UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2014 |
| |
xo | Quarterly report pursuant to SectionTRANSITION REPORT UNDER SECTION 13 or 15(d) of15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Securities Exchange Act of 1934transition period from to . |
For the quarterly period ended: September 30, 2013
ORCommission File Number 000-26460
oSPATIALIZER AUDIO LABORATORIES, INC. |
(Name of registrant in its charter) |
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
Commission File Number: 000-26460
SPATIALIZER AUDIO LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
DelawareDELAWARE | | 95-4484725 |
(State or other jurisdiction of incorporation or organization) | | (IRSI.R.S. Employer Identification No.Number) |
| | |
53 Forest Avenue, First Floor, Old Greenwich, Connecticut | | 06870 |
(Address of principal executive offices) | | (Zip Code) |
| | |
(203) 542-0235 |
(Issuer’s telephone number, including area code) |
|
|
(Former name, former address and former fiscal year, if changed since last report.) |
410 Park Avenue - 15th Floor, New York, NY 91362
(Address of principal corporate offices)
Telephone Number (212) 231-8359
(Registrant’s telephone number, including area code)
Indicate by check markCheck whether the registrantissuer (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 12past twelve 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: Yesninety days. xNo YES o NO
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | o | | o |
Non-accelerated filer | o | Smaller reporting company | x |
(Do not check if a smaller reporting company) | | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)Act.): Yes xNo YES o NO
As September 30, 2013, there were 12,142,000State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 15,409,999 shares of the Registrant’s Common Stock, outstanding.$0.01 par value, as of May 6, 2014.
SPATIALIZER AUDIO LABORATORIES, INC.
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2013
March 31, 2014
INDEX
PART I. FINANCIAL INFORMATION | | | |
| | | | |
Item 1. | Unaudited Financial Statements | | | 2 |
| | | | |
| Condensed Balance Sheets as of September 30, 2013March 31, 2014 and December 31, 20122013
| | | 3 | 2 |
| | | | | |
| Condensed Statements of Operations for the Three Months Ended September 30,March 31, 2014 and 2013 and 2012
| | | 4 | 3 |
| | | | | |
| Condensed Statements of Operations for the Nine Months Ended September 30, 2013 and 2012 | | | 5 | |
| | | | | |
| Condensed Statements of Cash Flows for the NineThree Months ended September 30,Ended March 31, 2014 and 2013 and 2012 | | | 6 | 4 |
| | | | | |
| Notes to Unaudited Financial Statements | | | 7-8 | 5-6 |
| | | | | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | 9-11 | 7-8 |
| | | | | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | | | 11 | 8 |
| | | | | |
Item 4. | Risk Controls and Procedures | | | 12 | 8 |
| | | | | |
PART II. OTHER INFORMATION | |
| | |
Item 1. | Legal Proceedings | | | | 9 |
Item 1.Item 1a. | Legal proceedingsRisk Factors | | | 13 | 9 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | | | 9 |
Item 1a.Item 3. | Risk factorsDefaults Upon Senior Securities | | | 13 | 9 |
Item 4. | Mine Safety Disclosures | | | | 9 |
Item 2.Item 5. | Unregistered sales of equity securities and use of proceedsOther Information | | | 13 | 9 |
Item 6. | Exhibits | | | | 9 |
Item 3. | Defaults upon senior securities | | | 13 | |
| | | | | |
Item 4. | Mine safety disclosures | | | 13 | |
| | | | | |
Item 5. | Other matters | | | 13 | |
| | | | | |
Item 6. | Exhibits | | | 13 | |
| | | | | |
Signatures | 10 |
| |
14Exhibits | 11 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SPATIALIZER AUDIO LABORATORIES, INC.
CONDENSEDUNAUDITED BALANCE SHEETS
(unaudited)
| | September 30, 2013 | | December 31, 2012 | | |
| | | | | | | March 31, 2014 | | December 31, 2013 | |
ASSETS | | | | | | | | | | | |
Current Assets: | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 684 | | $ | 1,381 | | | $ | 22,470 | | $ | 249 | |
Other Current Assets | | | 4,219 | | 4,219 | |
| | | | | | | | | | |
Other Current Assets | | 4,219 | | 4,219 | | |
Total Current Assets | | 4,903 | | 5,600 | | | | 26,689 | | | 4,468 | |
| | | | | | | | | | |
Total Assets | | $ | 4,903 | | $ | 5,600 | | | $ | 26,689 | | $ | 4,468 | |
| | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | |
Accounts Payable and Accrued Liabilities | | 9,616 | | 17,666 | | | $ | 2,783 | | $ | 22,695 | |
| | | | | | | | | | |
Loans from Shareholders | | 28,500 | | 8,000 | | |
Loans from Stockholders | | | 2,000 | | 2,000 | |
| | | | | | | | | | |
Total Current Liabilities | | 38,116 | | 25,666 | | | | 4,783 | | | 24,695 | |
| | | | | | | | | | |
Commitments and Contingencies | | | | | | | | | | |
| | | | | | | | | | |
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 | | |
Common shares, $.01 par value, 300,000,000 shares authorized, 15,409,999 and 12,142,025 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively | | | 154,100 | | 121,420 | |
Additional Paid-In Capital | | 47,250,887 | | 47,250,887 | | | 47,268,207 | | 47,250,887 | |
Accumulated Deficit | | (47,405,520 | ) | | (47,392,373 | ) | | | (47,400,401 | ) | | | (47,392,534 | ) |
Total Stockholders’ Deficit | | (33,213 | ) | | (20,066 | ) | |
Total Liabilities and Stockholders’ Deficit | | $ | 4,903 | | $ | 5,600 | | |
| | | | | | |
Total Stockholders’ Equity (Deficit) | | | | 21,906 | | | | (20,227) | |
| | | | | | |
Total Liabilities and Stockholders’ Equity (Deficit) | | | $ | 26,689 | | $ | 4,468 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| | Three Months Ended | |
| | September 30, 2013 | | | September 30, 2012 | |
O Operating Expenses : | | | | | | | | |
General and Administrative | | | 4,557 | | | | 4,566 | |
| | | | | | | | |
Operating Loss | | | (4,557 | ) | | | (4,566 | ) |
| | | | | | | | |
Loss Before Income Taxes | | | (4,557 | ) | | | (4,566 | ) |
Income Taxes | | | 0 | | | | (300 | ) |
| | | | | | |
N Net Loss | | $ | (4,557 | ) | | $ | (4,866 | ) |
B Basic and Diluted Loss Per Share | | $ | (0.00 | ) | | $ | (0.00 | ) |
Weighted Average Shares Outstanding | | | 12,142,000 | | | | 12,142,000 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
CONDENSEDUNAUDITED STATEMENTS OF OPERATIONS
(unaudited)
| | Nine Months Ended | |
| | September 30, 2013 | | | September 30, 2012 | |
O Operating Expenses : | | | | | | | | |
General and Administrative | | | 13,147 | | | | 12,693 | |
| | | | | | | | |
Operating Loss | | | (13,147 | ) | | | (12,693 | ) |
| | | | | | | | |
Loss Before Income Taxes | | | (13,147 | ) | | | (12,693 | ) |
Income Taxes | | | - | | | | (300 | ) |
| | | | | | | | |
N Net Loss | | $ | (13,147 | ) | | $ | (12,993 | ) |
B Basic and Diluted Earnings Per Share | | $ | (0.00 | ) | | $ | (0.00 | ) |
Weighted Average Shares Outstanding | | | 12,142,000 | | | | 12,142,000 | |
| | Three Months Ended March 31, | |
| | 2014 | | | 2013 | |
O Operating Expenses : | | | | | | |
General and Administrative | | $ | 7,584 | | | $ | 4,698 | |
| | | | | | | | |
O Operating Loss | | | (7,584 | ) | | | (4,698 | ) |
| | | | | | | | |
InLoss Before Income Taxes | | | (7,584 | ) | | | (4,698 | ) |
InIncome Taxes | | | 283 | | | | - | |
| | | | | | | | |
N Net Loss | | $ | (7,867 | ) | | $ | (4,698 | ) |
B Basic and Diluted Loss Per Share | | $ | (0.00 | ) | | $ | (0.00 | ) |
WWeighted Average Shares Outstanding – Basic and Diluted | | | 14,901,647 | | | | 12,142,000 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
CONDENSEDUNAUDITED STATEMENTS OF CASH FLOWS
(unaudited)
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Cash Flows from Operating Activities: | | | | | | | | |
Net Loss | | $ | (7,867 | ) | | $ | (4,698 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Net Change in Assets and Liabilities: | | | | | | | | |
Accounts Payable and Accrued Liabilities | | | (19,912 | ) | | | (7,523 | ) |
Net Cash Used In Operating Activities | | | (27,779 | ) | | | (12,221 | ) |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
Issuance of Common Stock | | | 50,000 | | | | - | |
Loans from Stockholders | | | - | | | | 12,000 | |
Net Cash Provided from Financing Activities | | | 50,000 | | | | 12,000 | |
| | | | | | | | |
Increase (decrease) in Cash and Cash Equivalents | | | 22,221 | | | | (221 | ) |
| | | | | | | | |
Cash and Cash Equivalents, Beginning of Period | | | 249 | | | | 1,381 | |
Cash and Cash Equivalents, End of Period | | $ | 22,470 | | | $ | 1,160 | |
Supplemental Disclosure of Cash Flow Information: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest | | $ | - | | | $ | 148 | |
Income Taxes | | | 1,732 | | | | 1,450 | |
| | Nine Months Ended |
| | September 30, |
| | 2013 | | 2012 |
Cash Flows from Operating Activities: | | | | | | | | |
Net Loss | | $ | (13,147 | ) | | $ | (12,993 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| | | | | | | | |
Net Change in Assets and Liabilities: | | | | | | | | |
| | | | | | | | |
Accounts Payable and Accrued Liabilities | | | (8,050 | ) | | | (8,089 | ) |
Net Cash Used In Operating Activities | | | (21,197 | ) | | | (21,082 | ) |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
Loans from Officers | | | 20,500 | | | | 5,000 | |
Net Cash Provided by Financing Activities | | | 20,500 | | | | 5,000 | |
| | | | | | | | |
Decrease in Cash and Cash Equivalents | | | (697 | ) | | | (16,082 | ) |
| | | | | | | | |
Cash and Cash Equivalents, Beginning of Period | | | 1,381 | | | | 18,231 | |
Cash and Cash Equivalents, End of Period | | $ | 684 | | | $ | 2,149 | |
| | | | | | | | |
Supplemental Disclosure of Cash Flow Information: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Income Taxes | | | - | | | | 300 | |
The accompanying notes are an integral part of these statements.
SPATIALIZER AUDIO LABORATORIES, INC.
Notes to Unaudited Financial StatementsNOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2014
(1) | Ability to Continue as a Going Concern |
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
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 technologyThe principal business of the Company was incorporated into products offered by our licenseesclosed down in 2007, and customers on various economicthe Company has no further operating activities and business terms. We were incorporatedis 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 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 State of Delaware in February 1994 and areCompany might be forced to liquidate or seek protection under the successor company in a Plan of Arrangement pursuant to which the outstanding shares of Spatializer Audio Laboratories, Inc., a publicly held Yukon, Canada corporation, were exchanged for an equal number of shares of our common stock. Our corporate office is located at 410 Park Avenue - 15th Floor, New York, NY 91362.Federal bankruptcy statutes, or both.
The foregoingaccompanying 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.
The Company is quoted on the OTCQB of the OTC Marketplace under the symbol “SPZR”.
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information is unaudited and has been prepared from the books and recordswith instructions to Form 10-Q. Accordingly they do not include all of the Company. Theinformation and footnotes required by accounting principles generally accepted in the United States for complete financial information reflectsstatements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company in conformity with generally accepted accounting principles. All such adjustments were of a normal recurring nature for interim financial reporting.have been included. Operating results for the three and nine monthsinterim period ended September 30, 2013March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Accordingly, your attention is directed2014.
For further information, refer to footnote disclosures foundthe financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012 Annual Report and particularly to Note 2 thereof, which includes a summary of significant accounting policies.2013.
Accounting Estimates
The foregoingpreparation of financial information has been prepared assumingstatements in conformity with accounting principles generally accepted in the United States 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 period. Actual results may differ from those estimates.
Cash Equivalents
For the purposes of the statements of cash flows, the Company will continue as a going concern. The Company’s current circumstances, including significant operating losses, raise substantial doubt about the likelihood that the Company will continue as a going concern. The foregoing financial information does not include any adjustments that might result from the outcome of this uncertainty.
We are quoted on the OTCQB of the OTC Marketplace under the symbol “SPZR”.
(2) Significant Accounting Policies
Cash and Cash Equivalents — Cash equivalents consist ofconsiders all highly liquid cash investments with original maturities ofthat mature in three months or less.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 UNAUDITED FINANCIAL STATEMENTS
March 31, 2014
Income Taxes
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 significant 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 shareholdersstockholders 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 each of the periods presented, outstanding stock options would have been anti-dilutive and were not considered in 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 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. Actual results could differ from those estimates.
Fair Value of Financial Instruments—
The carrying values of the Company’s current assets and liabilities approximateapproximated fair value due to their short maturity or nature.
(3) Income TaxesRecently 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
At September 30, 2013,March 31, 2014, we had net operating loss carry-forwards for Federal income tax purposes of approximately $9,600,000 which were available to offset future Federal taxable income, if any, through 2031. These net operating loss carry forwards 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.
The Company’s income tax returns remain subject to examination for the years 20092010 through 20122013 for federal and state purposes.
3. STOCK OPTION PLAN
(4) Subsequent EventsThere are no outstanding options as of March 31, 2014.
As previously reported on the Company’s Form 8-K, on January 15, 2014, the Company issued 3,267,974 shares of common stock to Lone Star Value Investors, LP, an entity controlled by a director and officer of the Company, for cash proceeds of $50,000. The proceeds of this issuance will be used to assist in funding the Company’s operating expenses.
5. SUBSEQUENT EVENTS
No material subsequent events have occurred since September 30, 2013March 31, 2014 that require recognition or disclosure in the financial statements.
SPATIALIZER AUDIO LABORATORIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS September 30, 2013March 31, 2014
Item 22. . Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This information should be read in conjunction with Management’s Discussion and Analysis and other parts of Financial Conditionthis report contain forward-looking statements that involve risks and Resultsuncertainties, 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 Operations contained1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s Annual Report on Form 10-K forforward-looking statements. The risks and uncertainties that may affect the year ended December 31, 2012,operations, performance, development and results of the audited financial statements and the notes thereto includedCompany’s business include, but are not limited to, its ability to maintain sufficient working capital, adverse changes in the Form 10-Keconomy, the ability to attract and the unaudited interim financialmaintain 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 actual results could differ materially from those anticipated in these forward-looking statements, and notes thereto includedincluding those set forth elsewhere in this report. The Company plansassumes no obligation to continue as a public entity and continues to seek merger, acquisition and business combination opportunities with other operating businesses or other appropriate financial transactions. Until such an acquisition or business combination is effectuated, the Company does not expect to have significant operations.
This report contains forward-looking statements, within the meaning of the Private Securities Reform Act of 1995, which are subject to a variety of risks and uncertainties. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied inupdate any such forward-looking statements.
Executive OverviewCRITICAL ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS
Revenues were $0 for the quarter and nine months ended September 30, 2013, compared to $0 for the quarter and nine months ended September 30, 2012.
Net loss was $4,557 for the quarter ended September 30, 2013 and $13,147 for the nine months then ended ($0.00 basic and diluted per share), compared to a net loss of $4,866 for the quarter ended September 30, 2012 and $12,993 for the nine months then ended ($0.00 basic and diluted per share).
At September 30, 2013, we had $684 in cash and cash equivalents as compared to $1,381 at December 31, 2012. We had negative working capital of $33,213 at September 30, 2013, as compared with negative working capital of $20,066 at December 31, 2012.
We ceased commercial operations in 2006.
Approach to 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 in financial condition and results of operations. As such, we seek to satisfy three principal objectives:
· | To provide a narrative explanation of a 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, a company’s earnings and cash flow, so that investors can ascertain the likelihood and relationship of past performance being indicative of future performance. |
SPATIALIZER AUDIO LABORATORIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2013
We believe the best way to achieve this is to give the reader:
· | An understanding of our operating environment and its risks (see below and Item 1A of Part II of this Form 10-Q); |
· | An outline of 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
The market for our stock may not remain liquid and the stock price may be subject to volatility.
Certain other risk factors are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 on file with the Securities and Exchange Commission.
Critical Accounting Policies
OurThis 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 financial statementsThere have been prepared assumingno material changes or developments in the Company’s evaluation of the accounting estimates and the underlying assumptions or methodologies that it believes to be Critical Accounting Policies and Estimates as disclosed in its Form 10-K for the Company will continue as a going concern. Asyear ended December 31, 2013.
Management’s Discussion included in the Form 10-K for the year ended December 31, 2013 includes discussion of various factors and items related to the Company’s results of operations and liquidity. There have been no other significant changes in most of the factors discussed in Note 1the Form 10-K and many of the items discussed in the Form 10-K are relevant to 2014 operations; thus the financial statements, the Company’s current circumstances, including significant operating losses, 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 outcomereader of this uncertainty.report should read Management’s Discussion included in Form 10-K for the year ended December 31, 2013.
RESULTS OF OPERATIONS
Key ComponentsRevenues
Revenues for the three months ended March 31, 2014 were zero, since all operations were discontinued as of the Financial Statements and Important TrendsSeptember 30, 2007.
General and Administrative
General and administrative expenses for the three months ended March 31, 2014 were $7,584 compared to $4,698 for the same period in 2013. The Company’s financial statements, including the Balance Sheets, the Statements of Operations, and the Statements of Cash Flows, should be readincrease was due to higher legal fees in conjunction with the Notes thereto included elsewhere in this report. MD&A explains the key components of each of these financial statements, key trends and reasons for reporting period-to-period fluctuations.2014 as compared to 2013.
SPATIALIZER AUDIO LABORATORIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2013March 31, 2014
The Balance Sheet provides a snapshot view of our financial condition at the end of our current fiscal period. A balance sheet helps management and our stockholders understand 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 ability of the Company to withstand business variations. The difference between Current Assets and Current Liabilities is referred to as Working Capital and measures how much liquid assets a company has available to build its business. This is addressed further in MD&A under Liquidity and Capital Resources.
LIQUIDITY AND CAPITAL RESOURCES
The StatementCompany has undertaken steps to reduce its expenses and improve the Company’s liquidity, including the previous sale and discontinuance 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.all operations.
The Statement of Cash Flows explainsaccompanying financial statements have been prepared assuming the actual sources and uses of cash.Company will continue as a going concern. However, the Company currently has no operating activities. There can be no assurances that the Company will be able to successfully complete a merger or acquisition or be able to maintain sufficient liquidity to continue to seek a merger or acquisition, in which case the Company might be forced to liquidate or seek protection under the Federal bankruptcy statutes, or both.
Results of Operations
Net Loss
Our net loss forcash used by operating activities during the three months ended September 30, 2013March 31, 2014 was $4,557,$27,779 compared to a net loss of $4,866$12,221 in the comparable period last year. Ourof 2013. The increase was attributable to a larger net loss for the nine months ended September 30, 2013 was $13,147, compared toand a net loss of $12,993decrease in accounts payable and accrued liabilities.
The Company did sell common stock in the comparablethree month period last year.
Operating Expenses
Operating expenses inended March 31, 2014 generating cash proceeds of $50,000. In the three months ended September 30,March 31, 2013, were $4,557, compared to operating expenses of $4,566the Company received $12,000 in the comparable period last year. Operating expenses in the nine months ended September 30, 2013 were $13,147, compared to operating expenses of $12,693 in the comparable period last year.loans from stockholders.
Liquidity and Capital Resources
At September 30, 2013, we had $684 in cash and cash equivalents as compared to $1,381 at December 31, 2012. We had negative working capital of $33,213 at September 30, 2013, as compared with negative working capital of $20,066 at December 31, 2012.
Based on current and projected operating levels, we believe that we can maintain our liquidity position at a consistent level, on a short-term basis. However, we do not believe our current cash reserves are sufficient for us to meet our operating obligations for more than 2-3 months without raising additional capital. There is no current source of future cash flow for the Company.
Net Operating Loss Carry forwards
At September 30, 2013, we had net operating loss carry-forwards for Federal income tax purposes of approximately $9,600,000 which were available to offset future Federal taxable income, if any, through 2031. These net operating loss carry forwards 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 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
SPATIALIZER AUDIO LABORATORIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2013
Item 4. Risk 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 OfficeOfficer and Principal Financial Officer concluded that as of September 30, 2013, thesethe disclosure controls and procedures as of the end of the period covered by this report were effective to ensuresuch that allthe information required to be disclosed by us 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.
(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.
SPATIALIZER AUDIO LABORATORIES, INC.
OTHER INFORMATION
PART II - OTHER INFORMATION
September 30, 2013
ITEMItem 1. LEGAL PROCEEDINGSLegal Proceedings
From time to time, we may be involved in various disputes and litigation matters arising in the normal course of business. We are not involved in any legal proceedings that are expected to have a material adverse effect on our financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, given the size of our Company, there exists the possibility of a material adverse impact on our results of operations of the period in which the ruling occurs. Our estimate of the potential impact on our financial position or overall results of operations for new legal proceedings could change in the future.None.
ITEM 1A. RISK FACTORSItem 1a. Risk Factors
In addition to the other information set forth in this Quarterly Report, stockholders should carefully consider the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2012,2013, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As previously reported on the Company’s Form 8-K filed on January 17, 2014, on January 15, 2014 the Company issued 3,267,974 shares of its common stock, $0.01 par value, in a private placement to Lone Star Value Investors, LP at $0.0153 per share for total cash proceeds of $50,000. The proceeds of this issuance will be used to assist in funding the Company’s operating expenses.
There were no unregistered salesrepurchases of equityCompany securities made by or repurchaseson behalf of the Company during the period covered by this report.
ITEMItem 3. DEFAULTS UPON SENIOR SECURITIESDefaults upon Senior Securities
NoneNone.
ITEMItem 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER MATTERS
NoneMine Safety Disclosures
ITEM 6. EXHIBITSItem 5. Other Information
None.
The following exhibits are filed as part of this report:
| | CEO-CertificationCEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as AmendedAmended. |
31.2 | | CFO-CertificationCFO Certification Pursuant to Rule 13a-14(a)/15(d)-14(a)15d-14(a) of the Securities Exchange Act of 1934, as AmendedAmended. |
32.1 | | CEO-CertificationCEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002. |
32.2 | | CFO-CertificationCFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002. |
| | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL). |
101.INS ** | | XBRL Instance Document |
101.SCH ** | | XBRL Taxonomy Extension Schema Document |
101.CAL ** | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF ** | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB ** | | XBRL Taxonomy Extension Label Linkbase Document |
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 the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this Reportreport to be signed on its behalf by the undersigned thereunto duly authorized.
| | SPATIALIZER AUDIO LABORATORIES, INC. (Registrant) |
May 7, 2014 | |
| (Registrant) | /s/ Kyle Hartley |
| | | |
Dated: November 6, 2013 | By: | /s/ JAY GOTTLIEB | Kyle Hartley |
| | Jay Gottlieb | President and Chief Executive Officer |
| | Chairman of the Board, President, Secretary, Treasurer and Principal Executive Officer
| /s/ Kyle Hartley |
| | | Kyle Hartley |
| | /s/ GREGG SCHNEIDERChief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. | | Description |
| | Gregg Schneider31.1 | | CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended. |
| | Chief Financial and Principal Financial Officer31.2 | | CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended. |
| 32.1 | | CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | | CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101 | | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail (XBRL). |