Filing summary
Entity and period: The request identifies Intellinetics, Inc., but the supplied Form 10-Q is for Globalwise Investments, Inc., a Nevada development-stage company and shell company. It covers the quarter and nine months ended September 30, 2011; the unaudited statements were signed October 31, 2011. Confirm the filing is for the intended issuer.
Financial results and position
- Revenue: $0 for both the third quarter and first nine months of 2011, unchanged from the comparable 2010 periods. The company reports no revenue since inception.
- Net loss: $2,692 in Q3 2011 versus $967 in Q3 2010; $9,047 for the first nine months of 2011 versus $5,018 in 2010. Nine-month basic and diluted loss per share was $0.01; Q3 loss per share rounded to $0.00.
- Expenses and margins: Nine-month general and administrative expense was $4,722, down from $5,018. Q3 expense was $1,252, up from $967, which management attributed primarily to XBRL filing costs. Interest expense was $4,325 for the first nine months and $1,440 in Q3. With no revenue, operating and profit margins are not meaningful.
- Cash flow: Nine-month operating cash use was $4,997, compared with $3,618 in 2010. Financing provided $5,000, all from advances and loans; cash increased $3 to $1,321. No investing cash flow was reported for the period.
- Liquidity and debt: At September 30, cash and current assets were $1,321, against current liabilities of $76,320, including $71,995 of loans and $4,325 of accrued interest. The loans are unsecured, bear 8% interest, and are due on demand. Stockholders’ equity was negative $74,999.
- Capitalization: 1,139,000 common shares were issued and outstanding; the filing reports the same count at October 27, 2011.
Changes, outlook, and risks
- During 2011, $66,995 of previously recorded accounts payable and advances was reclassified as loans effective January 1; the company also received $5,000 in additional advances or loans during the first nine months.
- Management is evaluating a potential business combination but had entered no definitive agreement as of the filing date. Its stated plan is to acquire or merge with an operating company; there is no assurance a suitable transaction or financing will be secured.
- Management expects ongoing reporting costs and says it may rely on management, stockholders, or third parties for funding, but none is contractually obligated to provide it. The company may issue stock to raise capital or settle obligations, potentially diluting existing holders.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern: it has no revenue-generating activities, recurring losses, negative operating cash flow, liabilities exceeding current assets, and dependence on financing. The financial statements include no adjustments for the outcome of that uncertainty.
- Management warns that limited funds and lack of full-time management may constrain due diligence on a target; a selected business could be financially unstable or early-stage, and a combination could involve significant share issuance and dilution. Management also cites the weak global economy as a constraint on opportunities and transaction financing.
- Disclosure controls were determined ineffective because staffing did not permit segregation of duties. Management said it could not remediate the deficiency until a business combination. No material changes to internal control over financial reporting were reported during the quarter.
Key facts for investors to verify
- Whether this Globalwise filing is the intended filing for the company named in the request.
- The status, terms, and due-diligence progress of any proposed business combination; none was definitive at filing.
- Availability and terms of future financing, and the timing or repayment status of the demand loans.
- Whether the company can fund ongoing reporting and other costs despite only $1,321 in cash and no committed funding.
- Potential dilution from future equity issuance and the status of the disclosed ineffective disclosure controls.