UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
or
For the transition period from _________ to _________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices including zip code) | (Registrant’s telephone number, including area code) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| None | N/A | N/A |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of November 10, 2022,
GOLOGIQ, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX TO FINANCIAL STATEMENTS
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying interim condensed financial statements of GoLogiq, Inc. (“the Company,” “we,” “us” or “our”), have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.
The interim condensed financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements.
In the opinion of management, the interim condensed financial statements contain all material adjustments, consisting only of normal adjustments considered necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
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GoLogiq, Inc.
Balance Sheets
(Expressed in U.S. dollars)
| September 30, 2022 | December 31, 2021 | |||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Prepaid expenses and deposits | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND STOCKHOLDER’S DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Due to related parties | ||||||||
| Total Liabilities | ||||||||
| Stockholder’s Funds (Deficit) | ||||||||
| Common stock Authorized: | ||||||||
| Preferred stock Authorized: | ||||||||
| Capital reserves | ||||||||
| Additional paid-in capital | ||||||||
| Share subscriptions receivable | ( | ) | ( | ) | ||||
| Deficit | ( | ) | ( | ) | ||||
| Total Stockholder’s Funds (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDER’S FUNDS | ||||||||
(The accompanying notes are an integral part of these financial statements)
2
GoLogiq, Inc.
Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollars)
| Three months ended | Three months ended | Nine months ended | Nine months ended | |||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||
| Service Revenue | ||||||||||||||||
| Cost of Service | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and Marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net (Loss) and Comprehensive (Loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
(The accompanying notes are an integral part of these financial statements)
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GoLogiq, Inc.
Statements of Cash Flows
(Expressed in U.S. dollars)
| Nine months ended | Nine months ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| ($) | ($) | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net (Loss) for the Period | ( | ) | ( | ) | ||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Prepaid expense and deposits | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Due to related parties | ||||||||
| Issuance of shares for service received | ||||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Arising from transitional arrangements and carve out assumptions on allocation of CreateApp and GoLogiq costs from Logiq, Inc. to the Company | ||||||||
| Net Cash Provided by Investing Activities | ||||||||
| Change in Cash | ( | ) | ||||||
| Cash, Beginning of Year | ||||||||
| Cash, End of Period | ||||||||
| NON-CASH TRANSACTION | ||||||||
| Issuance of shares for services received | ||||||||
(The accompanying notes are an integral part of these financial statements)
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GoLogiq, Inc.
Statements of Stockholder’s Equity (Deficit)
(Expressed in U.S. dollars)
| Common Stock | Additional Paid-in | Capital | Share Subscription | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||
| Number of Shares | Amount ($) | Capital ($) | Reserves ($) | Receivable ($) | Deficit ($) | (Deficit) ($) | ||||||||||||||||||||||
| Balance, December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of Shares for share exchange | ||||||||||||||||||||||||||||
| Issuance of Shares for services | ( | ) | ||||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of Shares | ||||||||||||||||||||||||||||
| Cancel Shares | ||||||||||||||||||||||||||||
| Issuance of Shares for services | - | |||||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of Shares | ||||||||||||||||||||||||||||
| Cancel Shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of Shares for services | ||||||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Capital | Share Subscription | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||
| Number of Shares | Amount $ | Capital $ | Reserves $ | Receivable $ | Deficit $ | (Deficit) $ | ||||||||||||||||||||||
| Balance, December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net (loss) for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
(The accompanying notes are an integral part of these financial statements)
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GoLogiq, Inc.
Notes to the Financial Statements
(Expressed in U.S. dollars)
(Unaudited)
Note 1 – Nature of Business and Continuance of Operations
GoLogiq, Inc. (formerly known as Lovarra) (the “Company”) was incorporated on January 29, 2018 under the laws of the State of Nevada. As of December 31, 2021, the Company was a shell company focused on software application development, including an expense and income tracker and a physical wallet with a lock that can be opened via Bluetooth linked by a user application. On January 27, 2022, the Company completed the acquisition of the business segment of CreateApp from Logiq Inc. (a fully reporting public company) (“Logiq”). As a result, the Company’s results of operations for the three and nine-month periods ended September 30, 2022 include the operations of CreateApp.
On May 9, 2022, the Company changed its name from Lovarra Inc. to GoLogiq, with the Secretary of State of the State of California, and on June 9, 2022, the Company’s common stock began trading on the OTC Markets marketplace under the Company’s new name, GoLogiq, Inc., and the new ticker symbol “GOLQ.”
On July 27, 2022, Logiq completed the spin off
of its direct interests in the Company, in connection with which Logiq distributed an aggregate of
As of September 30, 2022, Logiq controlled, through
one of its subsidiaries, approximately
As a result of the CreateApp acquisition, the Company ceased to be a shell company (as defined in Rule 12b-2 of the Act), and the Company’s primary business is now that of the CreateApp business. As a result of the CreateApp business acquisition, the Company now offers solutions that help small-to-medium-sized businesses (“SMBs”) to provide access to and reduce transaction friction of e-commerce for their clients globally. The Company’s solutions are provided through its core platform, operated as CreateApp (https://www.createapp.com/), which allows SMBs to establish their point-of-presence on the web.
The Company’s CreateApp platform enables SMBs to create a mobile app for their business without the need of technical knowledge, high investment, or background in IT by utilizing CreateApp, which is a platform that is offered as a Platform as a Service (“PaaS”). The Company provides its PaaS to SMBs in a wide variety of industry sectors.
Management believes the assumptions underlying the condensed financial statements are reasonable. However, the amounts recorded for the Company’s related party transactions with Logiq and its consolidated subsidiaries may not be considered arm’s length with an unrelated third party. Therefore, the condensed financial statements included herein may not necessarily reflect the results of operations, financial position and cash flows had the Company engaged in such transactions with an unrelated third party during all periods presented. Accordingly, the Company’s historical financial information is not necessarily indicative of what the Company’s results of operations, financial position and cash flows will be in the future, if and when the Company contracts at arm’s length with unrelated third parties for products and services the Company receives from and provides to Logiq.
Going Concern
These financial statements have been prepared
on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal
course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders,
the ability of the Company to obtain necessary equity financing to support operations, and the attainment of profitable operations. During
the nine months ended September 30, 2022, the Company had service revenues of CreateApp in the amount of $
6
Note 1–Nature of Business and Continuance of Operations (continued)
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn and increased inflation in the United States. The impact on the Company was significant for the nine months ended September 30, 2022 and also full year fiscal 2021, but management continues to monitor the situation as more of the population in the region where we operate is vaccinated and business has begun returning to some normality. In addition, many of our customers are working remotely, which may delay the timing of new business and implementations of our services. If COVID-19 and/or inflation continues to have a substantial impact on our partners, customers, vendors, resellers, or suppliers, our results of operations and overall financial performance could be harmed.
Note 2 – Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.
Use of Estimates and Judgments
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
The Company applies judgment in the application of the going concern assumption which requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Loss Per Share
The Company computes income (loss) per share in accordance with ASC 260 “Earnings per Share”. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.
7
Note 2 – Significant Accounting Policies (continued)
As of September 30, 2022 and 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.
Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets.
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist of cash, accounts payable and accrued liabilities, and amounts due to a related party. The recorded values of all financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Foreign Currency Translation
The Company’s functional and reporting currency is the U.S. dollar. Transactions may occur in foreign currencies and management has adopted ASC 830, “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the statement of operations.
Comprehensive Loss
ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of September 30, 2022 and 2021, the Company had no items that affected comprehensive loss.
Intangible assets.
The Company’s intangible assets consist
of its proprietary software platform and technologies, namely CreateApp and AtoZ PAY/GO, which is amortized using the straight-line method
over
8
Note 2 – Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The Company adopted Topic 842 on January 1, 2019 and there was no material impact on the Company’s financial statements.
Note 3 – Related Party Transactions
As of September 30, 2022, the Company owed $
As of September 30, 2022, the Company owed $
On January 27, 2022, the Logiq completed the transfer
of its AppLogiq business to the Company. In connection with the completion of the transfer of AppLogiq to the Company, the Company issued
On July 26, 2022, the Company sold and issued
an aggregate of
Note 4 – Business Combination
On January 27, 2022, the Company acquired substantially
all the CreateApp assets from Logiq in exchange for
The acquisition of substantially all the CreateApp assets from Logiq was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), with the results of CreateApp’s historical operations included in the Company’s consolidated financial statements from January 1, 2022. Goodwill has been measured as the excess of the total consideration over the amounts assigned to identifiable assets acquired and liabilities assumed.
During the nine-month period ended September 30, 2022, the Company acquired substantially all of the CreateApp assets from Logiq. The fair value of assets acquired assumed were as follows:
| ($) | ||||
| Intangible assets, net | ||||
| Goodwill | ||||
| Net assets acquired | ||||
Fair valuation methods used for the identifiable net assets acquired in the acquisition make use of quoted prices in active markets, discounted cash flows and risk adjusted weighted cost of capital. The methods used in determining fair value of the intangible assets included consideration of the three traditional approaches to value: market, income, and cost. Accordingly, after due consideration of other appropriate and generally accepted valuation methodologies, the value of intangible assets acquired from Logiq has been developed primarily on the basis of the income approach. Under the income approach, the Company evaluated revenue projections derived from the software technology and the appropriate royalty rate that the Company would have paid if the Company did not own the software technology.
9
Note 4 – Business Combination (continued)
On the acquisition date, goodwill of $
The CreateApp platform enables SMBs to create a mobile app for their business without the need of technical knowledge, high investment, or background in IT by utilizing “CreateApp,” which is a platform that is offered as a PaaS to our customers.
AtozPay competes primarily with credit card and debit card service providers, banks with payment processing offerings, other offline payment options and other electronic payment system operators.
AtozGo is our PaaS platform that provides mobile payment capabilities for the local food delivery service industry.
The Company incurred some accounting and legal fees related to the acquisition of the CreateApp assets. The amount attributable to the Company has been included in general and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2022.
In the consolidated statements of operations, revenues and expenses include the operations of CreateApp since January 27, 2022, which is the day after the acquisition date.
Note 5 – Bank Account Arrangement
As part of the transitional arrangements, the Company is able to utilize the GoLogiq bank account in Logiq for its operational activities.
Note 6 – Stockholder’s Equity
Issuance of Common Stock
During the period from January 1, 2022 to March
31, 2022, a total of
During the period from April 1, 2022 to June 30,
2022, a total of
During the period from July 1, 2022 to September
30, 2022, a total of
Creation of Series A Preferred Stock
On July 26, 2022, the Company filed a Certificate
of Designation of Series A Preferred Stock (the “COD”) with the Secretary of State of the State of Nevada to designate
A summary of the material rights, preferences and limitations of the Series A Preferred, as set forth in the COD, is set forth below.
Rank - Except as otherwise set forth in the COD, with respect to rights on liquidation, winding up and dissolution, the Series A Preferred ranks pari passu to shares of the Company’s common stock.
10
Dividends - Holders of Series A Preferred are entitled to dividends equal to (on an as-if-converted-to-common stock basis calculated based on the Conversion Ratio (defined below), disregarding for such purpose any conversion limitations or liquidation preferences) and in the same form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the common stock.
Liquidation Rights - In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, holders of Series A Preferred shall be entitled to receive, on an as-if-converted-to-common stock basis (calculated based on the Conversion Ratio, disregarding for such purpose any conversion limitations or liquidation preferences), the entire assets of the Company legally available for distribution by the Company with equal priority and pro rata among the holders of the Company’s common stock.
Voting Rights - Holders of Series A Preferred have the right to cast forty-five (45) votes for each share of Series A Preferred held of record on all matters submitted to a vote of holders of the Company’s common stock, including the election of directors, and all other matters as required by law. There is no right to cumulative voting in the election of directors. Holders shall vote together with all other classes and series of common stock of the Company as a single class on all actions to be taken by the common stock holders of the Company, except to the extent that voting as a separate class or series is required by law.
Conversion - Each share of Series A Preferred is convertible, at the option of the holder, at any time and from time to time commencing on the eighteenth (18th) anniversary of July 26, 2022 (such period, the “Holding Period”), into one (1) share of Company common stock (the “Conversion Ratio”), subject to certain adjustments. In the event of a Liquidation Event (as defined in the COD), such optional conversion right will terminate at the close of business on the last full day preceding the date fixed for payment or distribution in connection therewith.
In the event of (i) an initial public offering
of a subsidiary of the Company or (ii) a significant acquisition of a business or assets in a transaction value equal to or greater than
$
No fractional shares of common stock shall be issued upon conversion of the Series A Preferred. In lieu of any fractional shares to which a holder would otherwise be entitled, the number of shares of common stock to be issued upon conversion of the Series A Preferred shall be rounded to the nearest whole share.
In the event of a conversion, any shares of Series A Preferred that were converted into Company common stock shall be retired and cancelled, and may not be reissued as shares of such series.
Redemption - Holders of the Series A Preferred shall not have redemption rights.
Issuance of Preferred Stock
On July 26, 2022, the Company sold and issued
an aggregate of
Stock-Based Compensation
During the three months ended March 31, 2022,
a total of
During the three months ended June 30, 2022, a
total of
Note 6 – Stockholder’s Equity (continued)
During the three months ended September 30, 2022, a total of
Note 7 – Subsequent Events
None.
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and operating results should be read in conjunction with our consolidated financial statements and related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q (this “Report”). This document contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements. The forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as “believes,” expects,” “anticipates,” “intends,” “will,” “may,” “could,” “would,” “projects,” “continues,” “estimates” or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by the forward-looking statements. The forward-looking statements contained or incorporated by reference in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs, or current expectations. Among the important factors that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”), and elsewhere in this document and in our other filings with the SEC. Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events, or otherwise
The financial information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three- and nine-month periods ended September 30, 2022 is that of GoLogiq, Inc. (formerly, Lovarra), including CreateApp, as the acquisition of the CreateApp business from Logiq, Inc. (“Logiq”) was consummated on January 27, 2022. The comparative financial information for the three- and nine-month periods ended September 30, 2021 and year ended December 31, 2021 included in this Report, unless otherwise indicated or as the context otherwise requires, is that of GoLogiq, Inc. prior to its acquisition of the CreateApp business segment from Logiq.
12
Introduction and Recent Developments
As of December 31, 2021, we were a development stage shell company with minimal operations and no revenues. As of December 31, 2021, we intended to provide subscription-based, highly secure expense and earnings tracking application service for personal and corporate use.
On January 27, 2022, we completed the acquisition of the CreateApp business segment from Logiq (a fully reporting public company) (the “CreateApp Acquisition”).
On July 27, 2022, Logiq completed the spin off of its direct interests in the Company, in connection with which Logiq distributed an aggregate of 26,350,756 shares of the Company’s common stock then directly owned by Logiq to Logiq’s stockholders of record as of December 30, 2021 on a 1-for-1 basis (i.e. for every 1 share of Logiq held on December 30, 2021, the holder thereof received 1 share of the Company). As a result of the completion of the spin off, as of July 27, 2022, the Company is no longer a majority owned subsidiary of Logiq.
As of September 30, 2022, Logiq, through one of its subsidiaries, controlled approximately 12.2% of our issued and outstanding shares of common stock and voting power of our outstanding securities.
As a result of the CreateApp Acquisition, the Company ceased to be a shell company (as defined in Rule 12b-2 of the Act), and our primary business is now that of the CreateApp business. After the CreateApp Acquisition, we abandoned our previous business model, and now we offer solutions that help small-to-medium-sized businesses (“SMBs”) to provide access to and reduce transaction friction of e-commerce for their clients globally. Our solutions are provided through our core platform, operated as CreateApp (https://www.createapp.com/), which allows SMBs to establish their point-of-presence on the web.
Our CreateApp platform enables SMBs to create a mobile app for their business without the need of technical knowledge, high investment, or background in IT by utilizing CreateApp, which is a platform that is offered as a Platform as a Service (“PaaS”). We provide our PaaS to SMBs in a wide variety of industry sectors.
Additionally, we acquired our Atoz Pay/Go platform through the CreateApp Acquisition. Our AtozPay platform competes primarily with credit card and debit card service providers, banks with payment processing offerings, other offline payment options and other electronic payment system operators. AtozGo is our PaaS platform that provides mobile payment capabilities for the local food delivery service industry.
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Creation of Series A Preferred Stock
On July 26, 2022, the Company filed a Certificate of Designation of Series A Preferred Stock (the “COD”) with the Secretary of State of the State of Nevada to designate 2,000,000 of the Company’s authorized shares of preferred stock as Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred”), which COD sets forth the rights, preferences and limitations of the shares of the Series A Preferred. In accordance with the Company’s amended and restated articles of incorporation, the Company’s board of directors approved the COD and creation of the Series A Preferred; stockholder approval was not required.
A summary of the material rights, preferences and limitations of the Series A Preferred, as set forth in the COD, is set forth below.
Rank - Except as otherwise set forth in the COD, with respect to rights on liquidation, winding up and dissolution, the Series A Preferred ranks pari passu to shares of the Company’s common stock.
Dividends - Holders of Series A Preferred are entitled to dividends equal to (on an as-if-converted-to-common stock basis calculated based on the Conversion Ratio (defined below), disregarding for such purpose any conversion limitations or liquidation preferences) and in the same form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the common stock.
Liquidation Rights - In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, holders of Series A Preferred shall be entitled to receive, on an as-if-converted-to-common stock basis (calculated based on the Conversion Ratio, disregarding for such purpose any conversion limitations or liquidation preferences), the entire assets of the Company legally available for distribution by the Company with equal priority and pro rata among the holders of the Company’s common stock.
Voting Rights - Holders of Series A Preferred have the right to cast forty-five (45) votes for each share of Series A Preferred held of record on all matters submitted to a vote of holders of the Company’s common stock, including the election of directors, and all other matters as required by law. There is no right to cumulative voting in the election of directors. Holders shall vote together with all other classes and series of common stock of the Company as a single class on all actions to be taken by the common stock holders of the Company, except to the extent that voting as a separate class or series is required by law.
Conversion - Each share of Series A Preferred is convertible, at the option of the holder, at any time and from time to time commencing on the eighteenth (18th) anniversary of July 26, 2022 (such period, the “Holding Period”), into one (1) share of Company common stock (the “Conversion Ratio”), subject to certain adjustments. In the event of a Liquidation Event (as defined in the COD), such optional conversion right will terminate at the close of business on the last full day preceding the date fixed for payment or distribution in connection therewith.
In the event of (i) an initial public offering of a subsidiary of the Company or (ii) a significant acquisition of a business or assets in a transaction value equal to or greater than $5,000,000 (the “Premium Triggering Events”) during the Holding Period, the Conversion Ratio shall automatically increase such that each share of Series A Preferred shall be convertible, at the option of the holder thereof, at any time and from time to time thereafter, into three (3) shares of Company common stock.
No fractional shares of common stock shall be issued upon conversion of the Series A Preferred. In lieu of any fractional shares to which a holder would otherwise be entitled, the number of shares of common stock to be issued upon conversion of the Series A Preferred shall be rounded to the nearest whole share.
In the event of a conversion, any shares of Series A Preferred that were converted into Company common stock shall be retired and cancelled, and may not be reissued as shares of such series.
Redemption - Holders of the Series A Preferred shall not have redemption rights.
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Sale of Series A Preferred shares
On July 26, 2022 the Company sold and issued an aggregate of 2,000,000 shares of newly created Series A Preferred of the Company to certain members of its management for an aggregate purchase price of $20,000 ($0.01 per share). The Series A Preferred Stock issued to each of such members of management are subject to a repurchase option, and shall vest as follows: (i) 25% at issuance and (ii) the remaining 75% shall vest in equal monthly installments over a period of twelve (12) months from the date of issuance, provided that the relevant holder provides continued service to the Company during such period.
Completion of Logiq Spin Off of the GoLogiq Shares
On July 27, 2022, Logiq completed the previously announced spin off of the GoLogiq Shares, constituting 100% of Logiq’s direct equity ownership of the Company. The spin off was completed through a special dividend of the 26,350,756 GoLogiq Shares held by Logiq, which were distributed to Logiq’s shareholders of record as of the close of business on December 30, 2021 on a 1-for-1 basis (i.e. for every 1 share of Logiq held on December 30, 2021, the holder thereof received 1 share of Company common stock).
As a result of the completion of the spin off, the Company is no longer a majority owned subsidiary of Logiq.
Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
Revenue
During the three months ended September 30, 2022, the Company generated $334,987 of revenue from its CreateApp platform, compare to $nil for the three months ended September 30, 2021.
Cost of Service Revenues
During the three months ended September 30, 2022, the Company incurred $179,580 from CreateApp platform operations, compared to $nil during the three months ended September 30, 2021.
Gross margin
During the three months ended September 30, 2022, the Company generated gross margin of $155,407 from its CreateApp platform, compared to $nil during the three months ended September 30, 2021.
Operating Expenses
Operating expenses were $832,567 and $1,795 for the three months ended September 30, 2022 and 2021, respectively.
In connection with the CreateApp Acquisition in January 2022, during the period from July 1, 2022 to September 30, 2022, operating expenses of $582,000 were reallocated to the Company on the basis of the carve out operations of CreateApp on a going forward basis. Additionally, the period over period increase was partially due to stock compensation of $212,462 and $nil for the three months ended September 30, 2022 and 2021, respectively.
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Net Loss
Our net loss for the three months ended September 30, 2022 was $(677,160), compared to net loss of $(1,795) during the three months ended September 30, 2021, which increase is mainly attributable to the operations of CreateApp and corporate costs.
Comparison of the nine months ended September 30, 2022 and 2021
Revenue
During the nine months ended September 30, 2022, the Company generated $5,277,379 of revenue from its CreateApp platform, compare to $nil for the nine months ended September 30, 2021.
Cost of Service Revenues
During the nine months ended September 30, 2022, the Company incurred $3,287,992 from CreateApp platform operations, compared to $nil during the nine months ended September 30, 2021.
Gross margin
During the nine months ended September 30, 2022, the Company generated gross margin of $1,989,387 from its CreateApp platform, compared to $nil during the nine months ended September 30, 2021.
Operating Expenses
Operating expenses were $4,703,986 and $8,800 for the nine months ended September 30, 2022 and 2021, respectively.
In connection with the CreateApp Acquisition in January 2022, during the period from January 1, 2022 to September 30, 2022, operating expenses of $3,162,181 were reallocated to the Company on the basis of the carve out operations of CreateApp on a going forward basis. Additionally, the period over period increase was partially due to stock compensation of $1,148,7812 and $nil for the nine months ended September 30, 2022 and 2021, respectively.
Net Loss
Our net loss for the nine months ended September 30, 2022 was $(2,714,599), compared to net loss of $(8,800) during the nine months ended September 30, 2021, which increase is mainly attributable to the operations of CreateApp and corporate costs.
Liquidity and Capital Resources
During the nine-month period ended September 30, 2022, our primary sources of capital came from (i) cash flows from our operations, predominantly from providing services under our CreateApp platform, and (ii) our acquisition of the CreateApp working capital balance as of December 31, 2021.
As of September 30, 2022, our total assets were $31,792,401, compared to $350 in total assets as of December 31, 2021. The increase in assets is primarily a result of the acquisition of the CreateApp platform and related technology in January 2022, valued at $31,500,000.
Stockholders’ funds were $31,064,265 as of September 30, 2022, compared to stockholders’ deficit of $(42,643) as of December 31, 2021. The difference was due to acquisition of the CreateApp platform and related technology in January 2022, with a valuation of $31,500,000.
On July 26, 2022, the Company sold and issued an aggregate of 2,000,000 shares of its newly created Series A Preferred stock to certain members of its management for an aggregate purchase price of $20,000 ($0.01 per share).
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We expect that we will use our future sources of liquidity, cash flows (post-CreateApp Acquisition) and fund raising to fund ongoing operations, research and development projects for new products and technologies, and provide ongoing support services for our customers. Over the next two fiscal years, we anticipate that we will use our liquidity, and cash flows and from our operations together with fund raising to fund our growth. In addition, as part of our business strategy, we may occasionally evaluate potential acquisitions of businesses, products and technologies, and minority equity investments. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses or minority equity investments. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all.
We expect that we will need to raise additional capital through the issuance of additional equity and/or debt. If financing is not available at adequate levels, we may need to reevaluate our operating plans. Based on projected activities, management projects that cash and cash equivalents on hand are not sufficient to support operations for at least the next 12 months, which raises substantial doubt about the Company’s ability to continue as a going concern without implementing fund raising or continuing support from its shareholders.
Cash Used in Operating Activities
Operating activities used $(1,172,795) in operations for the nine months ended September 30, 2022, as compared to $(4,677) in for the nine months ended September 30, 2021. This increase is attributable to net loss from operations of $(2,714,599) during the 2022 period and an amount due to Logiq of $618,979.
Investing Activities
Investing activities provided $1,172,795 in cash for the nine months ended September 30, 2022, as compared to $nil in for the nine months ended September 30, 2021. This increase is a result of amounts arising from transitional arrangements and carve out assumptions on allocation of CreateApp and GoLogiq costs from Logiq to the Company.
Contractual Obligations and Commitments
We had no material contractual obligations as of September 30, 2022.
Off-Balance Sheet Financing Arrangements
We had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. We did not participate in transactions that created relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.
Our critical accounting policies and estimates are included in Note 2 of the notes to our financial statements for the nine months ended September 30, 2022, included elsewhere in this Report.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 of the notes to our financial statements for the nine months ended September 30, 2022, included elsewhere in this Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our principal executive officer and principal financial and accounting officer have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e) and 15(d)-15(e)) within the end of the period covered by this Report and have concluded that the disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. The Company does not address segregation of duties and does not have proper oversight of management through an independent Audit Committee or board of directors.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Our independent auditors have not, and is not required to, provide assurance over our internal controls over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and the risk factors discussed in Part I, “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 13, 2022 (the “Annual Report”), as well as the other information in this Report, including our financial statements and the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. If any of the risks included in this Report and our Annual Report actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Because of the risks discussed in this Report and our Annual Report ,as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
There have been no material updates or changes to the risk factors previously disclosed in our Annual Report; provided, however, additional risks not currently known or currently material to us may also harm our business
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 28, 2022, the Company issued 26,350,756 shares of the Company’s common stock to Logiq in connection with its acquisition of CreateApp.
During the three months ended March 31, 2022, a total of 3,120,000 shares with par value of $0.001 per share were issued for consultancy services received including shares issued to directors, operational staff, legal consultants.
During the three months ended June 30, 2022, a total of 600,000 shares with par value of $0.001 per share were issued for consultancy services received including shares issued to operational staff, legal consultants.
During the three months ended September 30, 2022, a total of 874,848 shares with par value of $0.001 per share were issued for consultancy services received including shares issued to operational staff, legal consultants.
As discussed above, on July 26, 2022, the Company sold and issued an aggregate of 2,000,000 shares of newly created Series A Preferred stock of the Company to certain members of its management for an aggregate purchase price of $20,000 ($0.01 per share). The Series A Preferred Stock issued to each of such members of management is subject to a repurchase option and shall vest as follows: (i) 25% at issuance and (ii) the remaining 75% shall vest in equal monthly installments over a period of twelve months from the date of issuance, provided that the relevant holder provides continued service to the Company during such period.
No underwriters were involved in the transactions described above. All of the securities issued in the foregoing transactions were issued by the Company in reliance upon the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D and/or Regulation S promulgated thereunder, in that the transactions involved the issuance and sale of the Company’s securities to financially sophisticated individuals or entities that were aware of the Company’s activities and business and financial condition, and took the securities for investment purposes and understood the ramifications of their actions. The Company did not engage in any form of general solicitation or general advertising in connection with the transactions. The individuals or entities represented that they were each an “accredited investor” as defined in Regulation D at the time of issuance of the securities, and that each of such individuals or entities was acquiring such securities for their own account and not for distribution. All certificates, if such certificates were issued in certificated form, representing the securities issued have a legend imprinted on them stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or an exemption applies.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable to our Company.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Furnished herewith. |
| ** | The XBRL related information in Exhibit 101 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 14, 2022
| GoLogiq, Inc. | ||
| By: | /s/ Matthew Brent | |
| Matthew Brent | ||
| Chief Executive Officer (Principal Executive Officer, Principal Financial Officer) | ||
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