Business context and reporting period
This is Globalwise Investments, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2011. The filing identifies the company as a development-stage company and a shell company. Its stated plan is to acquire or merge with an operating business; it reports no revenue-generating activities.
Entity discrepancy: The request identifies Intellinetics, Inc., but the filing text names Globalwise Investments, Inc. Investors should confirm that this is the intended filing.
Financial results and condition
| Metric | Three months ended June 30, 2011 | Six months ended June 30, 2011 | Comparable 2010 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| General and administrative expense | $677 | $3,470 | $775 and $4,051, respectively |
| Interest expense | $1,440 | $2,885 | $0 |
| Net loss | $2,117 | $6,355 | $775 and $4,051, respectively |
- At June 30, 2011, cash and total assets were $2,573; current liabilities were $74,880, including $71,995 in loans and $2,885 in accrued interest. Stockholders’ equity was negative $72,307.
- Six-month operating cash outflow was $3,745. Financing provided $5,000, producing a $1,255 increase in cash from year-end 2010. Cash paid for interest and income taxes was $0.
- Loans are unsecured, bear 8% interest, and are due on demand. The filing provides no gross margin or meaningful operating margin because revenue was zero.
- There were 1,139,000 common shares outstanding as of July 19, 2011; weighted-average shares were also 1,139,000 for the periods presented.
Changes versus prior comparable periods
Six-month general and administrative expense declined by $581 year over year, which management attributed primarily to lower audit fees. Second-quarter expense declined by $98. Interest expense was newly recorded in 2011 following the reclassification of $66,995 of prior liabilities as loans; the company also received $5,000 in advances or loans during the first half. Net loss increased by $2,304 for the six-month period and by $1,342 for the second quarter.
Outlook, risks, and unusual items
- Management and the financial statement notes state that substantial doubt exists about the company’s ability to continue as a going concern: it has recurring losses, no revenue, negative operating cash flow, liabilities exceeding current assets, and dependence on external financing.
- Management expects to seek funds from management, significant stockholders, or third parties, but no written funding commitments exist and no party is obligated to provide funds. Management anticipated costs for required SEC filings over the next 12 months.
- The company intends to seek a business combination, but management reported no discussions with another entity as of the report date. There is no assurance a suitable transaction or financing will be secured; a transaction could involve an unstable or early-stage business and substantial risks.
- Management said additional capital might be raised through common-stock issuance, potentially diluting existing shareholders. The company did not currently intend to make a public offering.
- Disclosure controls and procedures were deemed ineffective because the company lacked personnel to segregate duties. Management said the deficiency could not be remediated until an acquisition or merger. No material changes to internal control over financial reporting were reported during the quarter.
- The financial statements are unaudited and condensed; management cautioned that interim results are not necessarily indicative of full-year results.
Key facts for investors to verify
- Confirm whether this Globalwise Investments, Inc. filing is relevant to the requested Intellinetics, Inc. filing.
- Verify the status and terms of the $71,995 in loans, including their demand repayment terms, 8% interest, and any subsequent payments or extensions.
- Assess available financing, cash needs, and the company’s ability to continue as a going concern.
- Check for subsequent developments in business-combination discussions and any proposed share issuance or dilution.
- Review the control deficiency and whether any remediation occurred after the reporting date.