UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 333-231286
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
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230 Victoria Street Bugis Junction
#15-01/08, Singapore 188024 | | |
(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:
| | | | Name of Each Exchange on Which Registered |
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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. Yes
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No
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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). Yes
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No
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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 ☐ | |
| 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.
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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.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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No
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As of May 20, 2022, 35,801,756 shares of the registrant’s common stock were issued and outstanding.
GoLogiq, Inc. (formerly known as Lovarra) (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to amend and restate certain items in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 20, 2022 (the “Original Form 10-Q”).
Background of Restatement
As disclosed in the Company’s Current Report on Form 8-K, as filed with the SEC on February 9, 2024, the Company is restating its previously issued unaudited interim financial statements as of and for the three months ended March 31, 2022 and audited financial statements for the fiscal year ended December 31, 2021.
On January 27, 2022, the Company (then named Lovarra) acquired the AppLogiq/Createapp business from Logiq, Inc. (“Logiq”) and accounted for it as a business combination.
Subsequent to the filing of the Original Form 10-Q, the Company determined that it had improperly treated the reverse acquisition of the CreateApp business and not properly valued the intangible assets associated with the transaction, previously reported on Form 8-K/A as filed with the SEC on April 12, 2022.
1. Restatement of Financial Statements:
On November 21, 2023, the Staff of the U.S. Securities and Exchange Commission released a statement highlighting that the accounting acquiree (Lovarra) was a nonoperating public shell corporation at the time of the transaction and did not meet the definition of a business. Therefore, this transaction cannot be considered a business combination.
The merger of a private operating entity into a nonoperating public shell corporation with nominal net assets typically results in (1) the owners of the private entity gaining control over the combined entity after the transaction, and (2) the shareholders of the former public shell corporation continuing only as passive investors. This transaction is usually not considered a business combination because the accounting acquiree (Lovarra), the nonoperating public shell corporation, does not meet the definition of a business under ASC 805.
Instead, this type of transaction is considered to be a capital transaction of the legal acquiree and is equivalent to the issuance of shares by the private entity for the net monetary assets of the public shell corporation (Lovarra) accompanied by a recapitalization. Any excess of the fair value of the shares issued by the private entity over the value of the net monetary assets of the public shell corporation (Lovarra) is recognized as a reduction to equity. Based upon the above analysis, the company is restating the transaction accordingly in its interim financial statements as of and for the three months ended March 31, 2022 and audited financial statements for the fiscal year ended December 31, 2021.
2. Change in Accounting Treatment of Reverse Acquisition:
The Company has revised its accounting treatment for a reverse acquisition that was previously reported in its Original Form 10-Q. Upon further evaluation, the Company determined that prior quarter adjustments were necessary. The Company
acquired substantially all the CreateApp assets from Logiq in exchange for 26,350,756 of the Company’s common shares at a price per share of $1.195411 (par value $0.001). The fair value of the common shares at the close of the transaction was $31,500,000, as determined by a valuation of the business, on the acquisition date, goodwill of $7,500,000 and intangible assets of $24,000,000 were recorded. The value of CreateApp platform was revalued to $11,800,000 on February 28, 2023
. This Amendment presents the Company’s financial statements with reversed goodwill and intangible assets, and corresponding impairment loss on December 31, 2022.
In connection with the restatement of the financial statements and the change in accounting treatment described above, the Company continues to engaged current auditor Centurion ZD CPA & Co. to conduct a re-audit of the affected year ended
financial statements. The re-audit was performed in accordance with U.S. GAAP.
This Form 10-Q/A is presented as of the filing date of the Original Form 10-Q, does not reflect events occurring after that date, and does not modify or update disclosures in any way other than as required to reflect the fiscal quarter ended March 31, 2022 restatements described below. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Original Form 10-Q.
This Form 10-Q/A sets forth the Original Form 10-Q in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Form 10-Q, and such forward-looking statements should be read in their historical context.
The following items have been amended as a result of the restatement:
Part I, Item 1, “Unaudited Consolidated Condensed Financial Statement,” and
Part II, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
In accordance with applicable SEC rules, this Form 10-Q/A includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2 as required by Rule 12b-15.
Refer to Note 2,
Summary of Significant Accounting Policies
,
Restatement of Previously Issued Consolidated Financial Statements
of the Notes to Consolidated Financial Statements of this Form 10-Q/A for additional information and for the summary of the accounting impacts of the restatement of the Company’s consolidated financial statements.
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tem 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 document 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 months period ended March 31, 2022 is that of GoLogiq including CreateApp as the CreateApp Acquisition was consummated on January 27, 2022. The comparative financial information for the three months period ended March 31, 2021 and year ended December 31, 2021 included in this Report, unless otherwise indicated or as the context otherwise requires, is that of GoLogiq prior to its acquisition of the CreateApp business segment from Logiq.
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”). As of March 31, 2022, Logiq controlled approximately 87.6% of our issued and outstanding shares of common stock and voting power of our outstanding securities. As the Company is a majority-owned and controlled subsidiary of Logiq, our results of operations and financial position are consolidated with Logiq’s financial statements.
As a result of the CreateApp Acquisition, the Company is no longer 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
Comparison of the three months ended March 31, 2022 and 2021
During the three months ended March 31, 2022, the Company generated $3,309,017 from its CreateApp platform, compare to $2,441,128 for the three months ended March 31, 2021.
During the three months ended March 31, 2022, the Company incurred $2,235,341 from CreateApp platform operations, compared to $1,706,165 during the three months ended March 31, 2021.
During the three months ended March 31, 2022, the Company generated gross margin of $1,073,676 from its CreateApp platform, compared to $734,963 during the three months ended March 31, 2021.
Operating expenses were $2,464,299 and $1,252,395 for the three months ended March 31, 2022 and 2021, respectively.
The increase is mainly due to stock compensation of $780,000 and $nil for the three months ended March 31, 2022 and 2021, respectively.
Upon consummation of the CreateApp Acquisition in January 2022, the operating expenses of $1,343,371 were reallocated to the Company on the basis of the carve out operations of CreateApp on a going forward basis.
Our net loss for the three months ended March 31, 2022 was $(1,390,623), compared to net loss of $(517,432) during the three months ended March 31, 2021, which increase is mainly attributable to the operations of CreateApp.
Liquidity and Capital Resources
During the three months period ended March 31, 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.
Stockholders’ deficit was $(1,433,266) as of March 31, 2022, compared to stockholders’ deficit of $nil as of December 31, 2021.
We expect that we will use our future sources of liquidity and cash flows (post-CreateApp Acquisition) 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 from our operations 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 support from its shareholders.
Cash Used in Operating Activities
Operating activities used in $(610,623) in operations for the three months ended March 31, 2022, as compared to $(517,432) in for the three months ended March 31, 2021.
During the three months ended March 31, 2022, financing activities net cash provided by $1,433,266 compared to net cash used in $(1,467,062) for the three months ended March 31, 2021.
Investing activities used in $(822,643) in cash for the three months ended March 31, 2022, as compared to $nil in for the three months ended March 31, 2021. This increase is a result of 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 March 31, 2022.
Off-Balance Sheet Financing Arrangements
We had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 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.
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 of notes to our audited financial statements for the three months ended March 31, 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 three months ended March 31, 2022, included elsewhere in this Report.
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tem 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.
I
tem 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.