10-K/A: Logiq Inc. Restates Financials Following SEC Review, Cites Accounting Errors

Sentiment:

Annual Report Amendment 3 May 2024 4:46 PM

Logiq Inc. is restating its financial statements for 2021 and 2022 due to errors in valuing intangible assets and accounting for a reverse acquisition.

Capital raiseThe company may seek to raise additional capital through equity offerings, debt financings, collaborations, or licensing arrangements.The company may consider raising additional capital to expand its business, pursue strategic investments, or develop new products.The company may need to sell additional equity or debt securities or obtain expanded credit facilities to fund its operating expenses.

Worse than expectedThe company's financial results were worse than previously reported due to the restatement of financial statements.The restatement was caused by errors in valuing intangible assets and accounting for a reverse acquisition.The company's net loss increased from $(20,126,787) in 2021 to $(29,463,009) in 2022.

Summary

Logiq Inc. is filing an amendment to its annual report to restate its financial statements for the fiscal years ended December 31, 2022 and 2021.
The restatement is due to the improper valuation of intangible assets related to the former subsidiary, GoLogiq Inc., and incorrect accounting treatment of the reverse acquisition of the CreateApp business on January 27, 2022.
GoLogiq Inc. was determined to be the accounting acquirer in the AppLogiq/CreateApp business acquisition, which was previously treated as a reverse merger.
The transaction is now considered a capital transaction where GoLogiq issues shares for the net monetary assets of Lovarra, accompanied by a recapitalization.
The company is reversing its impairment loss for CreateApp in its December 31, 2022 financial statements.
The fair value of the common shares at the close of the transaction was $31,500,000, comprising goodwill of $7,500,000 and intangible assets of $24,000,000, which are now reversed.
The value of the CreateApp platform was revalued to $11,800,000 on February 28, 2023.
A re-audit of the affected year-end financial statements was conducted by Centurion ZD CPA & Co. in accordance with U.S. GAAP.

Sentiment

Score: 3

Explanation: The document reveals significant accounting errors and material weaknesses in internal controls, leading to a restatement of financials. This, coupled with a net loss and potential delisting risks, creates a negative outlook from an investment perspective.

Positives

The company is taking steps to correct accounting errors and ensure accurate financial reporting.
The re-audit was performed in accordance with U.S. GAAP.

Negatives

The restatement indicates material weaknesses in the company's internal control over financial reporting.
The company incurred unanticipated costs for accounting and legal fees in connection with the restatements.
The restatements may erode investor confidence and negatively impact the stock price.
The company may face stockholder litigation or regulatory actions due to the restatements.

Risks

Material weaknesses in internal control over financial reporting related to impairment of intangible assets and treatment of the reverse acquisition.
Potential for adverse regulatory consequences, including investigations, penalties, or suspensions by the SEC.
Risk of stockholder litigation due to the restatements.
The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if the PCAOB cannot inspect the auditor.
The company may face difficulties in raising capital due to the restatements.
The company is subject to risks associated with changing technologies in the mobile apps industry.
Systems failures could cause interruptions in services.
Security breaches could disrupt business and harm operating results.
Delays in the release of new products or errors in products may result in increased costs and lost revenue.
The company may be unable to respond to customer demands for new mobile app solutions.
Increasing competition and costs within customers industries may affect demand for products and services.
The company is subject to pricing pressures in some markets.
The company may be unable to respond to evolving industry practices and technology solutions.
The company depends on key personnel and may not be able to retain these employees or recruit additional qualified personnel.
Potential changes in U.S. and international tax law could increase the effective tax rate.
Negative commentaries by regulatory agencies or failure to comply with regulations could harm the company's reputation.
The company could incur substantial costs resulting from product liability claims.
The company may incur significant administrative workload and expenses in connection with new and changing compliance requirements.
Quarterly and annual operating results may fluctuate, and failure to meet expectations could cause the stock price to decline.
Substantial future sales of shares of common stock could cause the market price to decline.
Anti-takeover provisions could make an acquisition more difficult.
The company may be unable to raise additional capital on acceptable terms.
The company does not intend to pay dividends for the foreseeable future.
The company may be unable to adequately enforce or defend its intellectual property rights.
Claims by others that the company infringes their intellectual property rights could harm the business.
The company may be unable to comply with the terms of open source software licenses.
The audit report is prepared by an auditor who has been previously identified by the PCAOB as not previously being able to be inspected by the PCAOB.

Future Outlook

The company expects an uncertain outlook in its service revenues due to the ongoing impact of the COVID-19 pandemic, particularly in South East Asia. The company is focused on growing its data sales, where it has a technology advantage and higher margins, and expects to return to positive cash flow from operations.

Industry Context

The document highlights the challenges faced by companies in the mobile app and digital marketing industries, including rapid technological changes, increasing competition, and evolving privacy regulations. The company's focus on first-party data and AI-driven solutions reflects a broader industry trend towards privacy-compliant marketing strategies.

Comparison to Industry Standards

The restatement of financial statements due to accounting errors is not uncommon, but it does raise concerns about the effectiveness of internal controls.
The company's focus on AI-driven, first-party data solutions aligns with industry trends, but its ability to compete with larger players remains to be seen.
The company's reliance on a Hong Kong-based auditor and the potential for delisting under the HFCAA is a unique risk factor compared to many of its US based peers.
The company's revenue decline and increased losses are concerning and may indicate challenges in its business model or competitive landscape.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Operating Officer	John MacNeil	Chris Andrews	2023-01-02	John MacNeil resigned as an officer on December 29, 2022.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Audit Committee	The Audit Committee is responsible for overseeing the accounting and financial reporting processes and the audits of the financial statements.	na	The Audit Committee is responsible for ensuring the independence and performance of the independent registered public accounting firm, reviewing financial statements, and monitoring internal controls.
Compensation Committee	The Compensation Committee evaluates, recommends, and approves policy relating to compensation and benefits of the Company's officers and employees.	na	The Compensation Committee is responsible for setting the compensation of executive officers and administering cash and equity-based compensation plans.
Nominating and Corporate Governance Committee	The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board of Directors regarding candidates for directorship, and the structure and composition of the Company's Board of Directors and committees of the Board of Directors.	na	The Nominating and Corporate Governance Committee is responsible for identifying and evaluating candidates for the Board of Directors and developing corporate governance guidelines.
Social Media Committee	The Social Media Committee is responsible for overseeing the social media strategy initiatives for the Company pursuant to Regulation FD.	na	The Social Media Committee is responsible for providing compliant Regulation FD strategic leadership for social media and establishing corporate policies with respect to use of social media.

Legal Proceedings

The company is not currently a party to any legal proceedings, litigation or claims, which, if determined adversely to us, would have a material adverse effect on our business, financial condition, results of operations or cash flows.

Related Party Transactions

Since January 1, 2021, the company has not entered into any transactions with any of its directors, nominees for director, officers or principal shareholders, nor any associate or affiliate of the foregoing, and the company is not currently considering any proposed transactions with such related persons in which: the amounts involved exceeded or will exceed $120,000; or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years, and in which any such related person had or will have a direct or indirect material interest.

Stakeholder Impact

Shareholders may experience a decline in stock value due to the restatement and potential delisting risks.
Employees may be affected by potential cost-cutting measures or restructuring.
Customers may be concerned about the company's financial stability and ability to provide services.
Creditors may be concerned about the company's ability to repay debts.
Suppliers may be affected by potential changes in the company's operations or financial condition.

Next Steps

The company will continue to implement measures to remediate the identified material weaknesses in internal control over financial reporting.
The company will continue to monitor the situation for any regulatory changes related to the Holding Foreign Companies Accountable Act.
The company will continue to evaluate its capital expenditure needs and may seek additional financing.
The company will continue to develop and introduce new features and improved functionality to its platforms.

Key Dates

Date	Description
2020-02-25	Reverse stock split of 1 for 13.
2020-01-08	Acquisition of substantially all of the assets of Push Holdings, Inc.
2020-11-02	Acquisition of Fixel AI Inc.
2021-03-29	Acquisition of Rebel AI, Inc.
2021-12-15	Agreements to transfer AppLogiq business to GoLogiq, Inc.
2022-01-27	Transfer of AppLogiq business to GoLogiq, Inc. completed.
2022-03-31	Acquisition of Battle Bridge Labs business.
2022-07-27	Distribution and Spin Off of GoLogiq completed.
2022-09-09	Merger Agreement with Abri SPAC I, Inc. entered into.
2023-02-28	Revaluation of CreateApp platform to $11,800,000.
2023-04-10	Issuer had 74,397,046 shares of common stock issued and outstanding.
2023-05-08	Original Form 10-K filed with the SEC.
2023-05-01	Company disclosed restatement of financial statements.
2023-04-25	Share Exchange Agreement with Park Place Payments Inc.
2023-10-23	Special meeting of stockholders to approve merger agreement.
2023-11-02	Business Combination with Abri SPAC I, Inc. completed.
2024-05-03	Date of the re-audit report.

Keywords

financial restatement, intangible assets, reverse acquisition, accounting errors, internal control, auditing, GoLogiq, CreateApp, capital transaction, PCAOB, HFCAA, mobile apps, digital marketing, SaaS

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