NOTES TO UNAUDITED
FINANCIAL STATEMENTS
1. ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Logicquest Technology, Inc. (“we”,
“our”, the “Company” or “Logicquest”) is a Nevada Corporation that previously consisted of the networking
service (carrier/circuit) business. It provided internet connectivity to corporate clients on a subscription basis; essentially operating
as a value-added provider until it ceased operations effective June 30, 2014.
The Company was 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 (“Bluegate”). On March 19, 2015,
the Company changed its name to Logicquest Technology, Inc. (“Logicquest”).
The Company currently has no
operations and the Company’s Board of Directors is currently seeking investment opportunities.
Following is a summary of the
Company’s significant accounting policies:
BASIS OF PRESENTATION
The accompanying unaudited interim
financial statements of the Company, have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the
audited financial statements and notes thereto contained in Logicquest’s Annual Report filed with the SEC on Form 10-K. In the opinion
of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and
the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the full year.
SIGNIFICANT ESTIMATES
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the periods. The extent to which the COVID-19 pandemic may directly or indirectly impact our business,
financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of the COVID-19
pandemic on our estimates and assumptions and there was not a material impact to our financial statements as of March 31, 2023 and December
31, 2022, and for the three months ended March 31, 2023 and 2022. Actual results could differ from estimates making it reasonably possible
that a change in the estimates could occur in the near term.
RELATED PARTY TRANSACTIONS
A related party is generally
defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s
management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv)
anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related
party transaction when there is a transfer of resources or obligations between related parties.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company’s
financial instruments, including prepaid expenses and accrued liabilities, the carrying amounts approximate fair values due to their short
maturities.
Transactions involving related
parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were
consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
It is not, however, practical
to determine the fair value of amounts due to related parties and lease and management arrangement with related parties, if any, due to
their related party nature.
INCOME TAXES
The Company uses the liability
method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences on future
years of temporary differences between the tax basis of assets and liabilities and their financial amounts at year-end. The Company provides
a valuation allowance to reduce deferred tax assets to their net realizable value.
The Company recognizes the tax
benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions
are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
LOSS PER SHARE
Basic and diluted net loss per
share is computed on the basis of the weighted average number of shares of common stock outstanding during each period. The Company does
not have any potentially dilutive instruments for the three months ended March 31, 2023 and 2022. Accordingly, basic and diluted losses
per share were identical for the three months ended March 31, 2023 and 2022.
STOCK BASED COMPENSATION
The
Company accounts for share-based compensation awards in accordance with ASC 718, “Compensation – Stock Compensation”.
The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the statement
of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite
service period or vesting period. The Company records forfeitures as they occur.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
All new accounting pronouncements
issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.
2. GOING
CONCERN CONSIDERATIONS
During the
three months ended March 31, 2023 and 2022, and as of March 31, 2023 and December 31, 2022, we have been unable to generate cash flows
sufficient to support our operations and have been dependent on debt raised from a related party. We experienced negative financial results
as follows:
| |
2023 (Restated) | | |
2022 | |
Net loss for the three months ended March 31,
2023 and 2022 | |
$ | (276,226 | ) | |
$ | (99,397 | ) |
Negative working capital as of March 31, 2023 and December
31, 2022 | |
| (82,975 | ) | |
| (28,451 | ) |
Stockholders’ deficit as of March 31, 2023 and December
31, 2022 | |
| (82,975 | ) | |
| (28,451 | ) |
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.
3. ACCRUED
LIABILITIES
The accrued
liabilities are summarized below:
| |
March
31, 2023 (Restated) | | |
December 31, 2022 | |
Accrued general and administrative
expenses | |
$ | 44,063 | | |
$ | 28,962 | |
Accrued liabilities | |
$ | 44,063 | | |
$ | 28,962 | |
As of
March 31, 2023 and December 31, 2022, accrued liabilities was mainly consists of unpaid professional fee such as legal and audit fee.
4. DUE
TO RELATED PARTY
During
the three months ended March 31, 2023 and 2022, Logicquest Technology Limited, a company controlled by the Company’s former Chief
Financial Officer, Cheng Yew Siong paid operating expenses of $39,423 and $22,685 on behalf of the Company, respectively. As of March
31, 2023 and December 31, 2022, the Company has due to related party of $39,423 and $0 from Logicquest Technology Limited. The amount
of due to related party is unsecured, does not bear interest and is due on demand.
5. INCOME
TAXES
On December 22, 2017 U.S. tax
reform legislation known as the Tax Cuts and Jobs Act (the “2017 Act”) was signed into law. The 2017 Act made substantial
changes to U.S. tax law, including a reduction in the corporate tax rate from 34% to 21%, a limitation on deductibility of interest
expense, a limitation on the use of net operating losses to offset future taxable income, the allowance of immediate expensing of capital
expenditures, deemed repatriation of foreign earnings through a transition tax and significant changes to the taxation of foreign earnings
going forward. As a result of the 2017 Act, NOL carryforwards generated in years beginning after December 31, 2017 would carryforward
indefinitely, and would apply to 80% of future taxable income. Under the Act, carrybacks of NOLs were disallowed. In March 2021, the Coronavirus
Aid, Relief, and Economic Security (“CARES”) Act was enacted providing a five-year carryback for losses incurred in 2018,
2019, 2020 or 2021, which allows companies to modify tax returns up to five years prior to offset taxable income from those tax years.
The CARES Act also suspended the NOL limit of 80% of taxable income, but the NOLs generated in 2018 and forward will still carryforward
indefinitely.
The composition of deferred tax
assets at March 31, 2023 and December 31, 2022 were as follows:
| |
March
31, 2023 (Restated) | | |
December 31, 2022 | |
Deferred tax assets | |
| | |
| |
Benefit from carryforward of net operating loss | |
$ | 2,344,946 | | |
$ | 2,333,496 | |
Less valuation allowance | |
| (2,344,946 | ) | |
| (2,333,496 | ) |
Net deferred tax asset | |
$ | — | | |
$ | — | |
The difference between the income
tax benefit in the accompanying statement of operations and the amount that would result if the U.S. Federal statutory rate of 21% were
applied to pre-tax loss for 2023 and 2022, is attributable to the valuation allowance.
At
March 31, 2023, for federal income tax reporting purposes, the Company has $9,108,809 in unused net operating losses available for
carryforward to future years which will expire in various years through 2037, and $2,057,602 that will carryforward
indefinitely.
6. SHAREHOLDERS’
EQUITY
On February
24, 2023, the Board of Directors agreed to issue 98,000,000 shares of the Company’s to Ang Woon Han (the major shareholder of
the Company) to serve as the Company’s director. The fair value of the shares issued to Ang Woon Han was $221,702, which was fully
recognized as stock-based compensation expense during the three months ended March 31, 2023.
7. COMMITMENTS
AND CONTINGENCIES
On May 27, 2016, the Company
entered into an agreement for the lease of a virtual office in Princeton, NJ for monthly rental of $200. The lease began on May 12,
2016 on monthly basis and can be cancelled at either party’s discretion with a three-month notice.
8. SUBSEQUENT
EVENTS
The Company follows the guidance
in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements
were issued and determined the Company has the following material subsequent event that needs to be disclosed:
Effective
on April 7, 2023, the selling shareholder of the Company, who owns 99.16% equity ownership of the Company and also holds a control position
in the Company sold all of his equity interest in the Company (consisting of 99,457,724 shares of restricted common stock, 48 shares
of Series C convertible non-redeemable preferred stock and 10 shares of Series D convertible non-redeemable preferred stock) to RYVYL,
Inc. for a total purchase price of $225,000.
After
giving effect to the purchases, RYVYL, Inc. became the major and controlling shareholder of the Company.
9. RESTATEMENT
On May
22, 2023, the Company filed its Quarterly Report on Form 10-Q for the first quarter of 2023 without the knowledge or review of the Company’s
independent auditor, MaloneBailey, LLP. The Company identified the following errors in the Form 10-Q originally filed: 1) an understatement
of general and administrative expenses of $28,558; 2) accounting estimates for valuing the stock-based compensation which resulted in
an overstatement of general and administrative expenses of $27,952; 3) reclassification of due to related party of $39,423.
The following table presents
the effects of the restatement on the accompanying balance sheet at March 31, 2023:
| |
As of March 31, 2023 | |
| |
As
Previously
Reported | | |
Restatement
Adjustments | | |
Restatement
References | |
As
Restated | |
Current assets | |
| | |
| | |
| |
| |
Prepaid expense and other current assets | |
$ | 511 | | |
$ | - | | |
| |
$ | 511 | |
Total current assets | |
| 511 | | |
| - | | |
| |
| 511 | |
Total assets | |
$ | 511 | | |
$ | - | | |
| |
$ | 511 | |
| |
| | | |
| | | |
| |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | | |
| |
| | |
Current liabilities: | |
| | | |
| | | |
| |
| | |
Accrued liabilities | |
$ | 54,928 | | |
$ | (10,865 | ) | |
(A) (B) | |
$ | 44,063 | |
Due to related party | |
| - | | |
| 39,423 | | |
(B) | |
| 39,423 | |
Total current liabilities | |
| 54,928 | | |
| 28,558 | | |
| |
| 83,486 | |
| |
| | | |
| | | |
| |
| | |
Stockholders’ deficit: | |
| | | |
| | | |
| |
| | |
Undesignated preferred stock, $0.001 par value, 9,999,942 shares authorized, none issued and outstanding | |
| - | | |
| - | | |
| |
| - | |
Series C convertible non-redeemable preferred stock, $0.001 par value, 48 shares authorized, issued and outstanding at March 31, 2023; $12,500 per share liquidation preference ($600,000 aggregate liquidation preference at March 31, 2023) | |
| - | | |
| - | | |
| |
| - | |
Series D convertible non-redeemable preferred stock, $0.001 par value, 10 shares authorized, issued and outstanding at March 31, 2023; $8,725 per share liquidation preference ($87,250 aggregate liquidation preference at March 31, 2023) | |
| - | | |
| - | | |
| |
| - | |
Common stock, $0.001 par value, 200,000,000 shares authorized, 100,301,968 shares issued and outstanding at March 31, 2023 | |
| 100,302 | | |
| - | | |
| |
| 100,302 | |
Additional paid-in capital | |
| 29,350,472 | | |
| (27,952 | ) | |
(C) | |
| 29,322,475 | |
Accumulated deficit | |
| (29,505,146 | ) | |
| (606 | ) | |
(A) (C) | |
| (29,505,752 | ) |
Total stockholders’ deficit | |
| (54,417 | ) | |
| (28,558 | ) | |
| |
| (82,975 | ) |
Total liabilities and stockholders’ deficit | |
$ | 511 | | |
$ | - | | |
| |
$ | 511 | |
The
following table presents the effects of the restatement on the accompanying statement of operation for the three months ended March 31,
2023:
| |
Three
Months Ended March 31, 2023 | |
| |
As
Previously Reported | | |
Restatement
Adjustments | | |
Restatement
References | |
As
Restated | |
Operating expenses | |
| | |
| | |
| |
| |
Stock-based compensation expense | |
| 249,654 | | |
| (27,952 | ) | |
(C) | |
| 221,702 | |
General and administrative expenses | |
| 25,966 | | |
| 28,558 | | |
(A) | |
| 54,524 | |
Loss from operations | |
| (275,620 | ) | |
| (606 | ) | |
| |
| (276,226 | ) |
| |
| | | |
| | | |
| |
| | |
Interest expense | |
| - | | |
| - | | |
| |
| - | |
| |
| | | |
| | | |
| |
| | |
Net loss | |
$ | (275,620 | ) | |
$ | (606 | ) | |
| |
$ | (276,226 | ) |
| |
| | | |
| | | |
| |
| | |
Net loss per share – basic and diluted | |
$ | (0.01 | ) | |
| | | |
| |
$ | (0.01 | ) |
| |
| | | |
| | | |
| |
| | |
Basic and diluted weighted average shares outstanding | |
| 40,581,181 | | |
| | | |
| |
| 40,581,181 | |
The
following table presents the effects of the restatement on the accompanying statement of changes in stockholders’ equity for the
three months ended March 31, 2023:
| |
| | |
| | |
PREFERRED STOCK | | |
ADDITIONAL | | |
| | |
| |
| |
| | |
| | |
SERIES C | | |
SERIES D | | |
PAID-IN | | |
ACCUMULATED | | |
| |
| |
SHARES | | |
CAPITAL | | |
SHARES | | |
CAPITAL | | |
SHARES | | |
CAPITAL | | |
CAPITAL | | |
DEFICIT | | |
TOTAL | |
Balance at March 31, 2023 (As Previously Reported) | |
| 100,301,968 | | |
$ | 100,302 | | |
| 48 | | |
$ | - | | |
| 10 | | |
$ | | | |
$ | 29,350,427 | | |
$ | (29,505,146 | ) | |
$ | (54,417 | ) |
Restatement adjustments | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (27,952 | ) | |
| (606 | ) | |
| (28,558 | ) |
Balance at March 31, 2023 (As Restated) | |
| 100,301,968 | | |
$ | 100,302 | | |
| 48 | | |
$ | - | | |
| 10 | | |
$ | | | |
$ | 29,322,475 | | |
$ | (29,505,752 | ) | |
$ | (82,975 | ) |
The following table presents
the effects of the restatement on the accompanying statement of cash flows for the three months ended March 31, 2023:
| |
As Previously Reported | | |
Restatement
Adjustments | | |
As Restated | |
Net loss | |
$ | (275,620 | ) | |
$ | (606 | ) | |
$ | (276,226 | ) |
Stock-based compensation | |
| 249,654 | | |
| (27,952 | ) | |
| 221,702 | |
Accrued liabilities | |
| 25,966 | | |
| 28,558 | | |
| 54,524 | |
| |
| | | |
| | | |
| | |
Non-cash transactions: | |
| | | |
| | | |
| | |
Operating expenses directly paid by a related party | |
$ | - | | |
$ | 39,423 | | |
$ | 39,423 | |
| (A) | To record professional fee of $28,558. |
| (B) | To present professional fee paid by a related party of $39,423 as due to related party. |
| (C) | To correct over-recorded stock-based compensation expense by $27,952. |