Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2013, for IIM Global Corporation (formerly Silverwood Acquisition Corporation). The Company is a smaller reporting company incorporated in Delaware. On August 12, 2013, IIM Global completed a reverse merger with Innovation in Motion Inc., a private Florida corporation specializing in handheld biometric identification and mobile payment technologies. For accounting purposes, Innovation in Motion is deemed the acquiring company, and the financial statements reflect its historical results retroactively restated.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2013 | Nine Months Ended Sep 30, 2013 | Balance Sheet (Sep 30, 2013) |
|---|---|---|---|
| Total Revenues | $0 | $0 | - |
| Net Loss | $(294,719) | $(827,684) | - |
| Operating Expenses | $294,719 | $956,139 | - |
| Cash and Cash Equivalents | - | - | $2,849 |
| Total Assets | - | - | $429,789 |
| Total Liabilities | - | - | $151,580 |
| Stockholders' Equity | - | - | $278,209 |
| Net Cash Used in Operating Activities | - | $(313,653) | - |
Note: The filing does not provide explicit margin percentages due to zero revenue in the current period. The prior year (2012) nine-month period showed revenues of $7.7 million and a net income of $1.0 million, driven by a large government contract in Ghana.
Material Changes vs. Prior Period
- Revenue Collapse: Total revenues dropped from $82,942 (three months 2012) and $7.7 million (nine months 2012) to $0 for the corresponding periods in 2013. The 2012 revenue was primarily from a one-time biometric verification project for the Ghana 2012 Election, which concluded in 2012.
- Shift to Loss: The Company moved from a net income of $183,290 (three months 2012) and $1.0 million (nine months 2012) to a net loss of $(294,719) and $(827,684), respectively, in 2013.
- Asset Composition: Intangible assets increased significantly from $184,333 to $383,558, driven by a $200,000 cash purchase of Android payment software in April 2013.
- Liabilities: Current liabilities increased to $151,580 from $103,958, largely due to accrued payroll and related party payables.
Outlook, Risks, and Unusual Items
- Capital Raise: In April 2013, the Company raised $515,000 in cash from five private investors via stock subscription agreements to fund working capital.
- Debt Forgiveness: An unusual gain of $128,456 was recorded in the nine-month period due to an officer forgiving deferred payroll liabilities. Additionally, shares were issued to settle approximately $115,000 of accrued liabilities.
- Product Development: The Company is developing the "HDR+" (next-gen biometric device) and "SRIO" (biometric wallet). $43,000 was spent on R&D for HDR+ as of September 30, 2013.
- Liquidity Risk: Cash on hand is critically low at $2,849. The Company relies on future capital raises or revenue generation to sustain operations.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of September 30, 2013, citing material weaknesses including a lack of segregation of duties and insufficient accounting personnel.
Investor Verification Checklist
- Verify the status of the $515,000 capital raise and whether the shares were fully issued and registered.
- Confirm the timeline for the commercial launch of the SRIO and HDR+ products, as current revenue is zero.
- Assess the sustainability of operations given the $2,849 cash balance and ongoing operating losses.
- Review the remediation plan for the identified material weaknesses in internal controls over financial reporting.
- Validate the valuation of the $200,000 software acquisition and the remaining intangible assets.