Business Context and Reporting Period
Company: IIM Global Corporation (formerly Silverwood Acquisition Corporation), a Delaware corporation.
Reporting Date: August 12, 2013.
Event: Completion of the acquisition of Innovation in Motion Inc. ("Innovation in Motion") in a stock-for-stock transaction. Prior to this acquisition, IIM Global was a shell company with no significant operations. Post-acquisition, Innovation in Motion became a wholly-owned subsidiary, and the combined entity's business focuses on handheld biometric identification devices (HDR platform) and mobile payment solutions (SRIO biometric wallet).
Key Financial Metrics
The following financial data pertains to Innovation in Motion, the acquired operating entity, as IIM Global had no prior operations.
| Metric | Three Months Ended March 31, 2013 |
Year Ended Dec 31, 2012 |
Year Ended Dec 31, 2011 |
|---|---|---|---|
| Revenue | $0 | $7,695,067 | $0 |
| Gross Profit | $0 | $1,194,872 | $0 |
| Net Income (Loss) | $(299,009) | $193,813 | $(520,222) |
| Cash and Equivalents | $4,723 (Mar 31, 2013) | $17,568 (Dec 31, 2012) | $4,404 (Dec 31, 2011) |
| Total Assets | $247,591 (Mar 31, 2013) | $379,317 (Dec 31, 2012) | $385,660 (Dec 31, 2011) |
| Total Liabilities | $254,115 (Mar 31, 2013) | $103,608 (Dec 31, 2012) | $39,809 (Dec 31, 2011) |
| Stockholders' Equity | $(6,524) (Mar 31, 2013) | $275,709 (Dec 31, 2012) | $345,850 (Dec 31, 2011) |
Acquisition Details: 97,877,077 shares of Innovation in Motion were exchanged for 156,603,323 shares of IIM Global common stock (1.6:1 exchange ratio).
Material Changes vs. Prior Period
- Revenue Volatility: The company reported $7.7 million in revenue for the full year 2012, driven entirely by a single project (Ghana 2012 Election). Revenue dropped to $0 for the three months ended March 31, 2013, as the project concluded and no new recurring revenue streams were active.
- Profitability Shift: The company moved from a net loss of $520,222 in 2011 to a net income of $193,813 in 2012. However, it returned to a net loss of $299,009 in the first quarter of 2013 due to the absence of the 2012 project revenue while operating expenses continued.
- Liquidity Deterioration: Cash on hand decreased from $17,568 at year-end 2012 to $4,723 by March 31, 2013. Total liabilities increased significantly to $254,115, exceeding total assets and resulting in a stockholders' deficit of $6,524.
- Corporate Structure: Transitioned from a shell company (IIM Global) to an operating entity through the acquisition of Innovation in Motion.
Guidance, Outlook, Risks, and Contingencies
Going Concern Warning: Independent auditors have expressed substantial doubt regarding the company's ability to continue as a going concern. The company has limited cash ($4,723) and no current revenue stream. Continued operations depend on generating sufficient cash flow or obtaining additional financing.
Outlook and Strategy:
- Product Pipeline: The company plans to launch the HDR+ (Android-powered) and SRIO (biometric wallet) products to generate future revenue.
- Financing Needs: Management explicitly states the need to raise outside funding within the next year to fund business plans and marketing. There is no assurance that such funds will be available.
- Marketing: The company anticipates a significant budget for marketing activities to expand market penetration but has conducted limited advertising to date.
Risks and Contingencies:
- Concentration Risk: In 2012, 100% of revenue came from a single customer (Ghana Election project) and 100% of costs were from a single vendor.
- Related Party Transactions: Significant relationships exist with Tiber Creek Corporation (consulting fees of $100,000) and MB Americus, LLC. Officers and 5% shareholders own approximately 98% of the outstanding stock.
- Intellectual Property: The company relies on patents for HDR and SRIO technologies; there is a risk that protection may be inadequate.
- Regulatory: Biometric and security products may be subject to export controls and government regulations.
Investor Verification Checklist
- Cash Runway: Verify the current cash balance and burn rate, as the filing indicates only $4,723 in cash as of March 31, 2013, with no revenue in Q1 2013.
- Financing Status: Confirm whether the company has secured the additional financing required to continue operations, as auditors have raised a "substantial doubt" going concern opinion.
- Revenue Recurrence: Assess the validity of future revenue projections, given that 2012 revenue was a one-time government contract with no follow-up revenue in Q1 2013.
- Related Party Fees: Review the $100,000 consulting agreement with Tiber Creek Corporation and the equity ownership concentration (98% held by insiders) to understand potential conflicts of interest.
- Product Commercialization: Verify the status of the SRIO and HDR+ product launches and any signed contracts with new customers to replace the expired Ghana project.