LOGQ Logicquest Technology Inc (PK)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENT

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and 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 these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common shares” refer to the common shares in our capital stock.

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Logicquest Technology, Inc., unless otherwise indicated.

General Overview

We were originally incorporated as Solis Communications, Inc. on July 23, 2001 and adopted a name change to Crescent Communications Inc. upon completion of a reverse acquisition of Berens Industries, Inc. In 2004, we changed our name to Bluegate Corporation. On March 19, 2015, we changed our name to Logicquest Technology, Inc.

We are a Nevada corporation that previously consisted of the networking service (carrier/circuit) business, which provided internet connectivity to corporate clients on a subscription basis; essentially operating as a value added provider. During May 2014 our board of directors authorized an orderly wind down of our company's internet connectivity business which ceased effective June 30, 2014.

Our Current Business

We were previously engaged in the networking service (carrier/circuit) business that provides internet connectivity to corporate clients on a subscription basis; essentially operating as a value added provider. During May 2014 our board of directors authorized an orderly wind down our company’s internet connectivity business which ceased effective June 30, 2014.

On March 31, 2016, our company entered a memorandum of understanding/letter of intent (“ MOU )”) with Logicquest Technology Limited pursuant to which we shall effect a business combination (the “ Transaction ”).  The Transaction may be effected in one of several different ways, including an asset acquisition, merger of Logicquest Technology Limited and us, or a share purchase whereby we purchase the shares of Logicquest from its shareholders for cash and/or for shares of our company.

We will pay an aggregate of USD$3,000,000 to the shareholders of Logicquest Technology Limited for all issued and outstanding share of Logicquest Technology Limited, payable as follows:

(a)

$1,000,000 on closing of the Transaction;

(b)

$1,000,000 six months from closing of the Transaction; and

(c)

$1,000,000 on the first anniversary of the closing of the Transaction.

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The definitive agreement under which the parties will agree to carry out the Transaction will contain provisions that are customary for a transaction of this nature, including, but not be limited to,

(a)

approvals of the boards of directors of Logicquest and us and shareholders of Logicquest;

(b)

obtaining all required consents of third parties;

(c)

completion of all required audited and unaudited financial statements of Logicquest, prepared in accordance with US GAAP and audited and by a PCAOB registered audit firm;

(d)

no adverse material change in the business or financial condition of Logicquest or us since the execution of the Transaction Agreement; and

(e)

closing of Transaction by June 30, 2016.

The Company is currently in the midst of executing the above transaction with the deadlines to the letter of intent being extended till October 30, 2016.

Results of Operations

Three and Six Months Ended June 30, 2016 compared to the Three and Six Months Ended June 30, 2015

We had a net loss of $241,519 for the six month period ended June 30, 2016, which was $8,295 more than the net loss of $233,224 for the six month period ended June 30, 2015. The change in our results over the two periods is a result of an increase in selling, general and administrative expenses.

The following table summarizes key items of comparison and their related increase for the three and six month periods ended June 30, 2016 and 2015:

Revenue

We have not earned any revenues during the quarter of June 30, 2016 and we do not anticipate earning revenues in the upcoming quarter.

Liquidity and Capital Resources

As of June 30, 2016, our cash and cash equivalents were nil; total current liabilities were $3,978,378 and total stockholders’ deficit was $3,952,181.

We anticipate generating losses and, therefore, may be unable to continue operations further in the future.

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Operating Activities

Net cash used in operating activities during the six months ended June 30, 2016 was $0 and $0 during the six months ended June 30, 2015.  

Financing Activities

Cash provided by financing activities during the six months ended June 30, 2016 was $0 and $0 during the six months ended June 30, 2015.  

To date we have relied on proceeds from the sale of our shares and on loans from officers and directors, related companies and an independent third party in order to sustain our basic, minimum operating expenses; however, we cannot guarantee that we will secure any further sales of our shares or that our officers and directors, related companies or the independent third party will provide us with any future loans.  We intend to use debt to cover the anticipated negative cash flows until we can operate at a break-even cash flow mode. We may seek additional capital to fund potential costs associated with possible expansion and/or acquisitions. We believe that future funding may be obtained from public or private offerings of equity securities, debt or convertible debt securities, or other sources. Stockholders should assume that any additional funding will likely be dilutive.

We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.

Future Financings

We anticipate continuing to rely on loans from a related company. We may obtain funding through equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates. We base our estimates on historical experience and on assumptions that are believed to be reasonable. These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.

We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Our company’s internet connectivity business ceased effective June 30, 2014. Our company has currently no business.

Stock-Based Compensation

Accounting Standard 718, "Accounting for Stock-Based Compensation" ("ASC 718") established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. In January 2006, we implemented ASC 718, and accordingly, we account for compensation cost for stock option plans in accordance with ASC 718.

We account for share based payments to non-employees in accordance with ASC 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.  We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.  For option-based derivative financial instruments, we use the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.  Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Going Concern

We remain dependent on outside sources of funding for continuation of our operations.  Our independent registered public accounting firm issued a going concern qualification in their report dated March 30, 2016 (included in our annual report on Form 10-K for the year ended December 31, 2015), which raises substantial doubt about our ability to continue as a going concern.

During the six months ended June 30, 2016 and the year ended December 31, 2015, we have been unable to generate cash flows sufficient to support our operations and have been dependent on debt raised from a related party.

During the six months ended June 30, 2016 and 2015, we experienced negative financial results as follows:

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These factors raise substantial doubt about our ability to continue as a going concern.  The financial statements contained herein do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.  Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations.  However, there is no assurance that profitable operations or sufficient cash flows will occur in the future.