. Mr. Gottlieb holds a Bachelor of ArtsMBA with Distinction from New York University.University’s Leonard N. Stern School of Business, and a BA from Dartmouth College.
Directors serve a one-year term and hold office until their successors are elected by the shareholders, unless they shall sooner resign.
None of the members of the board of directors or executive officers of the Company has, in the last ten years, been involved in any legal proceeding of the type described under Item 401(f) of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3 and 4 furnished to us during the fiscal year ended December 31, 2012,2013, we are not aware of any director, officer or beneficial owner of more ten percent (10%)10% of the common stock of the Company who failed to file on a timely basis any reports required by Section 16(a) of the Securities Exchange Act of 1934.1934, except as follows: due to inadvertence, Kyle Hartley was late filing a Form 3 upon becoming a director of the Company.
Code of Ethics
We have adopted a Code of Ethics that appliesapplicable to all of our directors, officers and employees, including our Chief Executive Officer, our Chief Financial Officer and, in the future, any other officers. The Company will provide a copy of our codeCode of ethicsEthics to any person, free of charge, upon written request sent to our principal corporate office at 410 Park Avenue—15th Floor, New York, New York 10032.office.
Corporate Governance
At present, the Company does not have an audit committee. The entire board of directors is responsible for the assessment and oversight of the Company’s financial risk exposure.
The Company did not pay any salary to its officers or Directors in 2012 or 2013.
Outstanding equity awards
There are no outstanding options as of December 31, 2013.
Mr. Pearce is currently considered independent, as defined in the NASD listing standards, and met the criteria for independence set forth in the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Since 2005, no members have been nominated or appointed to the Audit Committee.
Item 11. Executive Compensation
Compensation Discussion and Analysis
The Company does not currently have any employees. The following summarizes payments made to its officers (both of whom are unpaid).
SUMMARY COMPENSATION TABLE
Name and Principal Position | | Year | | Salary | | | Options Awards | | | Bonus | | | All Compensation | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | |
Jay Gottlieb | | 2012 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Chairman of the Board, CEO | | 2011 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gregg Schneider | | 2012 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Chief Financial Officer | | 2011 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
Number of Securities | | | Number of Securities | | | | | | | |
Underlying | | | Underlying | | | | | | | |
Unexercised | | | Unexercised | | | Weighted Average | | | Option | |
Options(#) | | | Options(#) | | | Option Exercise | | | Expiration | |
Exercisable | | | Unexercisable | | | Price($) | | | Date | |
| | | | | | | | | | |
| 0 | | | | 0 | | | $ | 0 | | | | 0 | |
There are no outstanding options at the end of 2012.
Director Compensation
None of the Company’s directors received any cash compensation, stock option awards or other arrangements for services provided in their capacity as directors during the fiscal year ended December 31, 2012.2013.
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Principal shareholders
Based on information available to the Company through filings with the Securities and Exchange Commission, each of the following persons or groups beneficially owned 5% or more of the 15,409,999 shares of common stock outstanding as of February 28, 2014.
Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | | Percent of Class | |
| | | | | | |
Jeffrey E. Eberwein (1)(2) | | | 9,783,886 | | | | 63.49 | % |
53 Forest Avenue, First Floor, Old Greenwich, CT 06870 | | | | | | | | |
Lone Star Value Investors, LP(3) | | | 9,783,886 | | | | 63.49 | % |
53 Forest Avenue, First Floor, Old Greenwich, CT 06870 | | | | | | | | |
_______
(1) | Includes the 9,783,886 shares owned by Lone Star Value Investors, LP, which may be deemed to be beneficially owned by Mr. Eberwein. Mr. Eberwein disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
(2) | On November 27, 2013, the Company sold and issued 6,515,912 shares of the Company’s common stock, to Lone Star Value Investors, LP, for an aggregate purchase price of $100,000 pursuant to that certain Stock Purchase Agreement by and between the Company and Lone Star Value Investors, LP dated as of November 27, 2013. |
(3) | On January 15, 2014, the Company issued 3,267,974 shares of common stock to Lone Star Value Investors, LP, an entity ultimately controlled by Mr. Eberwein, at $0.0153 per share for total proceeds of $50,000. |
Security ownership of management
As of February 28, 2014, the amount of common stock owned by the directors of the Company was:
Name of individual or group | | Amount and Nature of Beneficial Ownership | | | Percent of Class | |
| | | | | | |
Jeffrey E. Eberwein (1) | | | 9,783,886 | | | | 63.49 | % |
Kyle Hartley | | | - | | | | - | |
All executive officers and directors as a group | | | 9,783,886 | | | | 63.49 | % |
_______
(1) | Includes the 9,783,886 shares owned by Lone Star Value Investors, LP, which may be deemed to be beneficially owned by Mr. Eberwein. Mr. Eberwein disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
Item 13. | Certain Relationships and Related Transactions and Director Independence |
Transactions with Related Persons
In January 2013, Mr. Jay Gottlieb, then a director and officer of the Company, loaned $12,000 to the Company on an interest-free basis to assist in funding its operating expenses.
Item 12. Security OwnershipIn April 2013, Mr. Jay Gottlieb, then a director and officer of Certain Beneficial Ownersthe Company, loaned $5,000 to the Company on an interest-free basis to assist in funding its operating expenses.
In July 2013, Mr. Gottlieb, then a director and Managementofficer of the Company, loaned $2,000 to the Company on an interest-free basis to pay for ongoing expenses.
In August 2013, Mr. Jay Gottlieb, then a director and Related Stockholder Mattersofficer of the Company, loaned $1,500 to the Company on an interest-free basis to assist in funding its operating expenses.
On November 27, 2013, the Company sold and issued 6,515,912 shares (the “Lone Star Shares”) of the Company’s common stock, to Lone Star Value Investors, LP, for an aggregate purchase price of $100,000 pursuant to that certain Stock Purchase Agreement by and between the Company and Lone Star Value Investors, LP dated as of November 27, 2013 (the “Stock Purchase Agreement”). Lone Star Value Investors, LP is ultimately controlled by Mr. Eberwein and Mr. Eberwein is a director and officer of the Company.
Also on November 27, 2013, and immediately after issuance of the Lone Star Shares, the Company acquired (i) 2,334,516 shares of the Company’s common stock for $35,828 (approximately $0.0153 per share) from Greggory Schneider, and (ii) 4,181,396 shares of the Company’s common stock for $64,172 (approximately $0.0153 per share) from Jay Gottlieb (collectively, the “Company Redemptions”) pursuant to that certain Stock Redemption Agreement by and between the Company and Mr. Schneider dated as of November 27, 2013 and that certain Stock Redemption Agreement by and between the Company and Mr. Gottlieb dated as of November 27, 2013 respectively. As a result of the Company Redemptions, the Company repurchased a total of 6,515,912 shares of the Company’s common stock for an aggregate purchase price of $100,000. Each of Mr. Schneider and Mr. Gottlieb were directors and officers of the Company at the time of the Company Redemptions.
On November 27, 2013, Jay Gottlieb released the Company from its obligation to repay $28,500 in loans previously made by Mr. Gottlieb to the Company pursuant to that certain Forgiveness of Debt Agreement dated as of November 27, 2013. Mr. Gottlieb was a director and officer of the Company at the time of this loan forgiveness.
The following table sets forth information (except as otherwise indicated by footnote) as toOn January 15, 2014, the Company issued 3,267,974 shares of common stock owned asto Lone Star Value Investors, LP, an entity ultimately controlled by Mr. Eberwein, at $0.0153 per share for total proceeds of February 28, 2013$50,000. Our common stock is quoted on the OTCQB of the OTC Marketplace, which does not have director independence requirements. Under NASDAQ Rule 4200(a)(15), a director is not considered independent if he or whichshe has also been an executive officer or employee of the corporation during the current year or any of the past three years. As such, only Mr. Hartley can be acquired within sixty days of February 28, 2013 by (i) each person known by management to beneficially own more than five percent (5%) of Spatializer’s outstanding common stock, (ii) each of Spatializer’s directors, and officers, and (iii) all executive officers and directorsclassified as a group. On February 28, 2013, there were 12,142,000 shares of common stock outstanding.independent under this definition.
| | AMOUNT AND | | | | |
| | NATURE OF | | | | |
| | BENEFICIAL | | | PERCENT OF | |
NAME OF BENEFICIAL OWNER | | OWNERSHIP | | | CLASS | |
| | | | | | | | |
Jay Gottlieb (2) | | | 4,667,484 | | | | 38.44 | % |
Greggory A. Schneider (1)(3) | | | 2,781,766 | | | | 22.91 | % |
Mike Pearce | | | 0 | | | | | |
All directors and executive officers as a group (3 persons)(1) | | | 7,449,250 | | | | 61.35 | % |
(1) | The persons named in the table have sole voting and investment power with respect to all shares shown to be beneficially owned by them, subject to community property laws, where applicable, and the information contained in the footnotes to this table. |
| |
(2) | Based on the Schedule 13-D filed by Mr. Gottlieb with the SecuritiesPrincipal Accountant’s Fees and Exchange Commission on December 3, 2009. Mr. Gottlieb’s address is 27 Misty Brook Lane, New Fairfield, Connecticut 06812. |
| |
(3) | Based on the Schedule 13-D filed by Mr. Schneider with the Securities and Exchange Commission on April 30, 2008. Mr. Schneider’s address is 10445 Wilshire Blvd., #1806, Los Angeles, California 90024.Services |
Item 13. Certain Relationships and Related Transactions, and Director Independence
At this time, the Company has no employees and an ad hoc bookkeeper. It has four directors, one of whom would be defined as independent in the NASD listing standards, and met the criteria for independence set forth in the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has no formal policy in place as to the procedure for approving any transactions between the Company and its related persons (including officers, directors and stockholders). In the event that the Company should undertake any transaction that would require disclosure under this section, the Company may consider, in light of all then existing facts and circumstances, whether stockholder approval thereof should be sought.
Item 14. Principal Accountant Fees and Services
The following summarizes theAggregate fees paid or payable to Ramirez Jimenez International CPAs in connection with their services during fiscal years 2012 and 2013 are listed below:
Fee category | | 2012 | | | 2013 | |
| | | | | | | | |
Audit Fees | | $ | 14,000 | | | $ | 14,000 | |
Audit-related fees | | | - | | | | - | |
Tax fees | | | - | | | | - | |
All other fees | | | - | | | | - | |
| | | | | | | | |
Total fees | | $ | 14,000 | | | $ | 14,000 | |
Audit Fees: Consists of fees billed for professional services rendered for the audits of the Company’s annual financial statements and the review of the Company’s quarterly financial statements.
Tax Fees: Consists of tax compliance/preparation and other tax services. Tax compliance/preparation consists of fees billed for professional services related to the fiscal years ended December 31, 2012federal, state and 2011:international tax compliance. Other tax services consist of fees billed for other miscellaneous tax consulting and planning.
| | December 31, | |
| | 2012 | | | 2011 | |
| | | | | | | | |
Audit Fees (1) | | $ | 14,000 | | | $ | 14,000 | |
| | | | | | | | |
Audit Related Fees | | | | | | | | |
| | | | | | | | |
All Other Fees | | | | | | | | |
| | | | | | | | |
Total Fees | | $ | 14,000 | | | $ | 14,000 | |
(1) | Audit Fees are fees for professional services rendered for the annual audit and for reviews of quarterly financial statements included in Form 10-Q filings. |
Since 2006, the Board of Directors’ Audit Committee has had no members. Thus, the Company’s Board of Directors has been and will be responsible for serving in the capacity of the Audit Committee and approving audit and non-audit services to be rendered by the Company’s independent registered public accounting firm until such time, if any, as members may be appointed to the Audit Committee.
PART IV
Item 15. Exhibits and Financial Statements(a) Financial Statements
See Item 8.
(b) | Exhibits, Financial Statement Schedules |
The following Exhibitsexhibits are filed as part of this report or incorporated by reference into, this Report:reference:
Financial Statements: as referenced in Item 8 hereof
Exhibit
Number
| | Description |
| | |
2.1 | | Asset Purchase Agreement dated as of September 18, 2006 among the Company, Desper Products, Inc., DTS, Inc. and DTS-BVI (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) |
| | |
3.1 | | Certificate of Incorporation of Spatializer-Delaware as filed February 28, 1994. (Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No. 33-90532,effective August 21, 1995.) |
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3.2 | | Amended and Restated Bylaws of Spatializer-Delaware. (Incorporated by reference to the Company’s Registration Statement on Form S-1,Registration No. 33-90532, effective August 21, 1995.) |
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3.3 | | Certificate of Elimination of Series A Preferred Stock as filed December 26, 2002 (Incorporated by reference to the Company’s Annual Report on Form 10-K, for the period ended December 31,2002.) |
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3.4 | | Certificate of Correction to a Certificate of Amendment to the Certificate of Incorporation of the Articles of Incorporation. Reference is made to Exhibit 3.1 of the Company’s Form 8-K filed on November 15, 2013. |
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10.1 | | Spatializer-Delaware Incentive Stock Option Plan (1995 Plan). (Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No. 33-90532, effective August 21,1995.) |
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10.2 | | Spatializer-Delaware 1996 Incentive Plan. (Incorporated by reference to the Company’s Proxy Statement dated June 25, 1996 and previously filed with the Commission.) |
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10.3 | | Form of Stock Option Agreement (Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2005.) |
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10.4 | | License Agreement dated June 29, 1994 between DPI and MEC. (Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No. 33-90532, effective August 21,1995.) |
| | Description |
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10.5 | | Employment Agreement dated November 12, 2005, between the Company and Henry Mandell, as amended. (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2005.) | |
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10.6 | | Related Party Promissory Note to the Successor Trustee of the Ira A. Desper Marital Trust dated November 1, 2003. (Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K, for the period ended December 31, 2005.) | |
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23.1 | | Consent of Independent Registered Public Accounting Firm | |
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31.1 | | PrincipalCertification of Chief Executive Officer Certificate pursuantPursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith | |
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31.2 | | PrincipalCertification of Chief Financial Officer Certificate pursuantPursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith | |
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32.132 | | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) and18 U.S.C. Section 1350, Chapter 63, Title 18as Adopted Pursuant to Section 906 of the United States CodeSarbanes-Oxley Act of 2002, filed herewith. (Certification will not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, as amended). |
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101.INS ** | | XBRL Instance Document |
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101.SCH ** | | XBRL Taxonomy Extension Schema Document |
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101.CAL ** | | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF ** | | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB ** | | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE ** | | XBRL Taxonomy Extension Presentation Linkbase Document |
____________________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this reportAnnual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| SPATIALIZER AUDIO LABORATORIES, INC. | |
| (Registrant) | |
| | | |
Dated: February 28, 2013DATE: March 27, 2014 | By: | /s/ Jay Gottlieb | Jeffrey E. Eberwein |
| By: | Jay Gottlieb | Jeffrey E. Eberwein |
| Its: | Chairman of the Board Secretary, | |
| | Treasurer and Principalof Directors, President, Chief Executive Officer, | Chief Financial Officer |
Pursuant toIn accordance with the requirements of the Securities Exchange Act, of 1934, this report has been signed below by the following persons on behalf of the registrantCompany and in the capacities and on the dates indicated.
SignatureDATE: March 27, 2014 | | Title/s/ Jeffrey E. Eberwein |
| DateBy: | Jeffrey E. Eberwein |
| Its: | President, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive and Financial Officer) |
| | |
DATE: March 27, 2014 | | /s/ Kyle Hartley |
| By: | Kyle Hartley |
| Its: | Director |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Spatializer Audio Laboratories, Inc.:
We have audited the accompanying balance sheets of Spatializer Audio Laboratories, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spatializer Audio Laboratories, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no operating activities. It is now a shell company and its future plans are uncertain. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Josh Krom | | Director | | February 28, 2013 |
Josh Krom | | | Ramirez Jimenez International CPAs | |
| |
| Irvine, California | |
| | | | |
/s/ Michael Pearce | | Director | | February 28, 2013 |
Michael Pearce | | | | |
| | | | |
| | | | |
/s/ Gregg Schneider | | Director , Chief Financial and Principal Financial Officer | | February 28, 2013 |
Gregg Schneider | | | | |
| | | | |
| | | | |
/s/ Jay Gottlieb | | Chairman of the Board, Secretary, | | February 28, 2013 |
Jay Gottlieb | | Treasurer and Principal Executive Officer | March 27, 2014 | |
24SPATIALIZER AUDIO LABORATORIES, INC.
BALANCE SHEETS
| | Year ended December 31, |
| | 2013 | | 2012 |
ASSETS |
Current Assets: | | | | | | | | |
Cash and Cash Equivalents | | $ | 249 | | | $ | 1,381 | |
| | | | | | | | |
Other Current Assets | | | 4,219 | | | | 4,219 | |
| | | | | | | | |
Total Current Assets | | | 4,468 | | | | 5,600 | |
| | | | | | | | |
Total Assets | | $ | 4,468 | | | $ | 5,600 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
Current Liabilities: | | | | | | | | |
Accounts Payable and Accrued Liabilities | | $ | 22,695 | | | $ | 17,666 | |
| | | | | | | | |
Loans and Advances from Officers | | | 2,000 | | | | 8,000 | |
| | | | | | | | |
Total Current Liabilities | | | 24,695 | | | | 25,666 | |
| | | | | | | | |
Stockholders’ Equity (Deficit): | | | | | | | | |
Preferred shares, $.01 par value, 1,000,000 shares authorized, none issued and outstanding | | | - | | | | - | |
Common shares, $.01 par value, 300,000,000 shares authorized, 12,142,025 shares issued and outstanding | | | 121,420 | | | | 121,420 | |
Additional Paid-In Capital | | | 47,250,887 | | | | 47,250,887 | |
Accumulated Deficit | | | (47,392,534 | ) | | | (47,392,373 | ) |
Total Stockholders’ Deficit | | | (20,227 | ) | | | (20,066 | ) |
| | | | | | | | |
Total Liabilities and Stockholders’ Deficit | | $ | 4,468 | | | $ | 5,600 | |
The accompanying notes are an integral part of these financial statements.
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTS OF OPERATIONS
| | Year Ended December 31, | |
| | 2013 | | | 2012 | |
Operating Expenses: | | | | | | |
General and Administrative | | $ | 27,211 | | | $ | 22,690 | |
| | | | | | | | |
Total Operating Expenses | | | 27,211 | | | | 22,690 | |
| | | | | | | | |
Other Income | | $ | 28,500 | | | $ | - | |
| | | | | | | | |
Income (Loss) before Income Taxes | | $ | 1,289 | | | $ | (22,690 | ) |
Income Taxes | | | (1,450 | ) | | | (1,931 | ) |
| | | | | | | | |
Net Loss | | $ | (161 | ) | | $ | (24,621 | ) |
| | | | | | | | |
Basic and Diluted Loss per Share | | $ | (.00 | ) | | $ | (.00 | ) |
Weighted-Average Shares Outstanding | | | 12,142,000 | | | | 12,142,000 | |
The accompanying notes are an integral part of these financial statements.
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| | | Common Stock | | | | | | | | | | | | | |
| | | Shares | | | | Amount | | | | Additional Paid-In Capital | | | | Accumulated Deficit | | | | Total Stockholders’ Equity (Deficit) | |
Balance, December 31, 2011 | | | 12,142,000 | | | $ | 121,420 | | | $ | 47,250,887 | | | $ | (47,367,752 | ) | | $ | 4,555 | |
| | | | | | | | | | | | | | | | | | | | |
Net Loss | | | - | | | | - | | | | - | | | | (24,621 | ) | | | (24,621 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 | | | 12,142,000 | | | $ | 121,420 | | | $ | 47,250,887 | | | $ | (47,392,373 | ) | | $ | (20,066 | ) |
| | | | | | | | | | | | | | | | | | | | |
Issuance of Common Stock | | | 6,515,912 | | | | 65,159 | | | | 34,841 | | | | - | | | | 100,000 | |
Redemption of Common Stock | | | (6,515,912 | ) | | | (65,159 | ) | | | (34,841 | ) | | | | | | | (100,000 | ) |
Net Loss | | | - | | | | - | | | | - | | | | (161 | ) | | | (161 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2013 | | | 12,142,000 | | | $ | 121,420 | | | $ | 47,250,887 | | | $ | (47,392,534 | ) | | $ | (20,227 | ) |
The accompanying notes are an integral part of these financial statements.
SPATIALIZER AUDIO LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
| | Year Ended December 31, | |
| | 2013 | | | 2012 | |
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (161 | ) | | $ | (24,621 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Gain on forgiveness of debt | | | (28,500 | ) | | | - | |
Net change in assets and liabilities: | | | | | | | | |
| | | | | | | | |
Accounts payable and accrued liabilities | | | 5,029 | | | | (229 | ) |
Advances from officers | | | 2,000 | | | | - | |
Net cash used in operating activities | | | (21,632 | ) | | | (24,850 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Issuance of common stock | | | 100,000 | | | | - | |
Redemption of common stock | | | (100,000 | ) | | | - | |
Proceeds from loans from officers | | | 20,500 | | | | 8,000 | |
Net cash provided by financing activities | | | 20,500 | | | | 8,000 | |
Net decrease in cash and cash equivalents | | | (1,132 | ) | | | (16,850 | ) |
Cash and cash equivalents, beginning of period | | | 1,381 | | | | 18,231 | |
Cash and cash equivalents, end of period | | $ | 249 | | | $ | 1,381 | |
| | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest | | $ | - | | | $ | - | |
Income Taxes | | $ | 1,450 | | | $ | 1,931 | |
The accompanying notes are an integral part of these financial statements.
SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Until 2007, Spatializer Audio Laboratories, Inc. (the “Company”) was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. The principal business of the Company was closed down in 2007, and the Company has no further operating activities and is now a shell company.
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has no operating activities and is now a shell company. The Company has concluded that it should look for acquisitions or identify a merger partner. There can be no assurances that the Company will be successful in completing such a transaction or be able to maintain sufficient liquidity over a period of time that will allow it to carry out these actions, in which case the Company might be forced to liquidate or seek protection under the Federal bankruptcy statutes, or both.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.
CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Company considers all highly liquid cash investments that mature in three months or less when purchased, to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.
STOCK OPTIONS
Compensation cost relating to stock-based payments, including grants of employee stock options, is recognized in financial statements based on the fair value of the equity instruments issued on the grant date. The Company recognized the fair value of stock-based compensation awards as compensation expense in its statement of operations on a straight line basis, over the vesting period.
SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
December 31, 2013 and 2012
INCOME TAXES
Deferred income taxes are provided under the asset and liability method and reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company establishes valuation allowances when the realization of specific deferred tax assets is subject to uncertainty. The Company records no tax benefits on its operating losses, as the losses will have to be carried forward and realization of any benefit is uncertain.
EARNINGS PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since the Company generated net losses in 2013 and 2012, outstanding stock options would have been anti-dilutive and were not considered in these calculations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, accounts payable and accrued liabilities, and loans and advances from officers at December 31, 2013 and 2012 approximated fair value due to their short maturity or nature.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
2. INCOME TAXES
Income tax expense for the years ended December 31, 2013 and 2013 consisted of the following:
| | Year ended December 31, |
| | 2013 | | | 2012 | |
| | | | | | | | |
State franchise taxes | | $ | 1,450 | | | $ | 1,931 | |
Federal taxes | | | 0 | | | | 0 | |
| | | | | | | | |
Total | | $ | 1,450 | | | $ | 1,931 | |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets is composed primarily of the net loss carry forwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, management believes it is more likely than not the Company will not realize the benefits of these deductible differences and has established a valuation allowance to fully reserve the deferred tax assets at December 31, 2013 and 2012. Additionally, the ultimate realizability of net operating losses may be limited by change of control provisions under Section 382 of the Internal Revenue Code. The Company’s income tax returns remain subject to examination for the years 2010 through 2013 for federal and state purposes.
SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
December 31, 2013 and 2012
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities as of December 31, 2013 and 2012 consist of the following:
| | Year ended December 31, | |
| | 2013 | | | 2012 | |
| | | | | | | | |
Legal and accounting costs | | $ | 22,695 | | | | 17,666 | |
| | | | | | | | |
Total | | $ | 22,695 | | | | 17,666 | |
4. STOCKHOLDERS’ EQUITY
On November 27, 2013, the Company sold and issued 6,515,912 shares of the Company’s common stock for an aggregate purchase price of $100,000 pursuant to a certain Stock Purchase Agreement. The common stock was sold to an individual who is a director and officer of the Company.
Also on November 27, 2013, and immediately after issuance of the aforementioned issuance of shares, the Company acquired an aggregate of 6,515,912 share of common stock from two shareholders pursuant to that certain Stock Redemption Agreement for an aggregate purchase price of $100,000. The two former shareholders were directors and officers of the Company at the time of the Company redemptions.
5. RELATED PARTY TRANSACTIONS
In January 2013, a then director and officer of the Company, loaned $12,000 to the Company on an interest-free basis to assist in funding its operating expenses.
In April 2013, a then director and officer of the Company loaned $5,000 to the Company on an interest-free basis to assist in funding its operating expenses.
In July 2013, a then director and officer of the Company loaned $2,000 to the Company on an interest-free basis to pay for ongoing expenses.
In August 2013, a then director and officer of the Company, loaned $1,500 to the Company on an interest-free basis to assist in funding its operating expenses.
On November 27, 2013, a former director and officer of the Company released the Company from its obligation to repay $28,500 in loans previously made by the director to the Company pursuant to that certain Forgiveness of Debt Agreement dated as of November 27, 2013. The individual was a director and officer of the Company at the time of this loan forgiveness. Such amount has been recorded as a forgiveness of debt and is included in other income on the accompanying 2013 statement of operations.
6. SUBSEQUENT EVENTS
On January 15, 2014, the Company issued 3,267,974 shares to Lone Star Value Investors, LP, an entity controlled by a director and officer of the Company, for proceeds of $50,000. The proceeds of this issuance will be used to assist in funding the Company’s operating expenses. No other material subsequent events have occurred since December 31, 2013 that require recognition or disclosure in the financial statements.