UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
Or
For the transition period from _____ to _____
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
| The
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company”, in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yes
☐
As of May 9, 2023, there were shares of the registrant's common stock, $0.0001 par value, outstanding.
| 1 |
Table of Contents
| Page | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | 3 |
| Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 | 3 | |
| Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three Months ended March 31, 2023 And 2022 | 4 | |
| Condensed Consolidated Statements of Stockholders' Equity for the Three Months ended March 31, 2023 and 2022 | 5 | |
| Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2023 and 2022 | 7 | |
| Notes to Condensed Consolidated Financial Statements | 8 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 47 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 68 |
| Item 4. | Controls and Procedures | 68 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 68 |
| Item 1A. | Risk Factors | 68 |
| Item 2. | Unregistered sales of Equity Securities and Use of Proceeds | 69 |
| Item 3. | Defaults Upon Senior Securities | 69 |
| Item 4. | Mining Safety Disclosures | 69 |
| Item 5. | Other Information | 69 |
| Item 6. | Exhibits | 70 |
| SIGNATURES | 71 | |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2023 AND DECEMBER 31, 2022
(Currency expressed in United States Dollars (“US$”))
| March 31, 2023 (Unaudited) | December 31, 2022 (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Intangible assets, net | ||||||||
| Property, plant and equipment, net | 827,332 | 706,038 | ||||||
| Right of use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payables | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued liabilities and other payables | ||||||||
| Due to related parties | ||||||||
| Deferred tax liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Loan | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Convertible preferred shares; $ par value, shares authorized, and shares undesignated as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Series A shares: shares designated; and Series A shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Series B shares: shares designated; and Series B shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Series B-1 shares: shares designated; and Series B-1 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Series C shares: shares designated; and Series C shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively, net of issuance cost | ||||||||
| Series C-1 shares: shares designated; and Series C-1 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively, net of issuance cost | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Series X Super Voting Preferred Stock, $par value, shares designated; and Series X shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Common shares; $ par value, shares authorized; and shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Less: Common shares held in treasury, at cost; and shares at March 31, 2023 and December 31, 2022 | ( | ) | ||||||
| Accumulated other comprehensive gain (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity attributable to Society Pass Incorporated | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Currency expressed in United States Dollars (“US$”))
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue, net | ||||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – digital marketing | ||||||||
| Sales – online ticketing and reservation | ||||||||
| Sales – data | ||||||||
| Software sales | ||||||||
| Hardware sales | ||||||||
| Total revenue | ||||||||
| Cost of sales: | ||||||||
| Cost of online ordering | ( | ) | ( | ) | ||||
| Cost of digital marketing | ( | ) | ||||||
| Cost of online ticketing and reservation | ( | ) | ||||||
| Cost of data | ( | ) | ||||||
| Software sales | ( | ) | ( | ) | ||||
| Hardware sales | ||||||||
| Total cost of revenue | ( | ) | ( | ) | ||||
| Gross income (loss) | ( | ) | ||||||
| Operating expenses: | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||
| Software development costs | ( | ) | ( | ) | ||||
| Impairment loss | ( | ) | ||||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| JV income | ||||||||
| Gain on early lease termination | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Warrant modification expense | ||||||||
| Other income | ||||||||
| Total other income (expense) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ( | ) | ( | ) | ||||
| NET LOSS | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO NON-SOCIETY PASS INCORPORATED | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss): | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to Society Pass Incorporated : | ||||||||
| – Basic | $ | ( | ) | $ | ( | ) | ||
| – Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding | ||||||||
| – Basic | ||||||||
| – Diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Currency expressed in United States Dollars (“US$”))
| Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid in Capital | Accumulated other comprehensive income | Accumulated deficits | Non-controlling interest | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||
| Balances at January 1, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Shares issued for services | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Share issued upon the exercise options | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Share repurchase during the period | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the year | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balances at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
Three Months ended March 31, 2022
| Preferred Stock | Common stock | |||||||||||||||||||||||||||||||||||||||||||
| Number of share | Amount | Number of shares | Amount | Additional paid-in | Accumulated other comprehensive (loss) income | Accumulated | Non-controlling | Total equity | ||||||||||||||||||||||||||||||||||||
| capital | deficits | interests | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Imputed interest | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | — | |||||||||||||||||||||||||||||||||||||||||||
| Sale of units in public offering (net of expense) | — | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued to acquire subsidiary | — | |||||||||||||||||||||||||||||||||||||||||||
| Share issued upon the exercise of warrant | — | |||||||||||||||||||||||||||||||||||||||||||
| Share issued for accrued services | — | |||||||||||||||||||||||||||||||||||||||||||
| Fair value of stock option granted for director’s bonus | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued to acquire non-controlling interest | — | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Currency expressed in United States Dollars (“US$”))
| Three Months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Gain from early lease termination | ( | ) | ||||||
| Impairment loss | ||||||||
| Financing charges – first insurance funding | ||||||||
| Stock based compensation for services | ||||||||
| Shares issued to acquire non-controlling interest | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ||||||
| Deposits, prepayments and other receivables | ||||||||
| Contract assets | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Accounts payables | ( | ) | ||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Advances to related parties | ( | ) | ( | ) | ||||
| Right of use assets | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of investment assets | ||||||||
| Purchase of property, plant, and equipment | ( | ) | ( | ) | ||||
| Purchase of subsidiary | ( | ) | ||||||
| Cash from purchase of subsidiary and business operation | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common share | ( | ) | ||||||
| Proceed from the issuance of preferred stock and exercise of warrants into preferred stock | ||||||||
| Proceeds from public offering, net of offering expenses | ||||||||
| Repayment of loan | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Effect on exchange rate change on cash and cash equivalents | ( | ) | ( | ) | ||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENT AT END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Shares issued to acquire subsidiary | $ | $ | ||||||
| Shares issued to acquire business operation | $ | $ | ||||||
| Shares issued for accrued services | $ | $ | ||||||
| Impact of adoption of ASC 842 - lease obligation and ROU asset | $ | $ | ||||||
| Common stock issued for accrued salaries | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
SOCIETY PASS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2023 AND 2022
(Currency expressed in United States Dollars (“US$”))
NOTE－ 1 DESCRIPTION OF BUSINESS AND ORGANIZATION
Society Pass Incorporated (the "Company") was incorporated in the State of Nevada on June 22, 2018, under the name of Food Society Inc. On October 3, 2018, the Company changed its company name to Society Pass Incorporated. The Company, through its subsidiaries, mainly sells and distributes the hardware and software for a Point of Sales (POS) application in Vietnam. The Company also has online lifestyle platform to enable consumers to purchase high-end brands of all categories under its own brand name of "Leflair." The Company has made a number of acquisitions in calendar year 2022, as follows:
| • | In
February 2022, the Company completed the acquisition of |
| • | In
May 2022, the Company completed another acquisition of |
| • | On
July 7, 2022, the Company and its wholly owned subsidiary Thoughtful Media Group Incorporated collectively acquired |
| • | On
July 21, 2022, the Company acquired |
| • | On
August 15, 2022, the Company and its |
On
February 10, 2021, the Company effected a
On
September 21, 2021, the Company effected a
The forward stock split and reverse stock split transactions described above had no effect on the stated value of the preferred stock and the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance with the respective certificate of designations. The number of authorized shares of preferred stock also remained unchanged.
The
registration statement for the Company's Initial Public Offering became effective on November 8, 2021. On November 8, 2021, the Company
entered into an underwriting agreement with Maxim Group LLC (the "Underwriter") related to the offering of shares of the Company's common stock (the "Firm
Shares"), at a public offering price of $per share. Under the terms of the Underwriting
Agreement, the Company granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the "Option Shares")
to cover over-allotments. The Company raised gross proceeds of $and $
| 8 |
On
February 8, 2022, the Company entered into an underwriting agreement (the "Underwriting Agreement") with the "Underwriter,
related to the offering of 3,030,300 shares (the "Shares") of the Company's common stock and warrants to purchase up to shares of common stock of the Company (the "Warrants").
Each Share was sold together with one Warrant to purchase one Share at a combined offering price of $.
In addition, the Company granted the Underwriter a 45-day over-allotment option to purchase up to an additional
Description of subsidiaries incorporated by the Company
Schedule of Description of subsidiaries
| Name | Place and date of incorporation | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||||
| % | ||||||||||
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Paid up: VND 1,034,029,911 |
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Common: US$4,032.7871 |
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| 9 |
On
February 23, 2023, Society Pass Incorporated acquired additional issued capital in Nusatrip International Pte Ltd of number of ordinary stock and increased its shareholding
from
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
NOTE－ 2 LIQUIDITY AND CAPITAL RESOURCES
The accompanying audited consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As
of March 31, 2023, the Company had cash balances of $
While the Company believes that it will be able to continue to grow the Company's revenue base and control expenditures, there is no assurance that it will be able to achieve these goals. As a result, the Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed to finance the Company's business development activities, general and administrative expenses and growth strategy.
Impact of COVID-19 and other Global Events
The spread of COVID-19 and the developments surrounding the global pandemic have had and may continue to have significantly negative impacts on all aspects of our business, including negative effects on our travel and digital media verticals . In response to the pandemic, many governments around the world implemented a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses.
We cannot predict the extent to which any lingering effects of the COVID-19 pandemic may affect our future business or operating results, which is highly dependent on inherently uncertain future developments, including the severity of outbreaks of COVID-19, the effects of new variants, the actions taken by governments and private businesses in relation to COVID-19 containment, the availability, deployment and efficacy of vaccines, and the transition from COVID-19 being a pandemic to an endemic illness. In geographies where we, our customers or our employees operate, health concerns and political or governmental developments in response to COVID-19 have resulted in, and could in the future result in, economic, social or labor instability or prolonged contractions in the industries in which our customers operate, slowdowns in our product development efforts, or other effects that may have a material adverse effect on our business or our results of operations and financial condition.
The Russian-Ukraine war and the supply chain disruption have not affected any specific segment of our business.
| 10 |
NOTE－ 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
• Basis of presentation
The Company has prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders' deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent quarter or for the full year ending December 31, 2023 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the 2022 audited financial statements and accompanying notes filed with the SEC.
• Emerging Growth Company
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
• Use of estimates and assumptions
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company's estimates, the Company's financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, the incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on amounts due to related parties, inventory valuation, revenue recognition, the allocation of purchase consideration in business combinations, and deferred tax assets and the related valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
• Business combination
The Company follows Accounting Standards Codification ("ASC") ASC Topic 805, Business Combinations ("ASC 805") and ASC Topic 810, Consolidation ("ASC 810"). ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at "fair value." The statement applies to all business combinations. Under ASC 805, all business combinations are accounted for by applying the acquisition method. Accounting for the resulting goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company's results of operations.
| 11 |
• Noncontrolling interest
The Company accounts for noncontrolling interests in accordance with ASC Topic 810, which requires the Company to present noncontrolling interests as a separate component of total shareholders' equity on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
• Segment reporting
ASC Topic 280, Segment Reporting ("Topic 280") establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organization structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements. The Company currently operates in four reportable operating segments: (i) Online Grocery and Food and Groceries Deliveries, (ii) Digital marketing, (iii) Online ticketing and reservation, (iv) Telecommunications Reseller, (v) e-Commerce, and (vi) Merchant Point of Sale ("merchant POS").
• Cash and cash equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of
March 31, 2023 and December 31,2022, the cash and cash equivalents excluded restricted cash amounted to $
The
Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides
protection for bank deposits up to $
• Restricted cash
Restricted
cash refers to cash that is held by the Company for specific reasons and is, therefore, not available for immediate ordinary business
use. The restricted cash represented fixed deposit maintained in bank accounts that are pledged. As of March
31, 2023 and December 31, 2022, the restricted cash amounted to $
• Accounts receivable
Accounts
receivables are recorded at the amounts that are invoiced to customers, do not bear interest, and are due within contractual payment
terms, generally 30 to 90-days from completion of service or the delivery of a product. Credit is extended based on an evaluation of
a customer's financial condition, the customer's creditworthiness and their payment history. Accounts receivable outstanding longer than
the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually
for collectability. Quarterly, the Company specifically evaluates individual customer's financial condition, credit history, and the
current economic conditions to monitor the progress of the collection of accounts receivables. The Company records bad debt expense and
records an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments.
For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to pursue all means of
collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance for doubtful
accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Currently, the Company
does not have any off-balance-sheet credit exposure related to its customers, and as of both March 31, 2023 and December 31, 2022, there
was
| 12 |
• Inventories
Inventories
are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware
equipment and peripheral costs which are purchased from the Company's suppliers as merchandized goods. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by customer demand. During the three months ended March 31,
2023 and 2022, the Company recorded an allowance for obsolete inventories of $
• Prepaid expenses
Prepaid expenses represent payments made in advance for products or services to be received in the future and are amortized to expense on a ratable basis over the future period to be benefitted by that expense. Since the Company has prepaid expenses categorized as both current and non-current assets, the benefits associated with the products or services are considered current assets if they are expected to be used during the next twelve months and are considered non-current assets if they are expected to be used over a period greater than one year.
• Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | ||
| Computer equipment | ||
| Office equipment | ||
| Renovation |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
• Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, "Impairment or Disposal of Long-Lived Assets", all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | Identify the contract with a customer; |
| • | Identify the performance obligations in the contract; |
| • | Determine the transaction price; |
| • | Allocate the transaction price to performance obligations in the contract; and |
| • | Recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities that correspond to our four business segments (business to consumer or "B2C"), grocery and food delivery (B2C), telecommunication reseller (B2C) and the services providing to merchants for their business growth (business to business or "B2B").
| 13 |
The Company's performance obligations include providing connectivity between merchants and consumers, generally through an online ordering platform. The platform allows merchants to create an account, display a menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create an account and order from merchants on the consumer facing application. The platform allows a delivery company to accept an online delivery request and deliver or ship an order from a merchant to customer.
Lifestyle
The Company has developed an online lifestyle platform (the "Lifestyle Platform") under its own brand name of "Leflair" to enable consumers to purchase high-end brands in many categories. Using the Company's smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer's home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company's logistics center.
Grocery and Food Delivery
Other online platforms include online platforms in Vietnam, under the brand name of "Handycart", and Philippines, under the brand names of "Pushkart" and "Mangan", to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area.
Telecommunications
The Company operates a Singapore-based online telecommunication reseller platform under brand name of "Gorilla" to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting.
Digital Media
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company's e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG's wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result, Thoughtful Media's content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media's data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views.
Travel
The Company purchased the Nusatrip Group, a leading Jakarta-based Online Travel Agency ("OTA") in Indonesia and across SEA. The NusaTrip acquisition extended SoPa's business reach into SEA regional travel industry and marked the Company's first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, NusaTrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, NusaTrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors.
| 14 |
The Company's e-Commerce business is primarily conducted using Leflair's Lifestyle Platform, as follows:
1) When a customer places an order on either the Leflair website or app, a sales orders report will be generated in the system. The Company will either fulfill this order from its inventory or purchase the item from the manufacturer or distributor. Once the Company has the item in its distribution center, it will contract with a logistics partner delivered to the end customer. The sale is recognized when the delivery is completed by the logistics partner to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to any product warranty. The Company is considered the principal in this e-commerce transaction and reports revenue on a gross basis as the Company establishes the price of the product, has responsibility for fulfillment of the order and retains the risk of collection.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
The Company's Merchant POS offers both software and hardware products and services to vendors, as follows:-
Software sales consist of:
1) Subscription fees consist of the fees that the Company charge merchants to obtain access to the Merchant Marketing Program.
2) The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month.
3) The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a "gross" basis pursuant to ASC Topic 606 when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606 are present in the arrangement, revenue is recognized net of related direct costs since in these instances we act as an agent.
Software subscription fee — The Company's performance obligation includes providing customer access to our software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company's software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and the customer is entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with automatic one-year renewal. The subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
| 15 |
The Company records its revenues, net of value added taxes ("VAT"), which is levied at the rate of 10% on the invoiced value of sales.
Grocery and food delivery consists of online grocery under brand name "Pushkart" and food delivery service under brand name "Handycart" as follows:
Customers place order for groceries and take-out food through our online platforms of "Pushkart" and "Handcart" respectively. When the grocery or food merchant receives and order, our platform will assign a third-party delivery service to pick up and deliver the grocery and/or food order to the customer. Revenue is recognized when the grocery and/or food is delivered, at which time the customer pays for the grocery and /or food order with cash, at Net of merchant cost.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
As a telecommunication reseller we provide local mobile data and overseas internet data plans under the brand name of "Gorilla," which company we acquired in May 2022. Our telecommunication revenues are recorded for ASC Topic 606 purposes as follows:
Local mobile plan - customers choose and subscribe to a monthly local mobile plan through our "Gorilla" online platform. The Company will proceed to register the sim card (effectively, the mobile telephone number activation card) and arrange delivery of that Sim card to the customer. Following Sim card activation, the system will capture the monthly data usage of each customer, calculated in accordance with the package data capacity and monthly subscription rate, which amounts are aggregated and recorded as revenue. Unused data will be converted to Rewards Points and carried forward to next month for potential subsequent data usage. As a result of the rewards points, the company also recognize revenue from Rewards Point redemption for subscription fees offset, voucher redemption, extra data purchases, that the customer chooses to use via our online platform.
Overseas internet data plan – a customer will place order for their desired overseas internet data plan through either the "Gorilla" online platform or third-party partner platforms. Subscription revenue is recognized when the Sim card is delivered and activated.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
Digital marketing provides the services that affiliate with multiple YouTube channels to offer services that include audience development, content programming, creator collaborations, digital right managements, monetization, and/or sales as follows:
The Company is required to establish as Multi-Channel Network (MCN) for YouTube Creators and fulfilled the basic MCN guidelines on timely basis. The Company engages the creator in contract as a platform to nurture the creator in brainstorming creative content ideas, coaching on growing their audience size and connection with top brands.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
| 16 |
Online ticketing and reservation provides information, prices, availability, booking services for domestic and international air travel and hotels as follows:
The Company's revenues are substantially reported on a net basis as the travel supplier is primarily responsible for providing the underlying travel services and the Company does not control the service provided by the travel supplier to the traveler. Revenue from air ticketing services, air ticket commission, hotel reservation and refund margin are substantially recognized at a point of time when the performance obligations that are satisfied.
During
the three months ended March 31, 2023 and 2022, the Company generated revenue of $
Contract assets
In accordance with ASC Topic 606, a contract asset arises when the Company transfers a good or performs a service in advance of receiving consideration from the customer as agreed upon. A contract asset becomes a receivable once the Company's right to receive consideration becomes unconditional.
There
were contract assets balance was $
Contract liabilities
In accordance with ASC Topic 606, a contract liability represents the Company's obligation to transfer goods or services to a customer when the customer prepays for a good or service or when the customer's consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract
liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing
of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition
of revenue. The Company's contract liability balance was $
• Software development costs
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985, Software, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. These capitalized software costs are ratably amortized over the period of the software's estimated useful life. Costs incurred to enhance the Company's software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research
and development expenditures arising from the development of the Company's own software are charged to operations as incurred. For the
three months ended March 31, 2023, and 2022, software development costs were $
• Cost of sales
Cost of sales under online ordering consist of the cost of merchandise ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales related to software sales consist of the cost of software and payroll costs, which are directly attributable to the sales of software. Cost of sales related to hardware sales consist of the cost of hardware and payroll costs, which are directly attributable to the sales of hardware.
| 17 |
Cost of sales related to grocery and food delivery consist of the cost of the outsourced delivery and the outsource payment gateway, which are directly attributable to the sales of grocery and food delivery.
Cost of sales related to our telecommunication data reseller segment consist of the cost of the primary telecommunication service, which are directly attributable to the sales of telecommunication data.
Cost of sales under digital marketing consist of the cost of primary digital marketing service, which are directly attributable to the sales of digital marketing.
• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers since those costs are borne by the Company's suppliers or distributors for our merchant POS business.
The shipping and handling costs for all segments other than our e-commerce segment are recorded net in sales. For shipping costs related to our e-commerce business, those shipping costs are recorded in cost of sales.
• Sales and marketing
Sales
and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel,
and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense
was $
• Product warranties
The Company's provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company's suppliers, the Company has concluded that no warranty liability is required as of March 31, 2023 and December 31, 2022. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal, although it looks at this issue every quarter to continue to support its assertion.
• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that 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 unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
In addition to U.S. income taxes, the Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax, there may be transactions and calculations for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
| 18 |
• Foreign currencies translation and transactions
The reporting currency of the Company is the United States Dollar ("US$") and the accompanying consolidated unaudited condensed financial statements have been expressed in US$s. In addition, the Company's subsidiary is operating in the Republic of Vietnam, Singapore, India and Philippines and maintains its books and record in its local currency, Vietnam Dong ("VND"), Singapore Dollar ("SGD"), Indian Rupee ("INR"), Philippines Pesos ("PHP"), Malaysian Ringgit ("MYR), Thailand Baht ("THB") and Indonesian Rupiah ("IDR"), respectively, which are the functional currencies in which the subsidiary's operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$s, in accordance with ASC Topic 830, "Translation of Financial Statement" ("ASC 830") using the applicable exchange rates on the balance sheet date. Shareholders' equity is translated using historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed statements of changes in shareholder's equity.
Schedule of Foreign currencies translation and transactions
Translation of amounts from SGD into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end SGD:US$ exchange rate | $ | $ | ||||||
| Period average SGD:US$ exchange rate | $ | $ | ||||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end VND:US$ exchange rate | $ | $ | ||||||
| Period average VND:US$ exchange rate | $ | $ | ||||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end INR:US$ exchange rate | $ | $ | ||||||
| Period average INR:US$ exchange rate | $ | $ | ||||||
Translation of amounts from PHP into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end PHP:US$ exchange rate | $ | $ | N/A | |||||
| Period average PHP:US$ exchange rate | $ | $ | N/A | |||||
| 19 |
Translation of amounts from THB into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end THB:US$ exchange rate | $ | $ | N/A | |||||
| Period average THB:US$ exchange rate | $ | $ | N/A | |||||
Translation of amounts from MYR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end MYR:US$ exchange rate | $ | $ | N/A | |||||
| Period average MYR:US$ exchange rate | $ | $ | N/A | |||||
Translation of amounts from IDR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March 31, 2023 | March 31, 2022 | |||||||
| Period-end IDR:US$ exchange rate | $ | $ | N/A | |||||
| Period average IDR:US$ exchange rate | $ | $ | N/A | |||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
• Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only "in the money" dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the years.
For the three months ended March 31, 2023 and 2022, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company's net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
| 20 |
Schedule of computation of diluted net loss per share:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding – Basic and diluted | ||||||||
| Net loss per share – Basic and diluted | $ | ( | ) | $ | ( | ) | ||
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:
Schedule of Common stock issued:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Options to purchase common stock (a) | ||||||||
| Warrants granted to underwriter | ||||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (b) | ||||||||
| Total of common stock equivalents | ||||||||
| (a) |
| (b) |
• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
As
of March 31, 2023 and December 31, 2022, the Company recorded the right of use asset of $
| 21 |
• Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
• Share-based compensation
The Company follows ASC Topic 718, Compensation—Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee and non-employee), at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company's common shares on the date of grant. The Company uses a Black-Scholes option pricing model to estimate the fair value of employee stock options at the date of grant. As of March 31, 2023, those shares issued and stock options granted for service compensation, vest 180 days after the grant date, and therefore these amounts are thus recognized as expense during the three months ended March 31, 2023 and 2022. Stock-based compensation is recorded in general and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss, with corresponding credits to common stock and accumulated paid-in capital.
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its preferred and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option pricing model to estimate the grant date fair value of the warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital (the accounting treatment for common stock issuance costs). All other warrants are recorded at the grant date fair value as an expense over the requisite service period, or at the date of issuance if the warrants vest immediately.
• Related parties
The Company follows ASC 850-10, Related Party Disclosures ("ASC 850") for the identification of related parties and the disclosure of related party transactions.
Pursuant to ASC 850, the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under ASC 825, Financial Instruments, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required by ASC 850. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| 22 |
• Commitments and contingencies
The Company follows the ASC 450, Commitments, to account for contingencies. Certain conditions may exist as of the date the unaudited condensed financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, which assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available, that these matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows if the current level of facts and circumstances changes in the future.
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
| 23 |
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties and operating lease liabilities, approximate their fair values because of the short maturity of these instruments.
• Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board ("FASB") or other standard setting bodies and adopted by the Company as of the specified effective date.
All other recently issued, but not yet effective, 2023 Accounting Standards Updates are not expected to have an effect on the Company.
NOTE－ 4 REVENUE
Revenue was generated from the following activities:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – digital marketing | ||||||||
| Sales – online ticketing and reservation | ||||||||
| Sales – data | ||||||||
| Software subscription sales | ||||||||
| $ | $ | |||||||
Contract liabilities recognized was related to online ticketing and reservation, digital marketing, telecommunication reseller and software sales and the following is reconciliation for the periods presented:
Schedule of Contract liabilities:
| March 31, 2023 | December 31, 2022 | |||||||
| Contract liabilities, brought forward | $ | $ | ||||||
| Add: recognized as deferred revenue | ||||||||
| Less: recognized as revenue | ( | ) | ( | ) | ||||
| Contract liabilities, carried forward | $ | $ | ||||||
| 24 |
NOTE－ 5 SEGMENT REPORTING
Currently, the Company has four reportable business segments:
| (i) | e-Commerce – operates an online lifestyle platform under the brand name of "Leflair" covering a diversity of services and products, such as fashion and accessories, beauty and personal care, and home and lifestyle, all managed by SOPA Technology Company Ltd, |
| (ii) | Merchant point of sale ("POS") – is involved in the sale of hardware and software to merchants and this segment is managed by Hottab group and SOPA entities except SOPA Technology Company Ltd, |
| (iii) | Online grocery and food deliveries – operate an online food delivery service under the "Handycart" brand name and an online grocery delivery under the "Pushkart" brand name, managed by Dream Space Trading Co Ltd and New Retail Experience Incorporated respectively, and |
| (iv) | Telecommunication reseller – provide sales of local mobile phone plans and global internet data provider plans, both services managed by the Gorilla Group. |
| (v) | Digital marketing operates the digital marketing business with creator and digital marketing platform |
| (vi) | Online ticketing and reservation - operates the sale of domestic and overseas air ticket and global hotel reservations |
The Company's Chief Finance Officer (CFO) evaluates operating segments using the information provided in the following tables that presents revenues and gross profits by reportable segment, together with information on the segment tangible and intangible assets.
| 25 |
Schedule of Segment Reporting
| Three months ended March 31, 2023 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cost of digital marketing | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software cost | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Impairment loss | ||||||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||||||||||
| General and administrative expenses, net of depreciation and amortisation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| Gain from early lease termination | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| JV income | ||||||||||||||||||||||||||||
| Warrant modification expense | ||||||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||
| Total other income (expense) | ||||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| 26 |
| Three months ended March 31, 2022 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online platform | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of data | ||||||||||||||||||||||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||||||||||
| General and administrative expenses, net of depreciation and amortisation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| Gain from early lease termination | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||
| Loss on settlement of litigation | ||||||||||||||||||||||||||||
| Warrant modification expense | ||||||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||
| Total other income (expense) | ||||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| 27 |
| March 31, 2023 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||||||||||
| Identifiable assets | ||||||||||||||||||||||||||||
| December 31 31, 2022 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||||||||||
| Identifiable assets | ||||||||||||||||||||||||||||
The below sales are based on the countries in which the customer is located. Summarized financial information concerning our geographic segments is shown in the following tables:
Schedule of geographic segments
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Indonesia | $ | $ | ||||||
| Vietnam | ||||||||
| Philippines | ||||||||
| Singapore | ||||||||
| United States | ||||||||
| Thailand | ||||||||
| Malaysia | ||||||||
| $ | $ | |||||||
| 28 |
NOTE－ 6 DEPOSIT, PREPAYMENTS AND OTHER RECEIVABLES
| March 31, 2023 (Unaudited) | December 31, 2022 | |||||||
| Deposits | $ | $ | ||||||
| Prepayments | ||||||||
| Prepayments for consultancy fee (a) | ||||||||
| Value added tax | ||||||||
| Interest receivable | ||||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
| (a) |
NOTE－ 7 INVENTORIES
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Less: | ||||||||
| Reserve for excess and obsolete inventory | ||||||||
| Total Inventories | $ | $ | ||||||
All
finished goods inventories were related to e-commerce business and was held by the third party logistic. The cost of sales totaled $
NOTE－8 INTANGIBLE ASSETS
As of March 31, 2023 and December 31, 2022, intangible assets consisted of the following:
| Useful life | March 31, 2023 | December 31, 2022 | ||||||||
| At cost: | ||||||||||
| Software platform | $ | $ | ||||||||
| Apps development | ||||||||||
| Computer software | ||||||||||
| Software system | ||||||||||
| Intellectual technology | ||||||||||
| Identifiable intangible asset | ||||||||||
| Other intangible assets | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
| 29 |
November 1 2018, the Company entered into a software development agreement with CVO Advisors Pte Ltd (CVO) 2018 to design and build an App and Web-based platform for the total consideration of $8,000,000. CVO who is a third party vendor in the business of designing, developing, operating computer software applications including mobile and web application for social media, big data, point of sales, loyalty rewards, food delivery and technology platforms in Asia. The CVO developer performed and accepted technical work, of software development phase, which was materially completed by December 23, 2018. The Company obtained a third party license (Wallet Factory International Ltd) for their technology build up by CVO.
The delivered platform was further developed by the Company's in-house technology team (based in Noida that Sopa is currently using for the loyalty platform. The platform can be downloaded from Apple store or Googleplay store (i.e. SoPa App) and the Company's web version is on www.sopa.asia. The platform was completed developed on September 30, 2020 and has estimated life of 2.5 years. The platform started to be amortized from October 1, 2020.
Further,
the Company entered into a subscription agreement with CVO to issue shares of preferred stock for the software development,
equal to the aggregate of $8,000,000 or at the stated value of $
Pursuant
to the subscription agreement entered into with CVO, the Company issued shares of Series A convertible preferred stock
for the purchase of software development at the stated value of $
Also, the owner of CVO entered into a call option agreement with the CEO of the Company to sale all the shares of CVO for the sum of $10 per share, as of date, these options were exercised by the CEO of the Company, but the equity holders of CVO Advisors Pte. Ltd. have not honored the exercise of the call. The parties are currently in litigation (refer Note 23). As a result of this option exercise, there were no accounting effect on the Company's financial statement during the year ended December 31, 2022.
Amortization of intangible assets attributable to future periods is as follows:
| Year ending December 31 2022: | Amount | ||||
| 2023 | $ |
Amortization
of intangible assets was $
Apps
development costs for the development stage of mobile apps development with blockchain feature used by the subsidiaries under Telecommunications
Reseller segment business amounted to $
Software system is the existing apps development cost and potential software value estimated base on acquisition exercise of Mangan business unit under New Retail Experience Incorporated. This will be concluded upon finalization of Purchase Price Allocation.
Intellectual technology is the identified technology value concluded from acquisition of Pushkart business unit under New Retail Experience Incorporated, through the finalization of Purchase Price Allocation.
Identifiable intangible asset is the potential intangible assets as stakeholder values estimated based on acquisition exercise of Nusatrip Group. This will be concluded upon finalization of Purchase Price Allocation.
| 30 |
NOTE－ 9 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| At cost: | ||||||||
| Computer | $ | $ | ||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Renovation | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: exchange difference | ||||||||
Depreciation
expense for the three months ended March 31, 2023 and 2022 were $
NOTE－ 10 AMOUNTS DUE TO RELATED PARTIES
Amounts due to related parties consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Amounts due to related parties (a) | $ | $ | ||||||
| (a) |
NOTE－11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES AND OTHER PAYABLES
Accounts payable consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables- Related Party (a) | ||||||||
| Accrued liabilities and other payables (b) | ||||||||
| Other Accounts payable | ||||||||
| Total Accounts payable | $ | $ | ||||||
| 31 |
Accounts
payable includes significant third parties balance of $
| (a) |
| (b) |
| March 31, 2023 | December 31, 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued VAT expenses | ||||||||
| Accrued taxes | ||||||||
| Customer deposit | ||||||||
| Customer refund | ||||||||
| Other payables (c) | ||||||||
| Other accrual (d) | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
| (c) |
| (d) |
NOTE－ 12 LEASES
We adopted ASU No. 2016-02, - Leases, on January 1, 2019, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease's commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease's commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of March 31, 2022 and December 31, 2022.
The
Company used a weighted average incremental borrowing rate of
During
the year ended December 31, 2022, the Company enter into new lease arrangements, and accounted as per ASC Topic 842, the ROU asset and
lease obligation of $
| 32 |
The Company excluded short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense, as follows:
| Three months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease expense (per ASC 842) | $ | $ | ||||||
| Short-term lease expense (other than ASC 842) | ||||||||
| Total lease expense | $ | $ | ||||||
As
of March 31, 2023, right-of-use assets were $
As
of December 31, 2022, right-of-use assets were $
Components of Lease Expense
We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.
Future Contractual Lease Payments as of March 31, 2023
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next three years ending March 31:
| Years ended March 31, | Operating lease amount | ||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Total | |||||
| Less: interest | ( | ) | |||
| Present value of lease liabilities | $ | ||||
| Less: non-current portion | ( | ) | |||
| Present value of lease liabilities – current liability | $ | ||||
NOTE－ 13 LOAN
| March 31, 2023 | December 31, 2022 | |||||||
| Loan – A (i) | ||||||||
| $ | $ | |||||||
| i) |
| 33 |
NOTE－ 14 SHAREHOLDERS’ DEFICIT
Authorized stock
The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 100,000,000 shares of capital stock, consisting of shares of common stock, $par value per share, and shares of preferred stock, $par value per share.
The holders of the Company’s common stock are entitled to the following rights:
Voting Rights: Each share of the Company’s common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of the Company’s common stock are not entitled to cumulative voting rights with respect to the election of directors.
Dividend Right: Subject to limitations under Nevada law and preferences that may apply to any shares of preferred stock that the Company may decide to issue in the future, holders of the Company’s common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by the Board of the Company out of funds legally available therefor.
Liquidation Right: In the event of the liquidation, dissolution or winding up of our business, the holders of the Company’s common stock are entitled to share ratably in the assets available for distribution after the payment of all of the debts and other liabilities of the Company, subject to the prior rights of the holders of the Company’s preferred stock.
Other Matters: The holders of the Company’s common stock have no subscription, redemption or conversion privileges. The Company’s common stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company’s common stock are subject to the rights of the holders of shares of any series of preferred stock which the Company may issue in the future.
Common stock outstanding
As of March 31, 2023 and December 31, 2022, the Company had a total of and shares of its common stock issued and outstanding, respectively.
On February 10, 2021, the Company effected a 750 for 1 stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in this financial statements and footnotes have been retroactively adjusted for the periods presented, unless otherwise indicated, to give effect to the forward stock split.
On
September 21, 2021, the Company effected a
The forward stock split and reverse stock split described above had no effect on the stated value of the preferred stock, and the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance with the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged.
On
November 8, 2021, the Company entered into an underwriting agreement with Maxim Group LLC, related to the offering of shares of the Company's common stock (the "Firm
Shares"), at a public offering price of $
per share. Under the terms of the Underwriting Agreement, the
Company granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the "Option Shares")
to cover over-allotments. The Company's common stock was listed on the Nasdaq Capital Market on November 9, 2021 and began trading on
such date. The closing (the IPO Closing.) of the offering and sale of the Firm Shares and the sale of 236,111 Option Shares occurred
on November 12, 2021. Aggregate gross proceeds from the closing related to the Firm Shares and the Option Shares was $and $,
respectively. The Company incurred expenses of $
| 34 |
Upon
During the three months ended March 31, 2023 and 2022, the Company issued and shares of its common stock in exchange for SOPA Technology Pte. Ltd.'s 0.08% non-controlling interest at $22,470 and valued it at par as there was no change in the control over the subsidiary.
On February 8, 2022, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Maxim Group LLC (the "Underwriter"), related to the offering of 3,484,845 shares including over-allotment (the "Shares") of the Company's common stock. Each Share was sold together with one Warrant to purchase one Share at a combined offering price of $3.30.
During the three months ended March 31, 2023, no warrants were exercised.
During
the three months ended March 31, 2023 and 2022, the Company issued and shares
of common stock to consultants in exchange for consulting services value at $
During
the three months ended March 31, 2023 and 2022, the Company issued and shares
of common stock to six of its employees as compensation valued at $
During
the three months ended March 31, 2022, the Company issued
In February 2022, the Company issued shares of common stock in exchange for 100% non-controlling interest of its subsidiary New Retail Experience Incorporated, at $3.53 per share, total amounting to $800,000 and valued it at par as there was no change in the control over the subsidiary.
Warrants
In August 2019, the Company issued 21,000 warrants to purchase 21,000 shares of its common stock to one employee as compensation for his services to the Company, at a fair value of $17,500. Each warrant is convertible into one share of common stock at an exercise price of $0.0001 per share. The warrants will expire on the second (2nd) anniversary of the initial date of issuance. As at December 31, 2019, none of the warrants have been exercised. 21,000 shares were fully exercised during the year ended December 31, 2020.
In
December 2020, the Company issued a certain number of warrants pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant
allows the holder to purchase one C-1 preferred stock at a price of $per share. The warrants shall be exercisable
on or before December 31, 2020, 2021 and 2022. During the three months ended March, 2023,
| 35 |
Below is a summary of the Company's issued and outstanding warrants as of Mach 31, 2023 and December 31, 2022:
| Warrants | Weighted average exercise price | Weighted average remaining contractual life (in years) | ||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||
| Issued (a) | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Expired | ( | ) | $ | — | ||||||||
| Expired | — | — | ||||||||||
| Outstanding as of December 31, 2022 | $ | |||||||||||
| Issued | — | — | ||||||||||
| Exercised | — | — | ||||||||||
| Expired | — | — | ||||||||||
| Outstanding as of March 31, 2023 | $ | |||||||||||
There is no intrinsic value for the warrants as of March 31, 2023 and December 31, 2022.
| (a) |
On
April 19, 2021, the Company extended the expiry date of the Warrant issued to the Series C-1 Preferred Stockholder by six months from
June 30, 2021 to December 31, 2021. Further, on November 16, 2021, the Company extended the expiry date of the Warrant issued to the
Series C-1 Preferred Stockholder by six months from December 31, 2021 to June 30, 2022. The Company considered this warrant as permanent
equity per ASC Topic 815-40-35-2, the warrants would not be marked to market at each financial reporting date. However, where there is
a subsequent change in assumptions related warrants (in the instant case, an extension of the expiration date of the warrants), the difference
between the amount originally recorded and the newly calculated amount, based upon the changed assumptions, is determined and the difference
between the before and after valuation is recorded as an expense, with the corresponding credit to additional paid-in capital.
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions
Schedule of Stock options assumptions
| Before modification | After Modification | |||||||
| Dividend rate | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Weighted average expected life (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
The Company considered 25% expected volatility from inception through the date of the Company public listing of its common stock.
| 36 |
Director's Stock option
On December 8, 2021, the Board of Directors approved a grant to Dennis Nguyen of a 10-year stock option to purchase 1,945,270 shares of common stock at an exercise price of $6.49 per share that are vested and are exercisable at any time.
Schedule of Stock Option
| Share option | Weighted average exercise price | Weighted average remaining contractual life (in years) | |||||||||||
| Outstanding as of December 31, 2020 | — | ||||||||||||
| Granted | $ | ||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of December 31, 2021 | $ | ||||||||||||
| Granted | — | ||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of December 31, 2022 | $ | ||||||||||||
The total fair value of options vested during the three months ended March 31, 2023 and 2022 was $and $respectively.
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions for the three months ended March 31, 2023 and 2022:
| December 8, 2021 | ||||
| Dividend rate | % | |||
| Risk-free rate | % | |||
| Weighted average expected life (years) | ||||
| Expected volatility | % | |||
| Share price | $ | |||
Director's stock awards
| Stock awards | Weighted average exercise price | Weighted average remaining contractual life | |||||||||||
| Unvested as of December 31, 2021 | $ | years | |||||||||||
| Issued | |||||||||||||
| Vested | ( | ) | — | ||||||||||
| Cancelled | — | ||||||||||||
| Unvested as of December 31, 2022 | $ | years | |||||||||||
| Issued | — | ||||||||||||
| Vested | — | ||||||||||||
| Cancelled | — | ||||||||||||
| Unvested as of March 31, 2023 | $ | ||||||||||||
| 37 |
Below are the unvested shares vesting schedule at future years:
| Year ended December 31 2023 | |||||
| Total |
The Company issued 814,950 shares of its common stock on September 1, 2021 ("start date") of which 651,960 shares shall be subject to vesting. The shares shall vest in accordance with the following vesting schedule: 162,990 vesting shares will vest every six-months for a two-year period from the start date, with the first vesting date being March 1, 2022. For the three months ended March 31, 2023 and 2022, the Company recognized the amortization of stock compensation expense of $346,500 and $1,168,614, respectively. The remaining unamortized vesting expenses in 0.67 years which estimated with a cost of $346,500.
NOTE－ 15 PREFERRED STOCKS AND WARRANTS
As of March 31, 2023 and December 31, 2022, the Company’s preferred stocks have been designated as follow:
| No. of shares | Stated Value | |||||
| Series A Convertible Preferred Stock | $ | |||||
| Series B Convertible Preferred Stock | $ | |||||
| Series B-1 Convertible Preferred Stock | $ | |||||
| Series C Convertible Preferred Stock | $ | |||||
| Series C-1 Convertible Preferred Stock | $ | |||||
| Series X Super Voting Preferred Stock | $ | |||||
All of the Series A, B, B-1, C, and C-1 Preferred Shares were issued at a value of respective stated value per share. These all Series of Preferred Shares contain a conversion option, are convert into a fixed number of common shares or redeemable with the cash repayment at the liquidation, so as a result of this liquidation preference, under U.S GAAP, the Company has classified the all these Series of Preferred Shares within mezzanine equity in the consolidated balance sheet.
Series X Super Voting Preferred Stock was issued a par value per share. This Series of Preferred Shares does not contain a conversion option, so as a result of this liquidation preference, under U.S GAAP, the Company has classified this Series of Preferred Shares within permanent equity in the consolidated balance sheet.
Voting Rights: (1) The affirmative vote of at least a majority of the holders of each series of preferred stock shall be necessary to:
| (a) | increase or decrease the par value of the shares of the Series A Preferred Stock, alter or change the powers, preferences or rights of the shares of Series A Preferred Stock or create, alter or change the powers, preferences or rights of any other capital stock of the Company if after such alteration or change such capital stock would be senior to or pari passu with Series A Preferred Stock; and |
| (a) | adversely affect the shares of Series A Preferred Stock, including in connection with a merger, recapitalization, reorganization or otherwise. |
| 38 |
(2) The affirmative vote of at least a majority of the holders of the shares of the Series A Preferred Stock shall be necessary to:
| (a) | enter into a transaction or series of related transactions deemed to be a liquidation, dissolution or winding up of the Corporation, or voluntarily liquidate or dissolve; |
| (b) | authorize a merger, acquisition or sale of substantially all of the assets of the Company or any of its subsidiaries (other than a merger exclusively to effect a change of domicile of the Company to another state of the United States); |
| (c) | increase or decrease (other than decreases resulting from conversion of the Series A Preferred Stock) the authorized number of shares of the Company’s preferred stock or any series thereof, the number of shares of the Company’s common stock or any series thereof or the number of shares of any other class or series of capital stock of the Company; and |
| (d) | any repurchase or redemption of capital stock of the Company except any repurchase or redemption at cost upon the termination of services of a service provider to the Company or the exercise by the Company of contractual rights of first refusal as applied to such capital stock. |
Dividend Rights: The holders of the Company’s preferred stock are not entitled to any dividend rights.
Conversion Rights (Series A Preferred Stock): Upon the consummation of this offering, the issued and outstanding shares of Series A Preferred Stock automatically convert into a number of shares of the Company’s common stock equal to the quotient obtained by dividing (x) the aggregate Stated Value of the issued and outstanding Series A Preferred Stock plus any other amounts due to the holders thereof divided by (y) the offering price of the Company’s common stock. If 90 days after conversion, the closing market price of the Company’s common stock as quoted on Nasdaq (the “Market Value”) has decreased below the initial public offering price, each holder of the Series A Preferred Stock shall be issued a warrant to purchase a number of shares of the Company’s common stock equal to 40% of the quotient of the (a) aggregate Stated Value held by such holder before conversion at the initial public offering price and the Market Value of the shares of common stock that were issuable upon conversion divided by (b) the Market Value. The warrants shall have a term of five years and shall be exercisable at the Market Value.
Conversion Rights (Preferred Stock other than Series A and Series X Super Voting Preferred Stock): Upon the consummation of this offering, each issued and outstanding share of Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock will automatically convert into 750 shares of the Company’s common stock. Series X Super Voting Preferred stock shall not have any rights to convert into the Company’s common stock.
Liquidation Rights: In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (a "Liquidation Event"), the holders of each series of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Company’s common stock by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the aggregate Stated Value for all shares of such series of Preferred Stock then held by then or (y) the amount payable per share of the Company’s common stock which such holder of preferred stock would have received if such holder had converted to common stock immediately prior to the Liquidation Event all of such series of preferred stock then held by such holder (the "Series Stock Liquidation Preference"). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the holders of the preferred stock shall be insufficient to permit the payment to the holders of the preferred stock the full Series Stock Liquidation Preference for all series, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the preferred stock in proportion to the aggregate Series Liquidation Preferences that would otherwise be payable to each of the holders of preferred stock. Such payment shall constitute payment in full to the holders of the preferred stock upon the Liquidation Event. After such payment shall have been made in full, or funds necessary for such payment shall have been set aside by the Company in trust for the account of the holders of preferred stock, so as to be immediately available for such payment, such holders of preferred stock shall be entitled to no further participation in the distribution of the assets of the Company. The sale of all or substantially all of the assets of the Company, or merger, tender offer or other business combination to which the Company is a party in which the voting stockholders of the Company prior to such transaction do not own a majority of the voting securities of the resulting entity or by which any person or group acquires beneficial ownership of 50% or more of the voting securities of the Company or resulting entity shall be deemed to be a Liquidation Event.
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Other Matters: The holders of the Company’s preferred stock have no subscription or redemption privileges and are not subject to redemption. The Company’s Series Preferred Stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s preferred stock are fully paid and non-assessable.
Series A Preferred Shares
Series A Preferred Stocks were issued during the three months ended March 31, 2023 and 2022.
Upon
the IPO Closing, all outstanding shares of Series A Preferred Stocks were automatically converted into shares of the Company's common stock valued at
$
As of March 31, 2023 and December 31, 2022, there were shares of Series A Preferred Stocks issued and outstanding, respectively.
Series B Preferred Stocks
Series B Preferred Stocks were issued during the three months ended March 31, 2023 and 2022.
Upon
the IPO Closing, all outstanding shares of Series B Preferred Stock were automatically converted into shares of the Company's common stock valued at
$
As of March 31, 2023 and December 31, 2022, there were no shares of Series B Preferred Stocks issued and outstanding, respectively.
Series B-1 Preferred Shares
There was Series B-1 Preferred Stocks issued during the three months ended March 31, 2023 and 2022.
During
the year ended December 31, 2020, the Company issued shares of its Series B-1 Preferred Stocks for
the consulting services rendered valued at $
Upon
the IPO Closing, all outstanding shares of Series B-1 Preferred Stocks were automatically converted into shares of the Company's common stock valued at
$
As of March 31, 2023 and December 31, 2022 , there were shares of Series B-1 Preferred Stocks issued and outstanding, respectively.
Series C Preferred Shares
Series C Preferred Stocks were issued during the three months ended March 31, 2023 and 2022.
Upon
the IPO Closing, all outstanding shares of Series C Preferred Stocks were automatically converted into shares of the Company's common stock valued at
$
As of March 31, 2023 and December 31, 2022, there were shares of Series C Preferred Stocks issued and outstanding, respectively.
Series C-1 Preferred Shares
The Company accounts for warrants issued in accordance with the guidance on "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" in Topic 480. These warrants did not meet the criteria to be classified as a liability award and therefore were treated as an equity award and classified the Series C-1 Preferred Stocks within mezzanine equity in the consolidated balance sheet.
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Upon
the IPO Closing, all outstanding shares of Series C-1 Preferred Stocks were automatically converted into shares of the Company's common stock valued at
$
As of March 31, 2023 and December 31, 2022, there were shares of Series C-1 Preferred Stocks issued and outstanding, respectively.
Series X Super Voting Preferred Shares
In August 2021, the Company created a new series of preferred stock titled "Series X Super Voting Preferred Stock", at par value, consisting of 2,000 shares. The Series X Super Voting Preferred Stock carries certain rights and privileges including but not limited to the right to 4,000 votes per share) to vote on all matters that may come before the stockholders of the Corporation, voting together with the common stock as a single class on all matters to be voted or consented upon by the stockholders but is not entitled to any dividends, liquidation preference or conversion or redemption rights. The Series X Super Voting Preferred Stock is accounted for as an equity classification.
As of March 31, 2023 and December 31, 2022, there were and shares of Series X Super Voting Preferred Stocks issued and outstanding, respectively.
NOTE－ 16 TREASURY STOCKS
On
January 25, 2023, the Board of Directors (“Board”) authorized a $
| Three Months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Aggregate common stock repurchased | ||||||||
| Weighted average price paid per share | $ | $ | ||||||
| Total Amount paid | $ | $ | ||||||
As
of March 31, 2023, we had up to $
NOTE－ 17 INCOME TAXES
For the three months ended March 31, 2023 and 2022, the local (“Nevada”) and foreign components of loss before income taxes were comprised of the following:
| Three Months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | ||||||||
| Loss before income taxes | $ | $ | ||||||
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The provision for income taxes consisted of the following:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Current: | ||||||||
| - United States | $ | $ | ||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| Deferred: | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: Singapore and Vietnam that are subject to taxes in the jurisdictions in which they operate, as follows:
United States
The Company is registered in the Nevada and is subject to the tax laws of United States.
As
of March 31, 2023, the operation in the U.S. incurred $
Singapore
The Company’s subsidiary is registered in the Republic of Singapore and is subject to the tax laws of Singapore.
As
of December 31, 2022, the operation in the Singapore incurred $
Vietnam
The
Company’s subsidiary operating in Vietnam is subject to Vietnam Income Tax at a standard income tax rate of
As
of March 31, 2023, the operation in Vietnam incurred $
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India
The
Company’s subsidiary operating in India is subject to the India Income Tax at a standard income tax rate of
As
of March 31, 2023, the operation in the India incurred $
Indonesia
The Company's subsidiary is registered in Indonesia and is subject to the tax laws of Indonesia.
As
of March 31, 2023, the Company's subsidiary operations in Indonesia incurred $
Philippines
The Company's subsidiary is registered in the Philippines and is subject to the tax laws of the Philippines.
As
of March 31, 2023, the Company's subsidiary operations in Philippines incurred $
Thailand
The Company's subsidiary is registered in Thailand and is subject to the tax laws of Thailand.
As
of March 31, 2023, the Company's subsidiary operations in Thailand incurred $
Malaysia
The Company's subsidiary is registered in Malaysia and is subject to the tax laws of Malaysia.
As
of March 31, 2023, the operation in the Malaysia incurred $
Deferred tax assets and liabilities are recognized for future tax consequences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the tax year in which the differences are expected to reverse. Significant deferred tax assets and liabilities of the Company as of March 31, 2023 and December 31, 2022 consist of the following:
Schedule of Deferred Tax Assets and Liabilities
| March 31, 2023 | December 31, 2022 | |||||||
| Deferred tax assets: | ||||||||
| Software intangibles (U.S) | $ | $ | ||||||
| Deferred Stock Compensation (U.S.) | ||||||||
| ROU net liability | ||||||||
| Net operating loss carryforwards | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| - Philippines | ||||||||
| - Indonesia | ||||||||
| - Thailand | ||||||||
| - Malaysia | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| 43 |
The Internal Revenue Code includes a provision, referred to as Global Intangible Low-Taxed Income ("GILTI"), which provides for a 10.5% tax on certain income of controlled foreign corporations. We have elected to account for GILTI as a period cost if and when occurred, rather than recognizing deferred taxes for basis differences expected to reverse.
The
Company is subject to taxation in the U.S. and various foreign jurisdictions. U.S. federal income tax returns for 2018 and after remaining
open to examination. We and our subsidiaries are also subject to income tax in multiple foreign jurisdictions. Generally, foreign income
tax returns after 2017 remain open to examination. No income tax returns are currently under examination. As of March 31, 2023 and December
31, 2022, the Company does
NOTE－ 18 PENSION COSTS
The
Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible
full-times employees in all countries operating in the Company. The Company is required to contribute a specified percentage of the participants’
relevant income based on their ages and wages level. During the three months ended March 31, 2023 and 2022, $
NOTE－ 19 RELATED PARTY TRANSACTIONS
From time to time, a shareholder and director of the Company advanced funds to the Company for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand.
The
Company paid and accrued to the director and key management personnel, the total salaries of $
The Company issued and shares of Common stock, at the price of $and $for the stock based compensation to a key management personnel during the years ended March 31, 2023 and 2022, respectively.
The
Company accrued shares to directors and key management personnel,
the total share option of $
The
Company subsidiary paid their sole officer, total professional fee of $
The Company paid and accrued to its shareholders, total professional fee of $and $and $and $during the three months ended March 31, 2023 and 2022, respectively. Including in the above the Company issued shares of $and $ during the three months ended March 31, 2023 and 2022, respectively.
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated unaudited condensed financial statements, the Company has no other significant or material related party transactions during the periods presented.
| 44 |
NOTE－ 20 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the three months ended March 31, 2023 and 2022, respectively, the customer who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances, are presented as follows:
| Three months ended March 31, 2023 | March 31, 2023 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Year ended March 31, 2022 | March 31, 2022 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | $ | ||||||||||
(b) Major vendors
For the three months ended March 31, 2023 and 2022, there is no vendor accounts for 10% or more of the Company’s cost of revenue.
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors affecting the credit risk of specific customers, historical trends and other information.
(d) Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in VND, SGD, PHP, INR, IDR, MYR and THB and a significant portion of the assets and liabilities are denominated in VND, SGD, INR, IDR, MYR and THB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and VND, SGD, PHP, INR, IDR, MYR and THB. If VND, SGD, PHP, INR, IDR, MYR and THB depreciate against US$, the value of VND, SGD, PHP, INR IDR, MYR and THB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose us to substantial market risk.
| 45 |
(e) Economic and political risks
The Company's operations are conducted in the Republic of Vietnam. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in Vietnam, and by the general state of Vietnam economy.
The Company's operations in Vietnam and India are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in Vietnam and India, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
NOTE－ 21 COMMITMENTS AND CONTINGENCIES
Acquisition
On
December 27, 2022, the Company entered into stock purchase agreement with PT Wahana Cerita Indonesia to acquire
NOTE－ 22 SUBSEQUENT EVENTS
In accordance with ASC Topic 855, "Subsequent Events", which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited condensed financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2023, up through May 8, 2023, the Company issued the unaudited condensed consolidated financial statements.
On April 11, 2023, the Company and its subsidiary entered into stock purchase agreement with Mekong Leisure Travel Joint Stock Company to acquire 100% equity interest for an aggregate purchase price equal to US$164,149 with the component of cash and number of Company’s common stock.
On April 17, 2023, the Company offer and sell, from time to time in one or more offerings, any combination of common stock, preferred stock, warrants or rights to purchase common stock or preferred stock, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities, having an aggregate initial offering price not exceeding $50,000,000.
On May 1, 2023, Patrick Soetanto, 51, transitioned to the role of, and was appointed as, Chief Operating Officer of Society Pass Incorporated (“SOPA”) replacing Pamela Aw-Young who resigned as Chief Operating Officer on May 1, 2023. Ms. Aw-Young will continue to work with SOPA on special projects related to acquisitions.
| 46 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as "may," "will," "expect," "anticipate," "estimate," "continue" or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
BASIS OF PRESENTATION
The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-Q (this "Report"), including our unaudited condensed consolidated financial statements and the related notes and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 23, 2023, and other reports that we file with the SEC from time to time.
References in this Quarterly Report on Form 10-Q to "us", "we", "our" and similar terms refer to Society Pass Incorporated.
Overview
We are, through the acquisition and operation of e-commerce platforms and mobile applications through our direct and indirect wholly or majority-owned subsidiaries, building the next generation digital ecosystem and loyalty platform in Southeast Asia (“SEA”) primarily Singapore, Thailand, Indonesia, Vietnam and the Philippines.
The companies by the Company form the Society Pass Group (the “Group”). The Group currently markets to both consumers and merchants in SEA while maintaining an administrative headquarters in Singapore and a software development center in the Philippines. We continue to expand our e-commerce ecosystem throughout the rest of SEA by making selective acquisitions of leading e-commerce companies and applications with particular focuses on Vietnam, Thailand, Indonesia and the Philippines of SEA. Material acquisitions include:
| • | In February 2021, we acquired an online lifestyle platform of Leflair branded assets (the “Leflair Assets”). |
| • | In February 2022, the Company completed the acquisition of 100% of the equity interest of New Retail Experience Incorporated and Dream Space Trading Company Limited through its subsidiary – Push Delivery Pte Limited, which two companies mainly provide an on-line grocery and food delivery platform in the Philippines and Vietnam respectively. |
| • | In May 2022, the Company completed another acquisition of 100% of the equity interests of Gorilla Networks Pte Ltd, Gorilla Mobile Pte Ltd, Gorilla Connects Pte Ltd and Gorilla Networks (VN) Co Ltd (collectively, "Gorilla Networks"), a food delivery service. |
| • | On July 7, 2022, the Company and its wholly owned subsidiary Thoughtful Media Group Incorporated collectively acquired 100% of the equity interests of Thoughtful Media Group Incorporated and AdActive Media, Inc. (collectively "Thoughtful Media"), whose business provides services to advertisers that helps to make internet advertising more effective. |
| • | On
July 21, 2022, the Company acquired 100% of the equity interests of Mangan PH Food Delivery
Service Corp. ("Mangan), a Philippines restaurant and grocery delivery business. |
| • | On August 15, 2022, the Company and its 95%-owned subsidiary SOPA Technology, Pte, Ltd., collectively acquired 75% of the outstanding capital stock of Nusatrip International Pte Ltd. ("Nusatrip") and also purchased all of the outstanding capital stock of PT Tunas Sukses Mandiri ("Tunas"), a company existing under the law of the Republic of Indonesia, and both engaged in online ticketing and reservation services. |
Operating in SEA, we are focused on six operating verticals: loyalty, lifestyle, grocery and food delivery, telecommunications, digital media and travel.
| 47 |
Loyalty
The Company spent over two years building a cutting edge, proprietary IT architecture to effectively scale and support our ecosystem’s companies, consumers and merchants. Using our loyalty platform, which we plan to introduce in 2023, consumers may earn, and merchants may issue, Society Points. The Company will aggregate the data across various touch points and build a realistic view or consumer behavior and use this behavior to increase sales across our ecosystem by: cross-pollinating acquired companies with other existing verticals, customer re-targeting, offline and online behavior prediction and cross promotions and loyalty points. The Company ecosystem becomes a key enabler for our users by converting this aggregation of data into creation of loyalty for our ecosystem companies to generate revenue.
Lifestyle
The Company has developed an online lifestyle platform (the "Lifestyle Platform") under its own brand name of "Leflair" to enable consumers to purchase high-end brands in many categories. Using the Company's smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer's home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company's logistics center.
Grocery and Food Delivery
Other online platforms include online platforms in Vietnam, under the brand name of "Handycart", and Philippines, under the brand names of "Pushkart" and "Mangan", to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area.
Telecommunications
The Company operates a Singapore-based online telecommunication reseller platform under brand name of "Gorilla" to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting.
Digital Media
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company's e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG's wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result, Thoughtful Media's content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media's data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views.
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Travel
The Company purchased the Nusatrip Group, a leading Jakarta-based Online Travel Agency ("OTA") in Indonesia and across SEA. The Nusatrip acquisition extended SoPa's business reach into SEA regional travel industry and marked the Company's first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, Nusatrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, Nusatrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors.
Our loyalty-focused and data-driven e-commerce marketing platform interfaces will connect consumers with merchants in the F&B and lifestyle sectors, assisting local brick-and-mortar businesses to access new customers and markets to thrive in an increasingly convenience-driven economy. Our Platform will integrate with both global and country-specific search engines and applications and accept international address and phone number data, providing a consumer experience that respects local languages, address formats and customs. Our plan is to have Strategic Partners work with us to penetrate local markets, while our Platform allows effortless integration with existing technological applications and websites.
As of May 12, 2023, we have onboarded over 3.3 million registered consumers and over 650,000 registered merchants on our Platform.
Impact COVID-19 and other Global Events
The spread of COVID-19 and the developments surrounding the global pandemic have had and may continue to have significantly negative impacts on all aspects of our business, including negative effects on our travel and digital media verticals . In response to the pandemic, many governments around the world implemented a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses.
We cannot predict the extent to which any lingering effects of the COVID-19 pandemic may affect our future business or operating results, which is highly dependent on inherently uncertain future developments, including the severity of outbreaks of COVID-19, the effects of new variants, the actions taken by governments and private businesses in relation to COVID-19 containment, the availability, deployment and efficacy of vaccines, and the transition from COVID-19 being a pandemic to an endemic illness. In geographies where we, our customers or our employees operate, health concerns and political or governmental developments in response to COVID-19 have resulted in, and could in the future result in, economic, social or labor instability or prolonged contractions in the industries in which our customers operate, slowdowns in our product development efforts, or other effects that may have a material adverse effect on our business or our results of operations and financial condition.
The Russian-Ukraine war and the supply chain disruption have not affected any specific segment of our business.
Software and Development
Our ability to compete depends in large part on our continuous commitment to research and development, our ability to rapidly introduce new features and functionality and our ability to improve proven applications for established markets in which we have competitive advantages. We intend to work closely with our customers to continuously enhance the performance, functionality, usability, reliability and flexibility of our applications.
Our software and development team is responsible for the design enhancements, development, testing and certification of the Application. In addition, we may, in the future, utilize third parties for our automated testing, managed upgrades, software development and other technology services.
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Intellectual Property Portfolio
We strive to protect and enhance the proprietary technology and inventions that are commercially important to our business, including seeking, maintaining and defending patent rights. Our policy is to seek to protect our proprietary position through a combination of intellectual property rights, including trademarks, copyrights, trade secret laws and internal procedures. Our commercial success will depend in part on our ability to protect our intellectual property and proprietary technologies.
Corporate Information
Our principal executive offices are located at 701 S. Carson Street, Suite 200, Carson City, NV 89701.
Our corporate website address is www.thesocietypass.com. The website for our loyalty marketplace is www.sopa.asia. The information included on our websites are not part of this prospectus.
Financial Condition
Results of Operations
The following table sets forth certain operational data for the three months ended March 31, 2023 and 2022:
| Three
months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue, net | $ | 2,042,580 | $ | 445,090 | ||||
| Cost of revenue | (1,356,343 | ) | (459,883 | ) | ||||
| Gross income (loss) | 686,237 | (14,793 | ) | |||||
| Less operating expenses: | ||||||||
| Sales and marketing expenses | (130,664 | ) | (196,102 | ) | ||||
| Software development costs | (13,919 | ) | (19,548 | ) | ||||
| Impairment loss | — | (528,583 | ) | |||||
| General and administrative expenses | (5,991,886 | ) | (5,840,698 | ) | ||||
| Total operating expenses | (6,136,469 | ) | (6,584,931 | ) | ||||
| Loss from operations | (5,450,232 | ) | (6,599,724 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 39,986 | 45 | ||||||
| Interest expense | (352 | ) | (4,045 | ) | ||||
| Gain on early lease termination | 1,064 | — | ||||||
| JV income | 3,148 | — | ||||||
| Other income | 16,787 | 13,621 | ||||||
| Total other expense | 60,633 | 9,621 | ||||||
| Loss before income taxes | (5,389,599 | ) | (6,590,103 | ) | ||||
| Income taxes | (614 | ) | (1,302 | ) | ||||
| NET LOSS | $ | (5,390,213 | ) | $ | (6,591,405 | ) | ||
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Revenue. We generated revenues of $2,042,580 and $445,090 during the three months ended March 31, 2023 and 2022, respectively. The significant increase in revenue for the three months periods was mainly due to an increase in the sales from our e-commerce online platform and newly acquired business in digital media and travel verticals.
During the three months ended March 31, 2023 and 2022, the following customer exceeded 10% of the Company's revenues and its outstanding receivable balances at year-end dates, are presented as follows:
| Three months ended March 31, 2023 | March 31, 2023 | |||||||||||
| Customer | Revenues | Percentage
of revenues | Accounts
receivable | |||||||||
| Customer A | $ | 952,665 | 46.64 | % | $ | 321,094 | ||||||
| Three months ended March 31, 2022 | March 31, 2022 | |||||||||||
| Customer | Revenues | Percentage
of revenues |
Accounts
receivable | |||||||||
| Customer A | $ | — | — | $ | — | |||||||
The customer is in United States.
Cost of Revenue. Cost of revenue was $1,356,343 and $459,883 for three months ended March 31, 2023, and 2022, respectively. Our cost of revenue increased was the result of increased sales from our digital media and travel verticals.
Major vendors
For the three months ended March 31, 2023 and 2022, no vendor accounted for 10% or more of the Company's cost of revenue and its outstanding payables balances, are presented as follows:
Gross Income (Loss) We recorded a gross income of $686,237 and a gross loss of $14,793 for the three months ended March 31, 2023 and 2022, respectively. The turnaround from gross loss to gross profit is due to increased gross income from revenue from e-commerce and our newly acquired digital media and travel verticals. Gross income margin is 34% and gross loss margin of 3% for the three months ended March 31, 2023 and 2022, respectively. Improved in gross margin for the three months period ended March 31, 2023 is due to higher profit margin arising from newly acquired businesses in the third quarter of 2022.
Sales and Marketing Expenses ("S&M"). We incurred S&M expenses of $130,664 and $196,102 for the three months ended March 31, 2023 and 2022, respectively. The decrease in S&M expense in 2023 is primarily attributable to the planned cost reductions.
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Software Development Cost ("SDC"). We incurred SDC expenses of $13,919 and $19,548 for three months ended March 31, 2023 and 2022 respectively. The decrease in SDC in 2023 is primarily attributable to the restructuring of our technology development team.
Impairment Charge ("IC"). We incurred impairment charges of $0 and $528,583 for the three months ended March 31, 2023, and 2022, respectively. The charge in 2022 is primarily attributable to the impairment of goodwill related to the acquisition of the New Retail Enperience Incorporated’s ecommerce asset in the first quarter of 2022 which was expensed during the period due to the short life term of the asset and the quantum of consideration.
General and Administrative Expenses ("G&A"). We incurred G&A expenses of $5,991,886 and $5,840,598 for the three months ended March 31, 2023 and 2022 respectively. The G&A is primarily consisting of the professional costs associated with costs related to business acquisitions, the Company's ongoing expenses for its listing on the Nasdaq Stock Exchange, stock based compensation for services, and D&O insurance cost.
Income Tax Expense. Our income tax expenses for the three months ended March 31, 2023 and 2022 was $614 and $1,302, respectively.
Net Loss. As a result of the items noted above, for the three months ended March 31, 2023, we incurred a net loss of $5,390,213 as compared to the same period ended March 31, 2022 of $6,591,405. The decrease in net loss is primarily attributable to increased gross profit. The net loss for the three months ended March 31, 2023 includes non-cash items including non-cash stock-based compensation for services of $1,886,793 and depreciation and amortization of $863,917.
Liquidity and Capital Resources
As of March 31, 2023, we had cash and cash equivalents and restricted cash of $13,827,941, accounts receivable of $858,109, deposits, prepayments and other receivables of $1,942,239, inventories of $229,010 and contract assets of $5,071.
As of December 31, 2022, we had cash and cash equivalents and restricted cash of $19,003,336, accounts receivable of $951,325, deposits, prepayments and other receivables of $2,711,042, inventories of $310,932 and contract assets of $20,310.
For the three months ended March 31, 2023, the Company's stockholders' equity was $15,565,493 which decreased as a result of an increase in accumulated deficit partially offset by additional paid-in-capital. For the three months ended March 31, 2023, the Company incurred net loss of $5,390,213 and net cash used in operating activities of $4,015,201. Net cash used in investing activities was $190,061. Net cash used in financing activities was $541,988, resulting principally from share buyback exercise.
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While the Company believes that it will be able to continue to grow the Company's revenue base and control expenditures, there is no assurance it will be able to do so. The Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed in order to finance the Company's business development activities, general and administrative expenses and growth strategy. We expect to continue to rely on cash generated through financing from public offerings or private offerings by our parent company or one or more of our subsidiaries, to finance our operations and future acquisitions. The Company believes that it has sufficient liquidity to continue its current business plans and operations for at least one year.
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (4,015,201 | ) | $ | (2,560,917 | ) | ||
| Net cash used in investing activities | (190,061 | ) | (225,134 | ) | ||||
| Net cash (used in) provided by financing activities | (541,988 | ) | 10,532,676 | |||||
| Effect on exchange rate change | (428,145 | ) | (43,841 | ) | ||||
| Net change in cash and cash equivalents | (5,175,395 | ) | 7,702,784 | |||||
| Cash and cash equivalent and restricted cash at beginning of period | 19,003,336 | 23,264,777 | ||||||
| Cash and cash equivalent and restricted cash at end of period | 13,827,941 | 30,967,561 | ||||||
Net Cash Used in Operating Activities.
For the three months ended March 31, 2023, net cash used in operating activities was $4,015,201, which consisted primarily of a net loss of $5,390,213 and a decrease in accrued liabilities and other payables of $2,376,133, partially offset by non-cash stock-based compensation for services of $1,886,793, a decrease in deposits, prepayments and other receivables of $768,803 and depreciation and amortization of $863,917.
For the three months ended March 31, 2022, net cash used in operating activities was $2,560,917, which consisted primarily of a net loss of $6,591,405, primarily offset by non-cash stock based compensation for services of $1,856,073, depreciation and amortization of $806,622, impairment loss of $528,583 increase in shares as well as changes in operating assets and liabilities including a decrease in deposits, prepayments and other receivables of $1,163,776 and a decrease in advance to related parties of $499,352.
We expect to continue to rely on cash generated through financing from public offerings or private offerings of our or one or more of our subsidiaries' securities, to finance our operations and future acquisitions.
Net Cash Used In Investing Activities.
For the three months ended March 31, 2023, there was a net cash outflow of $190,061 for purchase of property, plant, and equipment.
For the three months ended March 31, 2022, there was a net cash outflow of $225,134 for a deposit paid for subsidiaries asset acquisition and the purchase of property, plant, and equipment.
Net Cash Provided by Financing Activities.
For the three months ended March 31, 2023, net cash used in financing activities was $541,988 for repurchase of common stock.
For the three months ended March 31, 2022, net cash provided by financing activities was $10,532,676, consisting primarily of funds raised from our follow-on public offering and the exercise of Series C-1 warrants.
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Critical Accounting Policies and Estimate
• Basis of presentation
The Company has prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders' deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent quarter or for the full year ending December 31, 2023 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the 2022 audited financial statements and accompanying notes filed with the SEC.
• Emerging Growth Company
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
• Use of estimates and assumptions
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company's estimates, the Company's financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, the incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on amounts due to related parties, inventory valuation, revenue recognition, the allocation of purchase consideration in business combinations, and deferred tax assets and the related valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
• Business combination
The Company follows Accounting Standards Codification ("ASC") ASC Topic 805, Business Combinations ("ASC 805") and ASC Topic 810, Consolidation ("ASC 810"). ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at "fair value." The statement applies to all business combinations. Under ASC 805, all business combinations are accounted for by applying the acquisition method. Accounting for the resulting goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company's results of operations.
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• Noncontrolling interest
The Company accounts for noncontrolling interests in accordance with ASC Topic 810, which requires the Company to present noncontrolling interests as a separate component of total shareholders' equity on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
• Segment reporting
ASC Topic 280, Segment Reporting ("Topic 280") establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organization structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements. The Company currently operates in four reportable operating segments: (i) Online Grocery and Food and Groceries Deliveries, (ii) Digital marketing, (iii) Online ticketing and reservation, (iv) Telecommunications Reseller, (v) e-Commerce, and (vi) Merchant Point of Sale ("merchant POS").
• Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of March 31, 2023 and December 31,2022, the cash and cash equivalents excluded restricted cash amounted to $13,755,377 and $18,930,986, respectively.
The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250,000, so there were uninsured balance of $6,295,886 and $10,431,681 as of March 31, 2023 and December 31, 2022, respectively. In addition, the Company has uninsured bank deposits of $6,879,654 and $$12,032,534 with a financial institution outside the U.S as of March 31, 2023 and December 31, 2022, respectively. All uninsured bank deposits are held at high quality credit institutions.
• Restricted cash
Restricted cash refers to cash that is held by the Company for specific reasons and is, therefore, not available for immediate ordinary business use. The restricted cash represented fixed deposit maintained in bank accounts that are pledged. As of March 31, 2023 and December 31, 2022, the restricted cash amounted to $72,564 and $72,350, respectively.
• Accounts receivable
Accounts receivables are recorded at the amounts that are invoiced to customers, do not bear interest, and are due within contractual payment terms, generally 30 to 90-days from completion of service or the delivery of a product. Credit is extended based on an evaluation of a customer's financial condition, the customer's creditworthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Quarterly, the Company specifically evaluates individual customer's financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company records bad debt expense and records an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to pursue all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Currently, the Company does not have any off-balance-sheet credit exposure related to its customers, and as of both March 31, 2023 and December 31, 2022, there was no need for allowance for doubtful accounts.
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• Inventories
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company's suppliers as merchandized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the three months ended March 31, 2023 and 2022, the Company recorded an allowance for obsolete inventories of $0 and $0, respectively. The inventories amounted to $229,010 and $310,932 at March 31, 2023 and December 31, 2022, respectively.
• Prepaid expenses
Prepaid expenses represent payments made in advance for products or services to be received in the future and are amortized to expense on a ratable basis over the future period to be benefitted by that expense. Since the Company has prepaid expenses categorized as both current and non-current assets, the benefits associated with the products or services are considered current assets if they are expected to be used during the next twelve months and are considered non-current assets if they are expected to be used over a period greater than one year.
• Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | ||
| Computer equipment | 3 years | |
| Office equipment | 5 years | |
| Renovation | 5 years |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
• Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, "Impairment or Disposal of Long-Lived Assets", all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | Identify the contract with a customer; |
| • | Identify the performance obligations in the contract; |
| • | Determine the transaction price; |
| • | Allocate the transaction price to performance obligations in the contract; and |
| • | Recognize revenue as the performance obligation is satisfied. |
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The Company generates its revenues from a diversified a mix of e-commerce activities that correspond to our four business segments (business to consumer or "B2C"), grocery and food delivery (B2C), telecommunication reseller (B2C) and the services providing to merchants for their business growth (business to business or "B2B").
The Company's performance obligations include providing connectivity between merchants and consumers, generally through an online ordering platform. The platform allows merchants to create an account, display a menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create an account and order from merchants on the consumer facing application. The platform allows a delivery company to accept an online delivery request and deliver or ship an order from a merchant to customer.
Lifestyle
The Company has developed an online lifestyle platform (the "Lifestyle Platform") under its own brand name of "Leflair" to enable consumers to purchase high-end brands in many categories. Using the Company's smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer's home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company's logistics center.
Grocery and Food Delivery
Other online platforms include online platforms in Vietnam, under the brand name of "Handycart", and Philippines, under the brand names of "Pushkart" and "Mangan", to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area.
Telecommunications
The Company operates a Singapore-based online telecommunication reseller platform under brand name of "Gorilla" to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting.
Digital Media
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company's e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG's wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result, Thoughtful Media's content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media's data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views.
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Travel
The Company purchased the Nusatrip Group, a leading Jakarta-based Online Travel Agency ("OTA") in Indonesia and across SEA. The NusaTrip acquisition extended SoPa's business reach into SEA regional travel industry and marked the Company's first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, NusaTrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, NusaTrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors.
The Company's e-Commerce business is primarily conducted using Leflair's Lifestyle Platform, as follows:
| 1) | When a customer places an order on either the Leflair website or app, a sales orders report will be generated in the system. The Company will either fulfill this order from its inventory or purchase the item from the manufacturer or distributor. Once the Company has the item in its distribution center, it will contract with a logistics partner delivered to the end customer. The sale is recognized when the delivery is completed by the logistics partner to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to any product warranty. The Company is considered the principal in this e-commerce transaction and reports revenue on a gross basis as the Company establishes the price of the product, has responsibility for fulfillment of the order and retains the risk of collection. |
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $223,517 and $434,141 respectively, in the Lifestyle sector.
The Company's Merchant POS offers both software and hardware products and services to vendors, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to obtain access to the Merchant Marketing Program. |
| 2) | The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month. |
| 3) | The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants. |
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $195 and $10,949, respectively, from software fees.
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a "gross" basis pursuant to ASC Topic 606 when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606 are present in the arrangement, revenue is recognized net of related direct costs since in these instances we act as an agent.
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Software subscription fee — The Company's performance obligation includes providing customer access to our software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company's software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and the customer is entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with automatic one-year renewal. The subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
The Company records its revenues, net of value added taxes ("VAT"), which is levied at the rate of 10% on the invoiced value of sales.
Grocery and food delivery consists of online grocery under brand name "Pushkart" and food delivery service under brand name "Handycart" as follows:
Customers place order for groceries and take-out food through our online platforms of "Pushkart" and "Handcart" respectively. When the grocery or food merchant receives and order, our platform will assign a third-party delivery service to pick up and deliver the grocery and/or food order to the customer. Revenue is recognized when the grocery and/or food is delivered, at which time the customer pays for the grocery and /or food order with cash, at Net of merchant cost.
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $34,085 and $0, respectively, from this stream.
As a telecommunication reseller we provide local mobile data and overseas internet data plans under the brand name of "Gorilla," which company we acquired in May 2022. Our telecommunication revenues are recorded for ASC Topic 606 purposes as follows:
Local mobile plan - customers choose and subscribe to a monthly local mobile plan through our "Gorilla" online platform. The Company will proceed to register the sim card (effectively, the mobile telephone number activation card) and arrange delivery of that Sim card to the customer. Following Sim card activation, the system will capture the monthly data usage of each customer, calculated in accordance with the package data capacity and monthly subscription rate, which amounts are aggregated and recorded as revenue. Unused data will be converted to Rewards Points and carried forward to next month for potential subsequent data usage. As a result of the rewards points, the company also recognize revenue from Rewards Point redemption for subscription fees offset, voucher redemption, extra data purchases, that the customer chooses to use via our online platform.
Overseas internet data plan – a customer will place order for their desired overseas internet data plan through either the "Gorilla" online platform or third-party partner platforms. Subscription revenue is recognized when the Sim card is delivered and activated.
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $14,302 and $0, respectively, from telecommunications.
Digital marketing provides the services that affiliate with multiple YouTube channels to offer services that include audience development, content programming, creator collaborations, digital right managements, monetization, and/or sales as follows:
The Company is required to establish as Multi-Channel Network (MCN) for YouTube Creators and fulfilled the basic MCN guidelines on timely basis. The Company engages the creator in contract as a platform to nurture the creator in brainstorming creative content ideas, coaching on growing their audience size and connection with top brands.
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $1,283,774 and $0, respectively, from this stream.
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Online ticketing and reservation provides information, prices, availability, booking services for domestic and international air travel and hotels as follows:
The Company's revenues are substantially reported on a net basis as the travel supplier is primarily responsible for providing the underlying travel services and the Company does not control the service provided by the travel supplier to the traveler. Revenue from air ticketing services, air ticket commission, hotel reservation and refund margin are substantially recognized at a point of time when the performance obligations that are satisfied.
During the three months ended March 31, 2023 and 2022, the Company generated revenue of $486,707 and $0, respectively, from this stream.
Contract assets
In accordance with ASC Topic 606, a contract asset arises when the Company transfers a good or performs a service in advance of receiving consideration from the customer as agreed upon. A contract asset becomes a receivable once the Company's right to receive consideration becomes unconditional.
There were contract assets balance was $5,071 and $20,310 on March 31, 2023 and December 31, 2022, respectively.
Contract liabilities
In accordance with ASC Topic 606, a contract liability represents the Company's obligation to transfer goods or services to a customer when the customer prepays for a good or service or when the customer's consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue. The Company's contract liability balance was $1,264,725 and $1,405,090 on March 31, 2023 and December 31, 2022, respectively.
• Software development costs
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985, Software, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. These capitalized software costs are ratably amortized over the period of the software's estimated useful life. Costs incurred to enhance the Company's software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research and development expenditures arising from the development of the Company's own software are charged to operations as incurred. For the three months ended March 31, 2023, and 2022, software development costs were $13,919 and $19,548, respectively. Based on the software development process, technological feasibility is established upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release have, to date, been immaterial and have been expensed as incurred.
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• Cost of sales
Cost of sales under online ordering consist of the cost of merchandise ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales related to software sales consist of the cost of software and payroll costs, which are directly attributable to the sales of software. Cost of sales related to hardware sales consist of the cost of hardware and payroll costs, which are directly attributable to the sales of hardware.
Cost of sales related to grocery and food delivery consist of the cost of the outsourced delivery and the outsource payment gateway, which are directly attributable to the sales of grocery and food delivery.
Cost of sales related to our telecommunication data reseller segment consist of the cost of the primary telecommunication service, which are directly attributable to the sales of telecommunication data.
Cost of sales under digital marketing consist of the cost of primary digital marketing service, which are directly attributable to the sales of digital marketing.
• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers since those costs are borne by the Company's suppliers or distributors for our merchant POS business.
The shipping and handling costs for all segments other than our e-commerce segment are recorded net in sales. For shipping costs related to our e-commerce business, those shipping costs are recorded in cost of sales.
• Sales and marketing
Sales and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $130,664 and $196,102 for the three months ended March 31, 2023 and 2022, respectively.
• Product warranties
The Company's provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company's suppliers, the Company has concluded that no warranty liability is required as of March 31, 2023 and December 31, 2022. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal, although it looks at this issue every quarter to continue to support its assertion.
• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the unaudited condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that 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 unaudited condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
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In addition to U.S. income taxes, the Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax, there may be transactions and calculations for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
• Foreign currencies translation and transactions
The reporting currency of the Company is the United States Dollar ("US$") and the accompanying consolidated unaudited condensed financial statements have been expressed in US$s. In addition, the Company's subsidiary is operating in the Republic of Vietnam, Singapore, India and Philippines and maintains its books and record in its local currency, Vietnam Dong ("VND"), Singapore Dollar ("SGD"), Indian Rupee ("INR"), Philippines Pesos ("PHP"), Malaysian Ringgit ("MYR), Thailand Baht ("THB") and Indonesian Rupiah ("IDR"), respectively, which are the functional currencies in which the subsidiary's operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$s, in accordance with ASC Topic 830, "Translation of Financial Statement" ("ASC 830") using the applicable exchange rates on the balance sheet date. Shareholders' equity is translated using historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed statements of changes in shareholder's equity.
Schedule of Foreign currencies translation and transactions
Translation of amounts from SGD into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March 31, 2022 | |||||||
| Period-end SGD:US$ exchange rate | $ | 0.7521 | $ | 0.73848 | ||||
| Period average SGD:US$ exchange rate | $ | 0.7500 | $ | 0.73928 | ||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end VND:US$ exchange rate | $ | 0.000043 | $ | 0.000044 | ||||
| Period average VND:US$ exchange rate | $ | 0.000042 | $ | 0.000044 | ||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end INR:US$ exchange rate | $ | 0.01217 | $ | 0.01322 | ||||
| Period average INR:US$ exchange rate | $ | 0.01216 | $ | 0.01329 | ||||
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Translation of amounts from PHP into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end PHP:US$ exchange rate | $ | 0.01841 | $ | N/A | ||||
| Period average PHP:US$ exchange rate | $ | 0.01823 | $ | N/A | ||||
Translation of amounts from THB into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end THB:US$ exchange rate | $ | 0.02925 | $ | N/A | ||||
| Period average THB:US$ exchange rate | $ | 0.02944 | $ | N/A | ||||
Translation of amounts from MYR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end MYR:US$ exchange rate | $ | 0.22646 | $ | N/A | ||||
| Period average MYR:US$ exchange rate | $ | 0.22777 | $ | N/A | ||||
Translation of amounts from IDR into US$ has been made at the following exchange rates for the three months ended March 31, 2023 and 2022:
| March
31, 2023 | March
31, 2022 | |||||||
| Period-end IDR:US$ exchange rate | $ | 0.000067 | $ | N/A | ||||
| Period average IDR:US$ exchange rate | $ | 0.000066 | $ | N/A | ||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
• Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
• Earnings per share
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only "in the money" dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the years.
For the three months ended March 31, 2023 and 2022, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company's net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
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Schedule of computation of diluted net loss per share:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (5,294,927 | ) | $ | (6,548,378 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 27,082,849 | 21,892,111 | ||||||
| Net loss per share – Basic and diluted | $ | (0.20 | ) | $ | (0.30 | ) | ||
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:
Schedule of Common stock issued:
| Three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Options to purchase common stock (a) | 1,945,270 | 1,945,270 | ||||||
| Warrants granted to underwriter | 3,803,229 | 3,803,229 | ||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (b) | 1,068,000 | 1,068,000 | ||||||
| Total of common stock equivalents | 6,816,499 | 6,816,499 | ||||||
| (a) | The Board of Directors have approved a 10-year stock option at an exercise price of $6.49 per share that will be exercisable at any time. |
| (b) | The expiry date of warrants granted with Series C-1 was extended to June 30, 2022. |
• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
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As of March 31, 2023 and December 31, 2022, the Company recorded the right of use asset of $1,708,658 and $1,537,670 respectively.
• Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
• Share-based compensation
The Company follows ASC Topic 718, Compensation—Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee and non-employee), at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company's common shares on the date of grant. The Company uses a Black-Scholes option pricing model to estimate the fair value of employee stock options at the date of grant. As of March 31, 2023, those shares issued and stock options granted for service compensation, vest 180 days after the grant date, and therefore these amounts are thus recognized as expense during the three months ended March 31, 2023 and 2022. Stock-based compensation is recorded in general and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss, with corresponding credits to common stock and accumulated paid-in capital.
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its preferred and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option pricing model to estimate the grant date fair value of the warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital (the accounting treatment for common stock issuance costs). All other warrants are recorded at the grant date fair value as an expense over the requisite service period, or at the date of issuance if the warrants vest immediately.
• Related parties
The Company follows ASC 850-10, Related Party Disclosures ("ASC 850") for the identification of related parties and the disclosure of related party transactions.
Pursuant to ASC 850, the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under ASC 825, Financial Instruments, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
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The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required by ASC 850. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
• Commitments and contingencies
The Company follows the ASC 450, Commitments, to account for contingencies. Certain conditions may exist as of the date the unaudited condensed financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, which assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available, that these matters will have a material adverse effect on the Company's financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows if the current level of facts and circumstances changes in the future.
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties and operating lease liabilities, approximate their fair values because of the short maturity of these instruments.
• Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board ("FASB") or other standard setting bodies and adopted by the Company as of the specified effective date.
All other recently issued, but not yet effective, 2022 Accounting Standards Updates are not expected to have an effect on the Company.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for "smaller reporting companies."
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to be effective can only provide reasonable assurance that their objectives are achieved.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, from time to time, we have been and may be named as a defendant in various legal proceedings arising in connection with our business activities. We may also be involved, from time to time, in reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business (collectively, "regulatory matters"). We contest liability and/or the amount of damages as appropriate in each such pending matter. We do not anticipate that the ultimate liability, if any, arising out of any such pending matter will have a material effect on our financial condition, results of operations or cash flows.
Our material legal proceedings are described in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 21, "Commitments and Contingencies".
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in "Part I, Item 1A. Risk Factors" in the Company's Form 10-K filed with the Securities and Exchange Commission on March 23, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Form 10-K. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC."
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits.
EXHIBIT INDEX
| Exhibit No. | Description |
| 31.1** | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) |
| 31.2** | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) |
| 32.1++ | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith) |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** Filed herewith
++ Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOCIETY PASS INCORPORATED. | ||
| Date: May 10, 2023 | /s/ Dennis Nguyen | |
| Dennis Nguyen | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 10, 2023 | /s/ Raynauld Liang | |
| Raynauld Liang | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
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