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 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
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report refer to the following:
? "
"we," "us," or "our," are to the business of
Delaware corporation;
?
of the Company;
? AppLogiq, a former business segment of the Company, which is now owned by
GoLogiq (formerly Lovarra), which, prior to completion of the Spin Off, was a
majority owned subsidiary of the Company;
? "Lovarra" refers to a
majority owned subsidiary of the Company at that time, pursuant to which the
Company agreed to transfer its AppLogiq business to GoLogiq;
? "GOLogiq" refers to refers to a
reporting company that, at the time, was a majority owned subsidiary of the
Company, also formerly known as Lovarra;
? PAY/GOLogiq or Weyland International Perkasa, an Indonesian associate of the
Company;
? "SEC" refers to the
? "Securities Act" refers to the Securities Act of 1933, as amended;
? "Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
? "
States. 31 AppLogiq Spin-Off
On
On
On
As of
DataLogiq Spin-off
On
At Closing Abri will deliver to the Company
Overview
The following overview of the Company's business includes the AppLogiq business,
which was divested by the Company via the Distribution effective
The Company 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 (i) its "AppLogiq" business segment (operated as CreateApp (https://www.createapp.com/), which allows SMBs to establish their point-of-presence on the web, and (ii) "DataLogiq" business segment, 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 e-commerce landscape.
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The Company enables SMBs to create a mobile app for their business without the need of technical knowledge, high investment, or background in IT by utilizing AppLogiq's CreateApp platform that is offered as a Platform as a Service ("PaaS") to the Company's customers. The Company's DataLogiq business segment offers online marketing solutions on a performance marketing and self-serve, Software as a Service ("SaaS") basis.
We provide our PaaS and digital marketing to SMBs in a wide variety of industry sectors. We believe that SMBs can increase their sales, reach more customers, and promote their products and services using our affordable and cost-effective solutions. We recognize revenue on a pay to use subscription basis when our customers use our PaaS platform to create mobile apps for their business and on our SaaS platform when provisioning services for their marketing campaigns. We also recognize revenue on a cost per lead ("CPL") basis and other metrics for engagements undertaken on a performance marketing basis.
The Company continues to expand its portfolio of offerings and the industries they serve:
? InMay 2018 , the Company expanded its portfolio to fintech applications with the launch of its PayLogiq mobile payments platform inIndonesia . ? In the fall of 2019, the Company expanded its portfolio to short-distance food delivery service with the launch of GoLogiq, a PaaS platform that provides mobile payment capabilities for the local food delivery service industry inIndonesia . ? InJanuary 2020 , the Company completed the acquisition of substantially all of the assets ofPush Holdings, Inc. This acquired business, which the Company has rebranded as its DataLogiq division, operates a consumer data management platform powered by lead generation, online marketing, and multichannel reengagement strategies through its owned and operated brands. DataLogiq has developed a proprietary data management platform and integrated with several third-party service providers to optimize the return on its marketing efforts. DataLogiq focuses on consumer engagement and enrichment to maximize its return on acquisition through repeat monetization of each consumer. DataLogiq also licenses its software technology and provides managed technology services to various other e-commerce companies. DataLogiq is located inMinneapolis, Minnesota , USA. ? OnNovember 2, 2020 , the Company completed the acquisition ofFixel AI Inc. ("Fixel"), thereby acquiring its self-serve MarTech Audience Targeting platform as a further expansion of its DataLogiq product suite. ? OnMarch 29, 2021 , the Company completed the acquisition ofRebel AI, Inc. , thereby acquiring its "The Rebel AI" advertising platform as a further expansion of its DataLogiq product suite. ? OnJune 21, 2021 , the Company completed the Canadian IPO offering of 1,976,434 units of its securities, consisting of shares common stock and warrants to purchase shares of common stock, on the NEO exchange inCanada . ? OnMarch 31, 2022 the Company,Battle Bridge Acquisition Co, LLC , a company beneficially owned entirely by the Company (the "Buyer"), Section 2383 LLC, aWyoming limited liability company ("Seller"),Travis Phipps , an individual ("Phipps") andRobb Billy ("Billy" and, together with Phipps, the "Founders") andTravis Phipps , as Representative, entered into an asset purchase agreement (the "Battle Bridge Purchase Agreement") whereby the Buyer agreed to purchase from Seller and Seller agreed to sell to Buyer substantially all of the assets of Seller which represents the "Battle Bridge Labs " business (the "Battle Bridge Assets") (collectively, the "Transaction"). The consummation of the Transaction (the "Closing") occurred simultaneously with execution of the Battle Bridge Purchase Agreement onMarch 31, 2022 . As consideration for the Buyer's acquisition of the Battle Bridge Assets, the Company agreed to pay$3,250,000 (the "Purchase Price") which consisted of$250,000 in cash (the "Cash Consideration") and the issuance of 2,912,621 shares of restricted common stock of the Company at$1.03 per share (the "Stock Consideration") (representing$3,000,000 in Stock Consideration) which was the volume weighted average price (VWAP) of the Company's Common Stock as reported by Bloomberg LP for the twenty (20) trading days immediately prior to Closing.$500,000 in Stock Consideration was retained by the Company at the Closing and held as partial security to satisfy indemnification claims for a period of 12 months following the Closing. In addition, the recipients of the Stock Consideration agreed to sign lock-up and leak-out agreements which provide that, following a 6-month lock-period and ending 18 months after Closing, any sales of the Company's common stock by such recipients do not exceed one percent (1%) of the then applicable thirty (30) day trading average volume of the Company's common stock as of such date. 33
Recent Corporate Developments
Amendment to Equity Incentive Plan
On
On
The Company's Second A&R Plan and amended form award agreements were approved by
the Company's stockholders on
Amendments to Bylaws - Adoption of Majority Voting Policy
On
On
Under the Policy incorporated into the A&R Bylaws, in an uncontested election, any director nominee who receives a greater number of votes "withheld" than votes "for" his or her election at a meeting of shareholders of the Company must promptly tender his or her resignation to the chairman of the Board. Following receipt of such resignation, the Governance Committee of the Board (the "Committee") will consider the resignation and recommend to the Board whether to accept such tendered resignation. Except in special circumstances, the Committee will be expected to accept and recommend acceptance of the resignation by the Board. A press release disclosing the Board's determination (and the reasons for rejecting the resignation, if applicable) will be issued within 90 days following the date of the relevant meeting of shareholders and a copy of the press release will be sent concurrently to the NEO Exchange, provided that the Company's common stock is then listed for trading on the NEO Exchange. The director's resignation, if accepted, will become effective immediately upon acceptance thereof by the Board.
Any director who tenders his or her resignation pursuant to the Policy will not participate in the recommendation of the Committee or the decision of the Board with respect to such resignation.
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Subject to any restrictions imposed by applicable law, where the Board accepts a resignation in accordance with the Policy, the Board may (i) leave the director vacancy unfilled until the next annual meeting of shareholders, (ii) fill the vacancy through the appointment of a new director, or (iii) call a special meeting of shareholders at which a new candidate will be presented to fill the vacant position.
The Policy applies only in circumstances involving an uncontested election of directors. For purposes of the Policy, an "uncontested election" of directors of the Company means an election held at any meeting of shareholders called for, either alone or with other matters, the election of directors, with respect to which the number of nominees for election is equal to the number of positions on the Board to be filled through the election to be conducted at such meeting.
AppLogiq Spin Off
See above for information regarding the Company's sale and Spin Off of its
AppLogiq business segment to GoLogiq, which was completed on
Ionic Ventures Purchase Agreement
On
In connection with the execution of the Ionic Purchase Agreement, the Company
registered 2,926,000 shares of common stock sold to Ionic in connection with the
purchase of
The Regular Purchase Price, which is the price at which future shares of common stock sold under the Ionic Purchase Agreement will be sold at, for the Purchase Shares shall equal 97% of the arithmetic average of the five lowest VWAPs during the period starting on the date that Ionic receives Pre-Settlement Regular Purchase Shares and ending on such date that the aggregate dollar volume of our common stock traded on our Principal Market equals five times the Purchase Amount, in the aggregate, subject to a five Trading Day minimum (provided, however, that each day on which Ionic has requested Purchase Shares which cannot be delivered to Ionic shall be excluded from such calculation). This is a forward pricing mechanism based on an estimate and true up and as of the date of this filing, the Regular Purchase Price has yet to be calculated.
Also in connection with the execution of the Ionic Purchase Agreement, the
Company issued a Warrant to purchase 631,579 shares of Common Stock (1.5% of the
total
As noted above, the Purchase Agreement includes a forward pricing mechanism,
pursuant to which Ionic is entitled to receive, from time-to-time at Ionic's
request, additional true-up shares of the Company's common stock ("True-Up
Shares") at a later date, for no additional consideration. On
The Company intends to register the remaining up to
35 Battle Bridge Acquisition
On
As consideration for the Buyer's acquisition of the Battle Bridge Assets, the
Company agreed to pay
In addition, the recipients of the Stock Consideration agreed to sign lock-up and leak-out agreements which provide that, following a 6-month lock-period and ending 18 months after Closing, any sales of the Company's common stock by such recipients do not exceed one percent (1%) of the then applicable thirty (30) day trading average volume of the Company's common stock as of such date.
The Merger Agreement
On
The Merger is expected to be consummated after obtaining the required approval
by the stockholders of
The closing of the transactions (the "Closing") contemplated in the Merger
Agreement is anticipated to occur virtually on the fifth Business Day following
the satisfaction or waiver of closing conditions (the "Closing Date"). On the
Closing Date, the parties to the Merger Agreement will cause the Certificate of
Merger to be filed with the
At Closing,
Managed Services Agreement
On
In connection with the MSA, on
36
As compensation for the services to be provided by Client to the Company under
the IC Agreement, the Company agreed to issue Client 1,750,000 restricted shares
of its common stock (the "Initial Shares") upon execution of the Agreements. In
the event that the proposed acquisition of a wholly owned subsidiary of the
Company by Abri SPAC I, Inc., which proposed acquisition was previously
disclosed by the Company in that Current Report on Form 8-K filed with the
Pursuant to the MSA, Client shall have certain piggyback registration rights with respect to the Registrable Shares.
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 beginning in
Components of Results of Operations
Revenue (Service)
The Company's AppLogiq business segment's Platform as a Service ("Paas"), operated as CreateApp ("PaaS") provides the infrastructure allowing users to develop their own applications and IT services, which users can access anywhere via a smart mobile phone, web or desktop browser. The Company recognizes revenue on a pay-to-use subscription basis when our customers use our platform. For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user's use of our platform on a white label basis.
The Company maintains the PaaS software platform at its own cost. Any enhancements and minor customization for our resellers/distributors are not separately billed. Major new proprietary features are billed to the customer separately as development income while re-usable features are added to the features available to all customers on subsequent releases of our platform.
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. For Q3 2022, this resulted in revenues decreasing by 47.6% however, gross profit margins increased to 31.9%.
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.
37 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. Prior to 2022, 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
Results of Operation
Results of Operations for the Three Months ended
The following sets forth selected items from our statements of operations and
the percentages that such items bear to net sales for the three months ended
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