LOGIQ, INC.
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 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" set forth in this
Report, 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, subsequentevents, or otherwise. Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:
· "
or "our," are to the business of
and AppLogiq;
·
· "SEC" are to the
· "Securities Act" are to the Securities Act of 1933, as amended;
· "Exchange Act" are to the Securities Exchange Act of 1934, as amended;
· "
States.
Overview
The Company offers solutions that help small-to-medium-sized businesses ("SMBs")
to provide access to and reduce transaction friction of ecommerce for their
clients. The Company's solutions are provided through "DataLogiq" business, a
digital marketing analytics business unit that offers proprietary data
management, audience targeting and other digital marketing services that improve
an SMB's discovery and branding within the vast ecommerce landscape.
The Company, through its DataLogiq platform offers online marketing solutions on
a performance marketing and self-serve, Software as a Service ("SaaS") basis.
The Company provides its digital marketing to SMBs in a wide variety of industry
sectors. The Company believe that SMBs can increase their sales, reach more
customers, and promote their products and services using our affordable and
cost-effective solutions. The Company recognizes revenue on our SaaS platform
when provisioning services for their marketing campaigns. They also recognize
revenue on CPL and other metrics for engagements undertaken on a performance
marketing basis.
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Recent Corporate Developments
AppLogiq Spin-Off
On December 15, 2021 , the Company entered into various agreements with GoLogiq,
Inc. (then known as Lovarra), a Nevada corporation ("GoLogiq") and a public
reporting company that, at the time, was a majority owned subsidiary of the
Company, pursuant to which the Company agreed to transfer its AppLogiq business
to GoLogiq, subject to customary conditions and approvals and completion of
requisite financial statement audits (the "Separation"). GoLogiq is a fully
reporting U.S. public company. In connection with the Separation, the Company
announced that it intended to distribute, on a pro rata basis, 100% of the
Company's ownership interests in GoLogiq to the Company's shareholders of record
as of December 30, 2021 (the "Record Date") (the "Distribution," and
collectively with the "Separation," the "Spin Off"), which Distribution of said
shares was expected to occur approximately six months from completion of the
Separation (the "Distribution Date"), subject to customary conditions and
approvals.
On January 27, 2022 , the Company completed the transfer of its AppLogiq business
to GoLogiq. In connection with the completion of the transfer of AppLogiq to
GoLogiq, GoLogiq issued 26,350,756 shares of its common stock to the
Company (the "GoLogiq Shares"). The Company held the GoLogiq Shares until it
distributed 100% of the GoLogiq Shares to the Company'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 will receive 1 share of Lovarra) upon
completion of the Distribution.
On
As of
27 Pending DataLogiq Spin-off OnSeptember 9, 2022 , the Company and the Company's wholly-owned subsidiary,DLQ, Inc. , aNevada corporation ("DLQ") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Abri SPAC I, Inc., aDelaware corporation, ("Abri"), and Abri Merger Sub ("Merger Sub") wherein Merger Sub will merge with and into DLQ with DLQ being the surviving company ("Surviving Company"), and a wholly owned subsidiary ofAbri . The Merger is expected to close after obtaining the required approval by the stockholders ofAbri and the Company, and upon the satisfaction of certain other customary closing conditions ("Closing"). At Closing Abri will deliver to the Company$114 million worth of sharesAbri common stock, par value$0.0001 , at$10.00 per share (the "Merger Consideration Shares"). Also at Closing, the Company will issue a dividend to its shareholders on a pro-rata basis equal to 25% of the aggregate Merger Consideration Shares (the "Dividend Shares"), payable to the Company shareholders of record as of a record date to be set shortly before Closing. More information relating to the Merger Agreement, the dividend and the various agreements associated with the Merger Agreement can be found in the Form 8-K filed by the Company onSeptember 12, 2022 . COVID-19 Effect Due to the unprecedented effect and related impact of Covid-19 pandemic, the Company has experienced a push back from the Company's resellers and white label distributors fromApril 2020 , for its Platform as a Service pay-to-use subscription basis. The Company is expecting an uncertain outlook in its service revenues, as its operations inSouth East Asia are currently being disrupted by the continuing impact of Covid-19 pandemic. In particular, our PAY/GOLogiq associate revenues have been reduced as offices and compulsory lock down protocols are being implemented, which are expected to be in force until the majority of the populous have been vaccinated through to the end of calendar year 2022.
Components of Results of Operations
Revenue (Service)
The Company's DataLogiq revenues are derived through the management of online
advertising campaigns on behalf of customers, which include per-impression, and
cost per acquisition ("CPA") arrangements as well as the delivery of qualified
leads.
In 2020, during COVID-19, we pursued a path towards higher gross profit margins
which involved an elimination of lower margin business and increase of direct
sales/marketing. This caused a reduction in overall revenue but successfully
yielded higher margins more than double over the course of the following year.
Given the recent decline in the stock market and specifically in the price of
technology stocks, we felt that it was time to replicate the same strategy and
evaluate a higher margin path again.
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Cost of Revenue (Service)
Cost of revenue primarily consists of fees from cloud-based hosting services and
personnel costs. Personnel costs consist of wages, bonuses, benefits, and
stock-based compensation expenses. Allocated overhead costs consist of certain
facilities and utility costs. We expect cost of revenue to increase in absolute
dollars, as product revenue increases.
The Company's DataLogiq digital marketing analytics business segment cost of revenue is primarily generated by media cost to power our assets.
Operating Expenses
Our operating expenses consist of general and administrative, depreciation and amortization, and research and development expenses. Salaries and personnel-related costs, benefits, and stock-based compensation expense, are the most significant components of each category of operating expenses. Operating expenses also include allocated overhead costs for facilities and utility costs. General and Administrative - General and administrative expense consists primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources and fees for third-party professional services, as well as allocated overhead. We expect our general and administrative expense to increase in absolute dollars as we continue to invest in growing the business. Depreciation and amortization - Depreciation and amortization expense consists primarily of amortization of development costs and trademark for our software platforms. Research and Development - Research and development expense consists primarily of employee compensation and related expenses, allocated overhead, and developments to our website, e-commerce, and mobile app platforms. We expect our research and development expenses to increase in absolute dollars as we continue to invest in new and existing products and services.
Other Income (Expense), net
Other income consists of income received for activities outside of our core business. In 2021, this includes interest from US based financial asset money market funds.
Other (expense) consists of expense for activities outside of our core business. In 2021, DataLogiq incurred early withdrawal fees from an escrow account relating to Conversion Point Technologies.
Provision for Income Taxes
Provision for income taxes consists of estimated income taxes due to
29
Results of Operations for the fiscal years endedDecember 31, 2022 and 2021 The following sets forth selected items from our statements of operations and the percentages that such items bear to net sales for the fiscal years endedDecember 31, 2022 , andDecember 31, 2021 (Because of rounding, numbers may not foot). The Consolidated results includeLogiq, Inc. (aDelaware Corporation ) and its subsidiaries,DLQ, Inc (aNevada Corporation )(formerlyLogiq, Inc. (Nevada ),Fixel AI Inc. andRebel Inc. (collectively, also known as the DataLogiq segment).Logiq, Inc. (Delaware ) results include our business segment APPLogiq, prior to the Spin off to GoLogiq Inc. and GoLogiq Inc. post Spin off while it remains a material subsidiary of the Company.
Consolidated Results of Operations
For the fiscal years ended
December 31, 2022 December 31, 2021 Change
Revenue (service) $ 25,711,991 100.0 % $ 37,346,859 100.0 % $ (11,634,868 ) (31.2 )%
Cost of revenues
(service) 19,776,533 76.9 26,290,203 70.4 (6,513,670 ) (24.8 )
Gross profit 5,935,458 23.1 11,056,656 29.6 (5,121,198 ) (46.3 )
Depreciation and
amortization 10,996,628 42.8 3,782,136 10.1 7,214,492 190.8
General and
administrative 17,158,766 66.7 18,166,721 48.6 (1,007,955 ) (5.5 )
Sales and marketing 1,235,233 4.8 2,296,483 6.1 (1,061,250 ) (46.2 )
Impairment loss 19,700,000 76.6 - - 19,700,000 100.0
Research and
development 6,004,248 23.4 7,400,732 19.8 (1,396,484 ) (18.9 )
Total operating
expenses 55,094,875 214.3 31,646,072 84.7 23,448,803 74.1
(Loss) from
operations (49,159,417 ) (191.2 ) (20,589,416 ) (55.1 ) (28,570,001 ) 138.8
Other
(Expenses)/Income,
net (3,592 ) (0.01 ) 474,510 1.27 (478,102 ) (100.8 )
Net (Loss) before
income tax (49,163,009 ) (191.2 ) (20,114,906 ) (53.9 ) (29,048,103 ) 144.4
Income tax (100.0 )
(expense) - - (11,881 ) (0.0 ) 11,881
Net (Loss) (49,163,009 ) (191.2 ) (20,126,787 ) (53.9 ) (29,036,222 ) 144.3
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Logiq (Delaware ) including AppLogiq results of operations, prior to the Spin off
For the fiscal years ended
December 31, 2022 December 31, 2021 Change
Revenue (service) $ - - % $ 14,340,379 100.0 % $ (14,340,379 ) (100.0 )%
Cost of revenues
(service) - - 9,787,285 68.2 (9,787,285 ) (100.0 )
Gross profit - - 4,553,094 31.8 (4,553,094 ) (100.0 )
Depreciation and amortization 125,133 - 125,133 0.9 - - General and administrative 6,913,719 - 9,234,094 64.4 (2,320,375 ) (25.1 ) Sales and marketing 25,000 - 122,300 0.9 (97,300 ) (79.6) Impairment loss - - - - - - Research and development 2,887,525 - 6,718,168 46.8 (3,830,643 ) (57.0 ) Total operating expenses 9,951,377 - 16,199,695 113.0 (6,248,318 ) (38.6 ) (Loss) from operations (9,951,377 ) - (11,646,601 )
(81.2 ) 1,695,224 (14.6 )
Other (Expenses)/Income, net - - (76,937 ) (0.5 ) 76,937 - Net (Loss) before ) income tax (9,951,377 ) - (11,723,538 (81.8 ) 1,772,161 (15.1 ) Income tax (expense) - - (11,881 ) (0.1 ) 11,881 (100.0 ) Net (Loss) (9,951,377 ) - (11,735,419 ) (81.8 ) 1,784,042 (15.2 )
GoLogiq including CreateApp results of operations, post Spin off
For the fiscal years ended
December 31, 2022 December 31, 2021 Change
Revenue (service) $ 5,454,119 100.0 % $ - 100.0 % $ 5,454,119 100.0 %
Cost of revenues
(service) 3,382,954 62.0 - - 3,382,954 100.0
Gross profit 2,071,165 38.0 - - 2,071,165 100.0
Depreciation and
amortization - - - - - -
General and
administrative 3,503,764 64.2 - - 3,503,764 100.0
Sales and
marketing 5,000 0.1 - - 5,000 100.0
Impairment loss 19,700,000 361.2 - - 19,700,000 100.0
Research and
development 3,116,723 57.1 - - 3,116,723 100.0
Total operating
expenses 26,325,487 482.7 - - 26,325,487 100.0
(Loss) from
operations (24,254,322 ) (444.7 ) - - (24,254,322 ) 100.0
Other
(Expenses)/Income,
net - - - - - -
Net (Loss) before
income tax (24,254,322 ) (444.7 ) - - (24,254,322 ) 100.0
Income tax
(expense) - - - - - -
Net (Loss) (24,254,322 ) (444.7 ) - - (24,254,322 ) 100.0
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DLQ including DataLogiq results of
op
erations
For the fiscal years ended
December 31, 2022 December 31, 2021 Change
Revenue (service) $ 20,257,872 100.0 % $ 23,006,480 100.0 % $ (2,748,608 ) (11.9 )%
Cost of revenues
(service) 16,393,579 80.9 16,502,918 71.7 (109,339 ) (0.7 )
Gross profit 3,864,293 19.1 6,503,562 28.3 (2,639,269 ) (40.6 )
Depreciation and
amortization 10,871,495 53.7 3,657,003 15.9 7,214,492 197.3
General and (2,191,34
administrative 6,741,283 33.3 8,932,627 38.8 4 ) (24.5 )
Sales and marketing 1,205,233 5.9 2,174,183 9.5 (968,950 ) (44.6 ) Impairment loss - - - - - - Research and development - - 682,564 3.0 (682,564 ) (100.0 ) Total operating
expenses 18,818,011 92.9 15,446,377 67.1 3,371,634 21.8 (Loss) from operations (14,953,718 ) (73.8 ) (8,942,815 ) (38.9 ) (6,010,903 ) 67.2 Other
(Expenses)/Income,
net (3,592 ) (0.02 ) 551,447 2.40 (555,039 ) (100.7 ) Net (Loss) before income tax (14,957,310 ) (73.8 ) (8,391,368 ) (36.5 ) (6,565,942 ) 78.2 Income tax (expense) - - - - - - Net (Loss) (14,957,310 ) (73.8 ) (8,391,368 ) (36.5 ) (6,565,942 ) 78.2
Consolidated Geographical Information - Revenue
Revenue by geographical region for the years ended
2022 % 2021 %
Southeast Asia $ 10,128,936 39.4 7,170,190 19.2
EU 5,064,468 19.7 3,585,095 9.6
South Korea 3,038,681 11.8 2,151,056 5.8
Africa 2,025,787 7.9 1,434,038 3.8
North America 5,454,119 21.2 23,006,480 61.6
Total revenue $ 25,711,991 100.0 $ 37,346,859 100.0
Consolidated Revenue (Service)
Consolidated Service revenues were$25,711,991 and$37,346,859 for the twelve months endedDecember 31, 2022 and 2021, respectively. The decrease is due to the revenues of Applogiq decreased$8,886,260 or 62.0% from FY2021 to FY2022 due to a loss of customers as a result of adverse effects of the on-set of Covid-19 and from a strategic shift away from white label APP resellers and towards higher margin direct marketing customers.
Consolidated Cost of Revenue (Service)
Consolidated Cost of service was
32 Consolidated Gross Profit
Consolidated Gross Profit was
Consolidated Gross Profit margin was 23.1% and 29.6% for the twelve months ended
Consolidated Other Income/(Expenses)
Consolidated Other expenses was$3,592 and Other income was$474,510 for the twelve months endedDecember 31, 2022 and 2021, respectively. The Consolidated other income in 2021 represents interest and gain on change in fair value from a US based money market bond portfolio and expense from early withdrawal fees from an escrow account in DATALogiq.
Consolidated Operating Expenses
General and Administrative (G&A)
Consolidated General and administrative expenses were
Significant movements are explained in the review of operations by business segments of APPLogiq, DATALogiq and Fixel AI in the sections below.
Sales and Marketing (S&M)
Consolidated S&M expense was$1,235,233 and$2,296,483 for the twelve months endedDecember 31, 2022 and 2021, respectively. The decrease is mainly due to the decrease in sales and marketing for DATALogiq of$1,061,250 or 46.2% from FY2021 to FY2022.
Research and Development (R&D)
Consolidated Research and Development expense were$6,004,248 and$7,400,732 for the twelve months endedDecember 31, 2022 and 2021, respectively. The decrease was due to no research and development was incurred by DataLogiq in FY2022.
Impairment loss
An impairment loss of$19,700,000 arose as a result of revaluation of CreateApp platform onFebruary 28, 2023 . This loss was recognized in the Company as the AppLogiq segment (which includes CreateApp platform) was spun off to GoLogiq Inc onJuly 27, 2022 .
Consolidated (Loss) from operations
The Company posted a loss from operations of$(49,159,417) and$(20,589,416) for the twelve months endedDecember 31, 2022 and 2021, respectively. The increase is partly due to the inclusion of the impairment loss of CreateApp platform which was revalued from$31,500,000 to$11,800,000 onFebruary 28, 2023 .
The increase in the loss is due to increased staff costs, travel, consultancy, professional and development fee for mobile app and increase in research & development on our platform as further described below.
Consolidated Net (loss)/profit before income tax
The Company posted a net loss before income tax
The increase in the loss is due to increase in research & development costs, legal and professional costs, travelling cost, consultancy fee, stock-based compensation and increase in research & development on our platform as further described below. 33
Consolidated income tax (expense)
No provision for corporate taxes is made as the Company incurred a loss and has
unutilized loss carryforwards. The tax paid during the fiscal year is for
Stock-based compensation
Stock-based compensation expenses for the twelve months ended
Consolidated Net (loss) income
The Company posted a net loss$(49,163,009) and$(20,126,787) for the twelve months endedDecember 31, 2022 and 2021, respectively. The increase is partly due to the inclusion of the impairment loss of CreateApp platform which was revalued from$31,500,000 to$11,800,000 onFebruary 28, 2023 .
Revenue (Service) & Cost of Revenue (Service)
APPLogiq Service revenues and Cost of Revenues was transferred to GoLogiq entity.
General and Administrative (G&A)
G&A expenses was
Sales and Marketing (S&M)
S&M expense was
Research and Development (R&D)
Research and Development expense was
(Loss) from operations
APPLogiq and the Company posted a loss from operations of
34
DATALogiq Business Segment Results of Operations
Revenue (Service)
DATALogiq revenues decreased from
Cost of Revenue (Service)
DATALogiq Cost of service decreased from
Gross Profit
DATALogiq gross profit was
DATALogiq gross profit margin was 19.1% for the year ended
Other (Expenses)
DATALogiq other expenses was
General and Administrative (G&A)
DATALogiq general and administrative expenses were$6.7 million for the year ended toDecember 31, 2022 compared to$8.9 million for the same period in
2021, a decrease of$2.2 million . Sales and Marketing (S&M) DATALogiq sales and marketing expenses include those expenses required to support our sales efforts and includes sales commissions and consultants. Sales and marketing expenses for the years endedDecember 31, 2022 and 2021 were$1.2 million and$2.2 million , respectively.
Research and Development (R&D)
DATALogiq research and development expenses were $nil for the year ended
(Loss) from operations
DATALogiq's loss from operations was
35
Liquidity and Capital Resources
During the year endedDecember 31, 2022 , our primary sources of capital came from (i) cash flows from our operations, predominantly from providing services under our DataLogiq platform, (ii) existing cash, and (iii) proceeds from third-party financings. As ofDecember 31, 2022 , we currently have no material commitments for capital expenditures. Our capex & R&D plans are dependent on the availability of working capital and is able to be scaled back as required without penalty. We know of no material trends in our capital trends aside from the funds to be raised in future offerings. We have focused our resources behind a plan to grow our data sales, where we have a technology advantage and higher margins. If we are successful in implementing our plan, we expect to return to a positive cash flow from operations. However, there is no assurance that we will be able to achieve this objective.
We know of no trends or demands reasonably likely to affect liquidity other than those listed as Risk Factors.
The following table summarizes our cash flows for the years endedDecember 31, 2022 and 2021: For the Year Ended December 31, Cash flows: 2022 2021
Net cash (used in) operating activities$ (15,724,321 ) $ (16,855,183 ) Net cash provided by (used in) investment activities$ 7,209,381 $ (933,682 ) Net cash provided by financing activities$ 7,400,881
$ 15,885,352 Operating Activities
During the year ended
Investing Activities
During the year ended
36 Financing Activities
During the year ended
We estimate that based on current plans, assumptions and our continuing fund raising plans, that our available cash and the cash we generate from our core operations will generally be sufficient to satisfy our capital expenditures under our present operating expectations, without further financing, for up to 12 months. We have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. However, we shall continue to evaluate our capital expenditure needs based upon factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of our sales and marketing, the timing of new product introductions, and the continuing market acceptance of our products and services. If cash generated from operations is insufficient to satisfy our capital requirements, we may open a revolving line of credit with a bank, or we may have to sell additional equity or debt securities or obtain expanded credit facilities to fund our operating expenses, pay our obligations, diversify our geographical reach, and grow our company. In the event such financing is needed in the future, there can be no assurance that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional financing were obtained, then management would restructure the Company in a way to preserve its business while maintaining expenses within operating cash flows.
Known Trends or Uncertainties
We have seen some consolidation in the mobile applications industry during economic downturns. These consolidations have not had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward. We believe that the need for improved productivity in the research and development activities directed toward developing new and enhanced PaaS applications will continue to result in SMBs utilizing our products and services. New product developments could result in increased revenues and earnings if they are accepted by our markets; however, there can be no assurances that new products will result in significant improvements to revenues or earnings. For competitive reasons, we do not disclose all of our new product development activities.
The potential for growth in new markets is uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would be more efficiently used elsewhere.
Inflation
We have not been affected materially by inflation during the periods presented, and no material effect is expected in the near future.
Contractual Obligations and Commitments
We have no material contractual obligations as of
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are included in Note 2 - "Summary of Significant Accounting Policies" of Notes to Consolidated Financial Statements included in this Annual Report.
Recently Issued or Newly Adopted Accounting Standards
Our recently issued or newly adopted accounting standards are included in Note 2 - "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in this Annual Report.
Off-Balance Sheet Arrangements
As ofDecember 31, 2022 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.
We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.
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