Logiq (LGIQ) Risk Analysis

As a public company with securities quoted on the OTCQX marketplace, we are required to have our financial statements audited by an independent registered public accounting firm registered with the PCAOB. A requirement of being registered with the PCAOB is that if requested by the SEC or PCAOB, such accounting firm is required to make its audits and related audit work papers available for regular inspections to assess its compliance with the applicable professional standards. Because our auditor is located in Hong Kong, a jurisdiction where the PCAOB has been unable to conduct inspections because of positions taken by the authorities in that jurisdiction, including an approval requirement by such authorities, the PCAOB has indicated that it currently does not have free access to inspect the work of our auditor. The lack of access to the PCAOB inspection in Hong Kong prevents the PCAOB from fully evaluating audits and quality control procedures of our auditors based in Hong Kong. As a result, our investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of our auditor in Hong Kong makes it more difficult to evaluate the effectiveness of its audit procedures or quality control procedures as compared to auditors outside of Hong Kong and certain other foreign jurisdictions that are subject to the PCAOB inspections. On December 18, 2020, the HFCAA, was enacted. In essence, the HFCAA requires the SEC to restrict trading of securities on U.S. securities exchanges or OTC markets if the company retains a foreign accounting firm that cannot be inspected by the PCAOB, of which the restrictions shall occur for three consecutive years, unless otherwise terminated before the conclusion of such three year period, beginning in 2021. Our independent registered public accounting firm is located in and organized under the laws of Hong Kong, a jurisdiction where the PCAOB has indicated that it is currently unable to conduct inspections in without the approval of the necessary authorities. On June 22, 2021, the U.S. Senate passed the AHFCAA, which as of December 14, 2021, the AHFCAA remains before the House of Representatives for review. On November 5, 2021, the SEC approved PCAOB Rule 6100, Board determination under the HFCAA, effective immediately. The rule establishes "a framework for the PCAOB's determinations under the HFCAA that the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction." On December 2, 2021, SEC announced the adoption of interim final rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate ("Commission-Identified Issuers"). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm's foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a "foreign issuer," as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022. On December 16, 2021, the PCAOB issued a report on its determinations that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in certain foreign jurisdictions, including those firms headquartered in Hong Kong, because of positions taken by the authorities in those foreign jurisdictions. The PCAOB made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the HFCAA. The report further listed in its Appendix B, Registered Public Accounting Firms Subject to the Hong Kong Determination. The audit report included in this registration statement for the year ended December 31, 2021, was issued by Centurion, an audit firm headquartered in Hong Kong, a jurisdiction that the PCAOB has determined that the PCAOB is unable to conduct inspections or investigate auditors in. Our auditor, Centurion, is among those registered public accounting firms listed by the PCAOB Hong Kong Determination, a determination announced by the PCAOB on December 16, 2021, which the PCAOB is unable to inspect or investigate completely due to the fact it is headquartered in Hong Kong, a Special Administrative Region of the PRC, and because of a position taken by one or more authorities in Hong Kong. As a result, our investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in Hong Kong makes it more difficult to evaluate the effectiveness of these accounting firms' audit procedures or quality control procedures as compared to auditors outside of Hong Kong and certain other foreign jurisdictions that are subject to the PCAOB inspections. The HFCAA requires, among other things, for the SEC to identify public companies that that have retained a registered public accounting firm to issue an audit report where the firm has a branch or office that: (i) is located in a foreign jurisdiction, and (ii) PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction. On April 12, 2022, the Company was provisionally identified by the SEC as a Commission-Identified Issuer under the HFCAA, and given 15 business days (until May 3, 2022) to contact the SEC with evidentiary proof claiming that we have been incorrectly identified under the HFCAA. Because the Company's auditors are located in Hong Kong, the Company did not have a claim that it was incorrectly identified under the HFCAA, and as a result, it has been placed on the conclusive list. Due to the fact that we have been placed on the conclusive list, our securities may be subject to prohibitions on trading on a U.S. securities exchange or OTC trading market in the U.S. if we do not engage a new auditor or our auditor is not inspected by the PCAOB for three consecutive years (or two years if the AHFCAA is enacted), which would make it difficult for you to sell your securities. Additionally, the Company will be required to provide certain information to the SEC establishing that it is not owned or controlled by a governmental entity in Hong Kong on or before the filing deadline for the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The Company has not yet submitted such information to the SEC, but intends to do so prior to the deadline. There can be no assurances that the SEC will remove the Company from the list of issuers identified under the HFCAA, either now or in the future. In addition, the SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President's Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended that the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA. The enactment of the HFCAA and the implications of any additional rulemaking efforts to increase U.S. regulatory access to audit information in Hong Kong could cause investor uncertainty for affected SEC registrants, including us, and the market price of our common stock could be materially adversely affected. Additionally, whether the PCAOB will be able to conduct inspections of our auditor in the next three years (or two years if the AHFCAA is enacted), or at all, is subject to substantial uncertainty and depends on a number of factors out of our control. If our auditor is unable to meet the PCAOB inspection requirement in time or we do not engage a different auditor that complies with the relevant PCAOB inspection requirements, our securities may be restricted from trading on the OTC markets. Such restriction would substantially impair your ability to sell your securities when you wish to do so, and the risk and uncertainty associated with such restrictions on trading would have a negative impact on the price of our securities. On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. As a result, the Commission will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination. On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Commission must impose an initial trading prohibition on the issuer's securities from three years to two years. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Commission is required under the HCFAA to prohibit the trading of the issuer's securities on a national securities exchange and in the over-the-counter market. As noted above, on December 15, 2022, the PCAOB vacated its previous determinations that it is unable to inspect and investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong. Accordingly, until such time as the PCAOB issues any new determination, there are no issuers at risk of having their securities subject to a trading prohibition under the HFCAA. As such, due to the fact the Company was identified as a Commission-Identified Issuer, there is still a risk that the PCAOB issues a new determination that could put the Company at risk for trading prohibitions despite the PCAOB vacating its determinations related to Hong Kong based auditors such as the Company's. The Company will continue to monitor the situation for any regulatory changes.

We believe that operating results for any particular quarter are not necessarily a meaningful indication of future results. Nonetheless, fluctuations in our quarterly operating results could negatively affect the market price of our common stock. Our results of operations in any quarter or annual period have varied in the past, and may vary from quarter to quarter or year to year and are influenced by such factors as: Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management's attention and resources. Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you may want to sell your interest in our common stock.

As a public company with common stock quoted on OTCQX Market, we must comply with various laws, regulations and requirements. New laws and regulations, as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and rules adopted by the SEC, may result in increased general and administrative expenses and a diversion of management's time and attention as we respond to new requirements.

The markets for development, distribution, and sale of offering SMBs a platform to create mobile apps for their business are rapidly evolving. New entrants seeking to gain market share by introducing new technology, new products, and new platforms may make it more difficult for us to sell our products which could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition.

The market for PaaS for the SMB industry is intensely competitive. In response to increased competition and general adverse economic conditions in this market, we may be required to modify our pricing practices. Changes in our pricing model could adversely affect our revenue and earnings.

Any failure or errors caused by our products or services could result in a claim for substantial damages against us by our customers, regardless of our responsibility for the failure. Although we are generally entitled to indemnification under our customer contracts against claims brought against us by third parties arising out of our customers' use of our products, we might find ourselves entangled in lawsuits against us that, even if unsuccessful, may divert our resources and energy and adversely affect our business. Further, in the event we seek indemnification from a customer, a court may not enforce our indemnification right if the customer challenges it or the customer may not be able to fund any amounts for indemnification owed to us. In addition, our existing insurance coverage may not continue to be available on reasonable terms or may not be available in amounts sufficient to cover one or more large claims, or the insurer may disclaim coverage as to any future claim.

We maintain insurance coverage for protection against many risks of liability. The extent of our insurance coverage is under continuous review and is modified as we deem it necessary. Despite this insurance, it is possible that claims or liabilities against us may have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain any insurance coverage, or adequate insurance coverage, when our existing insurance coverage expires.