INTELLINETICS, INC. annual report, FY2011

Business Context and Reporting Period

Filing identity discrepancy: The request identifies Intellinetics, Inc., but the supplied Form 10-K is for Globalwise Investments, Inc. This summary reflects the filing provided. It covers the fiscal year ended December 31, 2011, with 2010 comparisons; it is not a quarterly report.

Globalwise reported that it had no operating business or revenue and was seeking a business combination. Management was investigating a potential acquisition but had signed no definitive agreement. The filing identifies the company as a shell company.

Financial Results and Condition

At December 31, 2011, total assets were $68, all in cash, against current liabilities of $81,832, leaving a working capital deficit of $81,764. Liabilities included $71,995 in unsecured notes payable due on demand at 8% interest, $4,174 in accounts payable, and $5,663 in accrued interest. Stockholders’ equity was negative $81,764. No meaningful operating margin was reported because the company had no revenue or operating business.

Changes, Outlook, and Risks

• Net loss increased by $9,550 year over year, reflecting higher reporting and audit-related general and administrative costs and $5,663 of interest expense. The company said the interest followed the reclassification of liabilities as loans effective January 1, 2011.
• Cash fell by $1,250 during 2011. The company reported no investing cash flows; financing cash flows included $5,000 of advances or notes payable.
• Management expected to rely on advances or loans from management, significant stockholders, or third parties to fund basic operations and filing costs. No written funding commitments existed, and the filing states that funding was not assured.
• The company planned to pursue a merger or acquisition, potentially using equity financing, which could dilute existing shareholders. Management gave no quantified guidance or timetable and cautioned that a transaction might not occur.
• The auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company’s ability to continue as a going concern. The statements contain no adjustments for the outcome of that uncertainty.
• Management found disclosure controls and internal control over financial reporting ineffective because the company lacked personnel to segregate duties; it said the deficiency could not be remedied before a business combination.
• The common stock had no trading activity during the prior two years, and the filing said there was no public trading market. A 4-for-1 forward split took effect December 20, 2011.
• The filing reported no legal proceedings, material off-balance-sheet arrangements, or material subsequent events.

Important Facts to Verify

• Confirm the issuer identity: the supplied filing is for Globalwise Investments, Inc., not Intellinetics, Inc.
• Verify the $71,995 demand loans, 8% interest terms, accrued interest, and counterparties.
• Confirm whether any committed financing or acquisition agreement was secured after the filing date; none was disclosed in this report.
• Assess the company’s ability to meet near-term obligations given $68 of cash, $81,832 of current liabilities, and the going-concern warning.
• Review the shell-company status, lack of a trading market, and potential dilution or transfer restrictions associated with a future transaction.
• Consider the disclosed ineffective controls and limited staffing when evaluating financial reporting risk.