Enveric Biosciences, Inc. - Quarter Report: 2014 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2014
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TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to .
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SPATIALIZER AUDIO LABORATORIES, INC.
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(Name of registrant in its charter)
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DELAWARE
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95-4484725
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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53 Forest Avenue, First Floor, Old Greenwich, Connecticut
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06870
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(Address of principal executive offices)
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(Zip Code)
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(203) 489-9500
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(Issuer’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report.)
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Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ninety days. x YES o NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o YES x NO (Not required)
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):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): x YES o NO
State 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 Common Stock, $0.01 par value, as of November 10, 2014.
SPATIALIZER AUDIO LABORATORIES, INC.
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2014
INDEX
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PART I. FINANCIAL INFORMATION
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Item 1.
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Unaudited Financial Statements
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3
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Balance Sheets as of September 30, 2014 and December 31, 2013
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3
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Statements of Operations for the Three Months Ended September 30, 2014 and 2013
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4
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Statements of Operations for the Nine Months Ended September 30, 2014 and 2013
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5
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Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013
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6
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Notes to Unaudited Financial Statements
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7-9
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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10-11
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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11
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Item 4.
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Risk Controls and Procedures
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11
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PART II. OTHER INFORMATION
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Item 1.
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Legal Proceedings
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12
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Item 1a.
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Risk Factors
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12
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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12
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Item 3.
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Defaults Upon Senior Securities
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12
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Item 4.
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Mine Safety Disclosures
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12
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Item 5.
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Other Information
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12
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Item 6.
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Exhibits
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12
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Signatures
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13
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Exhibits
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14
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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SPATIALIZER AUDIO LABORATORIES, INC.
UNAUDITED BALANCE SHEETS
AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
| September 30,
2014
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December 31,
2013
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ASSETS
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Current Assets:
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Cash and Cash Equivalents
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$
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9,126
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$
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249
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Other Current Assets
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-
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4,219
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Total Current Assets
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9,126
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4,468
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Total Assets
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$
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9,126
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$
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4,468
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| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
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Current Liabilities:
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Accounts Payable and Accrued Liabilities
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2,300
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22,695
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Loans from Stockholders
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-
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2,000
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Total Current Liabilities
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2,300
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24,695
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Commitments and Contingencies
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Stockholders’ Equity (Deficit):
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Preferred shares, $.01 par value, 1,000,000 shares authorized, none issued and outstanding
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-
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-
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Common shares, $.01 par value, 300,000,000 shares authorized, 15,409,999 and 12,142,025 shares issued and outstanding as of September 30, 2014 and December 31, 2013 respectively
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121,420
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121,420
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Additional Paid-In Capital
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47,300,887
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47,250,887
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Accumulated Deficit
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(47,415,481
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)
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(47,392,534
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)
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Total Stockholders’ Equity (Deficit)_
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6,826
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(20,227
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)
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Total Liabilities and Stockholders’ Equity (Deficit)
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$
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9,126
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$
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4,468
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The accompanying notes are an integral part of these statements.
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UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
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Three Months Ended
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September 30,
2014
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September 30,
2013
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O Operating Expenses :
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General and Administrative
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$ |
3,113
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$ |
4,557
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Operating Loss
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(3,113
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)
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(4,557
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)
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Loss Before Income Taxes
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(3,113
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)
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(4,557
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)
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Income Taxes
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65
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0
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N Net Loss
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$
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(3,178
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)
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$
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(4,557
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)
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B Basic and Diluted Loss Per Share
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$
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(0.00
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)
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$
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(0.00
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)
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Weighted Average Shares Outstanding – Basic and Diluted
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15,409,999
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12,142,000
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The accompanying notes are an integral part of these statements.
- 4 -
SPATIALIZER AUDIO LABORATORIES, INC.
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
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Nine Months Ended
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September 30,
2014
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September 30,
2013
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O Operating Expenses :
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General and Administrative
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$ |
22,414
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$ |
13,147
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Operating Loss
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(22,414
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)
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(13,147
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)
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Loss Before Income Taxes
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(22,414
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)
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(13,147
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)
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Income Taxes
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533
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0
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N Net Loss
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$
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(22,947
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)
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$
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(13,147
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)
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B Basic and Diluted Earnings Per Share
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$
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(0.00
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)
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$
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(0.00
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)
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Weighted Average Shares Outstanding – Basic and Diluted
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15,242,411
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12,142,000
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The accompanying notes are an integral part of these statements.
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SPATIALIZER AUDIO LABORATORIES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
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Nine Months Ended
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September 30,
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2014
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2013
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Cash Flows from Operating Activities:
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Net Loss
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$
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(22,947
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)
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$
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(13,147
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Net Change in Assets and Liabilities:
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Other Current Assets
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4,219
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-
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Accounts Payable and Accrued Liabilities
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(20,395
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)
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(8,050
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)
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Net Cash Used In Operating Activities
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(39,123
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)
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(21,197
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)
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Cash Flows from Financing Activities:
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Issuance of Common Stock
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50,000
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0
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Loans from Stockholders
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(2,000)
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20,500
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Net Cash Provided by Financing Activities
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48,000
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20,500
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Increase (Decrease) in Cash and Cash Equivalents
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8,877
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(697
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)
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Cash and Cash Equivalents, Beginning of Period
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249
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1,381
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Cash and Cash Equivalents, End of Period
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$
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9,126
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$
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684
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Supplemental Disclosure of Cash Flow Information:
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Cash paid during the period for:
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Income Taxes
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533
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0
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The accompanying notes are an integral part of these statements.
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SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2014
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Spatializer Audio Laboratories, Inc. (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. 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 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.
The Company is quoted on the OTCQB of the OTC Marketplace under the symbol “SPZR”.
Basis of presentation
The (a) balance sheet as of December 31, 2013 has been derived from audited financial statements and (b) the accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. Accordingly they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.
Accounting Estimates
The preparation of financial statements 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 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.
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SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 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 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 each of the periods presented, outstanding stock options would have been anti-dilutive and were not considered in these calculations.
Fair Value of Financial Instruments
The carrying values of the Company’s current assets and liabilities approximated fair value due to their short maturity or nature.
Recently Issued Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which provides guidance under U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The ASU is effective for all entities and for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The adoption of ASU No. 2014-15 is not expected to have a significant impact on the Company’s financial statements and related disclosures.
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SPATIALIZER AUDIO LABORATORIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2014
2. INCOME TAXES
At September 30, 2014, the Company 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 2010 through 2013 for federal and state purposes.
3. STOCK OPTION PLAN
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 former 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, 2014 that require recognition or disclosure in the financial statements.
- 9 -
September 30, 2014
FORWARD-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 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 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 actual results could differ materially from those anticipated in these forward-looking statements, including those set forth elsewhere in this report. The Company assumes no obligation to update any such forward-looking statements.
CRITICAL ACCOUNTING POLICIES AND COMMENTS RELATED TO OPERATIONS
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.
There have been no 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 year 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 the Form 10-K and many of the items discussed in the Form 10-K are relevant to 2014 operations; thus the reader of this report should read Management’s Discussion included in Form 10-K for the year ended December 31, 2013.
RESULTS OF OPERATIONS
Revenues
Revenues for the nine months ended September 30, 2014 were zero, since all operations were discontinued as of September 30, 2007.
General and Administrative
General and administrative expenses for the three months and nine months ended September 30, 2014 were $3,113 and $22,414, respectively, and were $4,557 and $13,147, respectively, for the comparable periods in 2013. The increase is due to higher legal expenses in 2014 as compared to 2013.
- 10 -
SPATIALIZER AUDIO LABORATORIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
September 30, 2014
LIQUIDITY AND CAPITAL RESOURCES
The Company has undertaken steps to reduce its expenses and improve the Company’s liquidity, including the previous sale and discontinuance of all operations.
The accompanying financial statements have been prepared assuming the 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.
Net cash used by operating activities during the nine months ended September 30, 2014 was $39,123 compared to $21,197 in the comparable period of 2013. The increase was attributable to a larger net loss and a decrease in accounts payable and accrued liabilities.
On January 15, 2014 within the nine months ended September 30, 2014, the Company sold common stock generating cash proceeds of $50,000.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Not applicable.
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Item 4. Risk Controls and Procedures
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(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.
(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.
- 11 -
SPATIALIZER AUDIO LABORATORIES, INC.
OTHER INFORMATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 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, 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.
None.
None.
Item 4. Mine Safety Disclosures
Item 5. Other Information
None.
The following exhibits are filed as part of this report:
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CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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31.2
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CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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32.1
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CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2
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CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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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).
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- 12 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SPATIALIZER AUDIO LABORATORIES, INC.
(Registrant)
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November 13, 2014
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/s/ Kyle Hartley
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Kyle Hartley
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President and Chief Executive Officer
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/s/ Kyle Hartley
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Kyle Hartley
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Chief Financial Officer
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- 13 -
.
INDEX TO EXHIBITS
| Exhibit No. | Description | |
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CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
|
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31.2
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CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Amended.
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32.1
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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
|
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CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
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).
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_________________
** 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.
- 14 -