Filing summary
Entity and period: The supplied filing is ID Global Solutions Corporation’s Form 10-K for the fiscal year ended December 31, 2014—not a filing identifying Authid Inc. The company was developing biometric identification and mobile-payment products. Its business was at an early stage, and it said it had not completed development of a marketable product.
Financial performance and condition
- Revenue and margins: The statements report operating expenses and losses but provide no revenue line or clear revenue amount. The filing is inconsistent: risk disclosures refer to revenues and limited profits, while the auditor states the company had no revenue and income since inception. Gross margin is not provided.
- Losses: Net loss was $904,687 in 2014 versus $976,238 in 2013; basic and diluted loss per share was $0.01 versus $0.02. Operating expenses were $767,846, down $203,609, primarily reflecting lower general and administrative and R&D expenses.
- Unusual expenses and interest: The company recorded a $71,616 loss on sale of its office building and $65,225 of net interest expense in 2014. Interest expense increased $60,442 year over year, primarily due to related-party borrowing.
- Cash flow: Operating activities used $362,812, investing activities used $407,043, and financing activities provided $923,802. Cash at year-end was $159,296, compared with $5,349 a year earlier.
- Liquidity and debt: Current assets were $159,296 and current liabilities were $258,845, producing a $99,549 working-capital deficit. Current liabilities included $150,228 of accounts payable and accrued expenses, $60,200 of related-party payables, and $48,417 of related-party notes. The filing says $46,792 of notes were due in May 2015 at 15% interest; $1,625 was repaid in January 2015.
- Balance sheet: Total assets were $777,039 and stockholders’ equity was $518,194. Accumulated deficit was $2,395,421.
Changes and significant developments
- Net loss narrowed by $71,551 from 2013, despite the building-sale loss and higher interest expense. Operating expenses fell by $203,609.
- From March to August 2014, the company borrowed $1.11 million from Penn Investments, a related party, at 15%. In September, $1,165,675 of principal and accrued interest was converted into 2,915,000 common shares at $0.40 per share.
- The company bought its Longwood office building for $430,000 in May 2014, sold it for $240,000 in December, and recorded a $71,616 loss. It then leased the premises for $3,000 per month for 12 months, with an extension option at $3,300 per month.
- At December 31, 2014, 163,538,289 shares were issued and outstanding. The filing reports 164,300,789 shares outstanding as of March 26, 2015. The 2014 equity plan reserved 25 million shares, with no plan securities issued as of March 26, 2015.
- After year-end, the company agreed to acquire Multipay S.A. for 7.6 million shares, subject to closing and a condition concerning approximately $340,000 of liabilities. The filing expected closing by April 6, 2015; this was a subsequent event, not a completed 2014 transaction.
Outlook, risks and controls
- Funding and going concern: Management estimated a minimum need of $1.95 million over the next 12 months for existing obligations, product development and executing its business plan. It disclosed no firm funding commitments. The auditor’s report raised substantial doubt about the company’s ability to continue as a going concern; the financial statements include no adjustments for a possible failure to continue.
- Product plans: The company estimated that completing the HDR handheld product would require additional funding (the filing gives differing amounts in different sections, including $60,000 and $200,000) and projected availability about six months after funding. A voter-verification product was estimated to need $60,000 and about two months after funding. SRIO mobile payment was estimated to require about $400,000 and 12 months after funding. Two backend software products were each described as roughly 50% complete, requiring about three more months and $25,000 each. These are management estimates, not assured outcomes.
- Commercialization risks: The company cited limited operating history, intense competition, unproven demand, dependence on additional capital and third parties, possible export and security regulation, and uncertainty over patent protection. It had two full-time employees and three consultants.
- Control weakness: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end. Cited material weaknesses included limited segregation of duties, reliance on outside consultants and attorneys, and no formal audit committee. The auditor did not attest to internal control effectiveness.
- Other investor risks: The common stock was quoted on the OTCQB, with no sales reported through March 26, 2015. The filing warns of limited liquidity and price volatility. Officers and directors beneficially owned approximately 61.2% of shares, and the company did not anticipate paying dividends.
Important facts to verify
- Confirm the filing issuer and period: the document identifies ID Global Solutions Corporation and fiscal 2014, not Authid Inc. or a standalone fourth-quarter report.
- Reconcile whether the company generated revenue: the filing’s narrative and auditor’s going-concern discussion conflict, and the statements provide no revenue figure.
- Reconcile reported R&D: the results table shows $1,500 for 2014, while the narrative says no R&D costs were incurred.
- Reconcile 2014 financing cash flow: the cash-flow statement reports $923,802, while the MD&A reports $932,802.
- Confirm actual funding, product completion and sales after year-end, and whether the Multipay acquisition closed and its liability-payment condition was met.
- Review the going-concern uncertainty, debt maturities, accrued obligations, related-party transactions, and remediation of the disclosed material weaknesses.