F-1 1 formf-1.htm

 

As filed with the U.S. Securities and Exchange Commission on June 15, 2022

 

Registration No. 333-[●]

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

Starbox Group Holdings Ltd.

(Exact name of registrant as specified in its charter)

 

Cayman Islands   7310   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

VO2-03-07, Velocity Office 2, Lingkaran SV, Sunway Velocity, 55100

Kuala Lumpur, Malaysia

+603 2781 9066

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

800-221-0102

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

With a Copy to:

 

Ying Li, Esq.

Lisa Forcht, Esq.

Hunter Taubman Fischer & Li LLC
48 Wall Street, Suite 1100
New York, NY 10005
212-530-2206

Lawrence Venick, Esq.

Loeb & Loeb LLP

2206-19 Jardine House

1 Connaught Place

Central, Hong Kong SAR

852-3923-1111

 

Approximate date of commencement of proposed sale to the public: Promptly after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933

 

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act ☐

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell the securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting any offer to buy these securities in any jurisdiction where such offer or sale is not permitted.

 

SUBJECT TO COMPLETION

 

PRELIMINARY PROSPECTUS DATED JUNE 15, 2022

 

5,000,000 Ordinary Shares

 

 

Starbox Group Holdings Ltd.

 

This is an initial public offering of our ordinary shares, par value $0.001125 (“Ordinary Shares”). Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price of our Ordinary Shares to be in the range of $4.00 to $5.00 per share.

 

We have reserved the symbol “[●]” for purposes of listing our Ordinary Shares on the Nasdaq Capital Market and have applied to list our Ordinary Shares on the Nasdaq Capital Market. It is a condition to the closing of this offering that our Ordinary Shares qualify for listing on a national securities exchange.

 

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 8 to read about factors you should consider before buying our Ordinary Shares.

 

We are an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 5 of this prospectus for more information.

 

   Per Share   Total Without
Over-Allotment
Option
   Total With
Over-Allotment
Option
 
Initial public offering price  $        $                 $              
Underwriters’ discounts(1)  $    $    $  
Proceeds to our company before expenses(2)  $    $    $  

 

(1) Represents underwriting discounts equal to 7% per Ordinary Share.
   
(2) In addition to the underwriting discounts listed above, we have agreed to issue, upon closing of this offering, warrants to Network 1 Financial Securities, Inc., as representative of the several underwriters (the “Representative”), exercisable after the date of issuance and for a five-year period after the date of commencement of sales of Ordinary Shares in this offering, entitling the representative to purchase 7% of the total number of Ordinary Shares sold in this offering (including any Ordinary Shares sold as a result of the exercise of the underwriters’ over-allotment option) at a per share price equal to 140% of the public offering price (the “Representative’s Warrants”). The registration statement of which this prospectus is a part also covers the Representative’s Warrants and the Ordinary Shares issuable upon the exercise thereof. See “Underwriting” for additional information regarding total underwriter compensation.

 

This offering is being conducted on a firm commitment basis. The underwriters are obligated to take and pay for all of the Ordinary Shares if any such Ordinary Shares are taken. The underwriters expect to deliver the Ordinary Shares against payment in U.S. dollars in New York, New York on or about [●], 2022.

 

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

LOGO

 

Prospectus dated [●], 2022

 

 
 

 

TABLE OF CONTENTS

 

  Page
PROSPECTUS SUMMARY 1
   
RISK FACTORS 8
   
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 28
   
ENFORCEABILITY OF CIVIL LIABILITIES 29
   
USE OF PROCEEDS 30
   
DIVIDEND POLICY 31
   
EXCHANGE RATE INFORMATION 32
   
CAPITALIZATION 33
   
DILUTION 34
   
CORPORATE HISTORY AND STRUCTURE 35
   
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 36
   
INDUSTRY 53
   
BUSINESS 60
   
REGULATIONS 76
   
MANAGEMENT 81
   
PRINCIPAL SHAREHOLDERS 86
   
RELATED PARTY TRANSACTIONS 88
   
DESCRIPTION OF SHARE CAPITAL 89
   
SHARES ELIGIBLE FOR FUTURE SALE 106
   
MATERIAL INCOME TAX CONSIDERATION 108
   
UNDERWRITING 116
   
EXPENSES RELATING TO THIS OFFERING 123
   
LEGAL MATTERS 123
   
EXPERTS 123
   
WHERE YOU CAN FIND ADDITIONAL INFORMATION 123
   
INDEX TO FINANCIAL STATEMENTS F-1

 

i
 

 

About this Prospectus

 

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for Ordinary Shares is made to the public in the Cayman Islands. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Our business, financial condition, results of operations, and prospects may have changed since that date.

 

Conventions that Apply to this Prospectus

 

Unless otherwise indicated or the context requires otherwise, references in this prospectus to:

 

 

“GETBATS website and mobile app” are to the GETBATS cash rebate website (www.getbats.com) and the GETBATS app operated by StarboxGB (defined below);

     
 

“Members” are to retail shoppers that have registered as a member on the GETBATS website and mobile app;

     
 

“Merchants” are to retail merchants (both online and offline) that have registered as a merchant on the GETBATS website and mobile app;

     
  “MYR” are to the Malaysian ringgit, the legal currency of Malaysia;
     
  “Nasdaq” are to the Nasdaq Stock Market LLC;
     
  “Ordinary Shares” are to ordinary shares of Starbox Group (defined below), par value $0.001125 per share;
     
  “Preferred Shares” are to preferred shares of Starbox Group, par value $0.001125 per share;
     
  “SEC” are to the U.S. Securities and Exchange Commission;
     
  “SEEBATS website and mobile app” are to the SEEBATS video streaming website (www.seebats.com) and the SEEBATS app operated by StarboxSB (defined below);
     
  “Starbox Berhad” are to Starbox Holdings Berhad, a company limited by shares incorporated under the laws of Malaysia and a wholly owned subsidiary of Starbox Group;
     
  “StarboxGB” are to Starbox Rebates Sdn. Bhd., a company limited by shares incorporated under the laws of Malaysia, which is a wholly owned subsidiary of Starbox Berhad;
     
  “Starbox Group” are to Starbox Group Holdings Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands;
     
  “StarboxPB” are to Paybats Sdn. Bhd., a company limited by shares incorporated under the laws of Malaysia, which is a wholly owned subsidiary of Starbox Berhad;
     
  “StarboxSB” are to StarboxTV Sdn. Bhd., a company limited by shares incorporated under the laws of Malaysia, which is a wholly owned subsidiary of Starbox Berhad;
     
  “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States; and
     
  “we,” “us,” “our,” “our Company,” or the “Company” are to one or more of Starbox Group and its subsidiaries, as the case may be.

 

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

 

Starbox Berhad is a Malaysian holding company. Our business is conducted by our subsidiaries, StarboxPB, StarboxGB, and StarboxSB in Malaysia using MYR. Our consolidated financial statements are presented in U.S. dollars. In this prospectus, we refer to assets, obligations, commitments, and liabilities in our consolidated financial statements in U.S. dollars. These dollar references are based on the exchange rate of MYR to U.S. dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets, including accounts receivable (expressed in dollars).

 

ii
 

 

PROSPECTUS SUMMARY

 

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Ordinary Shares, discussed under “Risk Factors,” before deciding whether to buy our Ordinary Shares.

 

Unless otherwise indicated, all share amounts and per share amounts in this prospectus have been presented giving effect to a reverse split of our Ordinary Shares and Preferred Shares at a ratio of 1-for-11.25 shares approved by our shareholders on June 8, 2022.

 

Overview

 

We are building a cash rebate, digital advertising, and payment solution business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. Through our subsidiaries in Malaysia, we connect retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants, provide digital advertising services to advertisers, and provide payment solution services to merchants. Substantially all of our current operations are located in Malaysia.

 

Our cash rebate business is the foundation of the business ecosystem we are building. We have cooperated with retail merchants, which have registered on the GETBATS website and mobile app as “Merchants,” to offer cash rebates on their products or services, which have attracted retail shoppers to register on the GETBATS website and mobile app as “Members” in order to earn cash rebates for shopping online and offline. As the number of Members grows and sales of the existing Merchants increase, more retail merchants are willing to cooperate with us. As of September 30, 2021 and 2020, the GETBATS website and mobile app had 514,167 and 66,580 Members, respectively, and 723 and 478 Merchants, respectively. During the fiscal years ended September 30, 2021 and 2020, we facilitated 295,393 and 1,759 transactions through the GETBATS website and mobile app, respectively. We generate revenue by keeping an agreed-upon portion of the cash rebates offered by Merchants through the GETBATS website and mobile app.

 

Making use of the vast Member and Merchant data we have collected from the GETBATS website and mobile app, we help advertisers design, optimize, and distribute advertisements through online and digital channels. We primarily distribute advertisements through (i) our SEEBATS website and mobile app, on which viewers can watch movies and television series for free through over-the-top (“OTT”) streaming, which is a means of providing television and film content over the Internet at the request and to suit the requirements of the individual consumer, (ii) our GETBATS website and mobile app to its Members, and (iii) social media, mainly consisting of accounts of influencers and bloggers. During the fiscal years ended September 30, 2021 and 2020, we served 25 and two advertisers, respectively. We generate revenue through service fees charged to the advertisers.

 

To diversify our revenue sources and supplement our cash rebates and digital advertising service businesses, we started to provide payment solution services to merchants in May 2021 by referring them to VE Services Sdn Bhd, a Malaysian Internet payment gateway company and a related-party entity controlled by one of our beneficial shareholders (“VE Services”). Pursuant to an appointment letter dated October 1, 2020 with VE Services (the “Appointment Letter”), we serve as its independent merchant recruitment and onboarding agent and refer merchants to VE Services for payment processing. We referred 11 merchants to VE Services during the fiscal year ended September 30, 2021. We generate insignificant revenue through commissions from VE Services for our referrals and such revenue has been reported as revenue from a related party in our consolidated financial statements.

 

For the fiscal years ended September 30, 2021 and 2020, we had total revenue of $3,166,228 and $153,863, respectively, and net income of $1,447,650 and a net loss of $205,154, respectively. Revenue derived from digital advertising services accounted for approximately 99.75% and 99.53% of our total revenue for those fiscal years, respectively. Revenue derived from cash rebate services accounted for approximately 0.20% and 0.47% of our total revenue for those fiscal years, respectively. Revenue derived from payment solution services accounted for approximately 0.05% and 0.00% of our total revenue for those fiscal years, respectively.

 

1
 

 

Competitive Strengths

 

We believe that the following competitive strengths have contributed to our success and differentiated us from our competitors:

 

  business ecosystem comprising cash rebate, digital advertising, and payment solution services;
     
  capability of providing targeted digital advertising services by leveraging our business data analysis technology;
     
  solid advertiser base spanning a wide range of industries; and
     
  visionary and experienced management team with strong technical and operational expertise.

 

Growth Strategies

 

We intend to develop our business and strengthen brand loyalty by implementing the following strategies:

 

  further expand our business scale and secure new advertisers;
     
  further grow our Merchant and Member bases on the GETBATS website and mobile app;
     
  continue to invest in and develop technologies relating to data analysis; and
     
  expand our cash rebate and digital advertising services internationally.

 

Summary of Risk Factors

 

Investing in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our Ordinary Shares. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Risk Factors.”

 

Risks Related to Our Business and Industry

 

Risks and uncertainties related to our business include, but are not limited to, the following:

 

  if advertisers stop purchasing digital advertising services from us or decrease the amount they are willing to spend on marketing campaigns and promotional activities, or if we are unable to establish and maintain new relationships with advertisers, our business, financial condition, and results of operations could be materially adversely affected (see page 8 of this prospectus);
     
  if we fail to retain and expand our Merchant and Member bases, our revenue and business will be harmed (see page 8 of this prospectus);
     
  our limited operating history in rapidly evolving industries makes it difficult to accurately forecast our future operating results and evaluate our business prospects (see page 9 of this prospectus);
     
  we have significantly unstable operating revenue, anticipate increases in our operating expenses in the future, and may not achieve or sustain profitability on a consistent basis. If we cannot achieve and sustain profitability, our business, financial condition, and operating results may be adversely affected (see page 10 of this prospectus);
     
  the markets in which we operate are highly competitive, and we may not be able to compete successfully against existing or new competitors, which could reduce our market share and adversely affect our competitive position and financial performance (see page 10 of this prospectus);
     
  our major clients generate a significant portion of our revenue. Any interruption in operations in such major clients may have an adverse effect on our business, financial condition, and results of operations (see page 11 of this prospectus);

 

2
 

 

  we have licensed all of the movies and television series on our SEEBATS website and mobile app from a third-party content provider. Any interruption in the operations of the content provider or our licensing partnership may have an adverse effect on our business, financial condition, and results of operations (see page 11 of this prospectus);
     
  our payment solution service business relies on our cooperation with VE Services. Any interruption in the operations of VE Services or its cooperation with us may have an adverse effect on our business, financial condition, and results of operations (see page 11 of this prospectus);
     
  if we fail to improve our services to keep up with the rapidly changing demands, preferences, advertising trends, or technologies in the digital advertising industry, our revenue and growth could be adversely affected (see page 12 of this prospectus);
     
  our failure to anticipate or successfully implement new technologies could render our technologies or advertising services unattractive or obsolete and reduce our revenue and market share (see page 12 of this prospectus);
     
  if we fail to manage our growth or execute our strategies and future plans effectively, we may not be able to take advantage of market opportunities or meet the demand of our advertisers (see page 13 of this prospectus);
     
  the ongoing effects of the COVID-19 pandemic in Malaysia may have a material adverse effect on our business (see page 14 of this prospectus);
     
  our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions (see page 15 of this prospectus);
     
  we may be unsuccessful in expanding and operating our business internationally, which could adversely affect our results of operations (see page 15 of this prospectus);
     
  any negative publicity about us, our services, and our management may materially and adversely affect our reputation and business (see page 16 of this prospectus); and
     
  if we sustain cyber-attacks or other privacy or data security incidents that result in security breaches, we could be subject to increased costs, liabilities, reputational harm, or other negative consequences (see page 17 of this prospectus).

 

Risks Relating to this Offering and the Trading Market

 

In addition to the risks described above, we are subject to general risks and uncertainties relating to this offering and the trading market, including, but not limited to, the following:

 

  there has been no public market for our Ordinary Shares prior to this offering, and you may not be able to resell our Ordinary Shares at or above the price you pay for them, or at all (see page 20 of this prospectus);
     
  we do not intend to pay dividends for the foreseeable future (see page 22 of this prospectus);
     
  because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer (see page 24 of this prospectus); and
     
  we are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this will make it more difficult to compare our performance with other public companies (see page 25 of this prospectus).

 

3
 

 

Our Securities

 

On June 8, 2022, our shareholders approved (i) a reverse split of our outstanding Ordinary Shares at a ratio of 1-for-11.25 shares, (ii) a reverse split of our authorized and unissued Preferred Shares at a ratio of 1-for-11.25 shares, (iii) an increase in our authorized share capital from $50,000 to $999,000, and (iv) an amendment and restatement of our memorandum and articles of association, in order to reflect the foregoing alterations to our share capital. The net effect of these corporate actions is that, with effect on and from June 8, 2022, our authorized share capital was changed to $999,000, divided into 883,000,000 Ordinary Shares of par value $0.001125 each and 5,000,000 Preferred Shares of par value $0.001125 each.

 

Unless otherwise indicated, all references to Ordinary Shares, options to purchase Ordinary Shares, share data, per share data, and related information have been retroactively adjusted, where applicable, in this prospectus to reflect the reverse split as if it had occurred at the beginning of the earlier period presented.

 

Corporate Information

 

Our principal executive offices are located at VO2-03-07, Velocity Office 2, Lingkaran SV, Sunway Velocity, 55100 Kuala Lumpur, Malaysia, and our phone number is +603 2781 9066. Our registered office in the Cayman Islands is located at the offices of Gold-In (Cayman) Co., Ltd., whose physical address is Suite 102, Cannon Place, North Sound Rd., George Town, Grand Cayman, Cayman Islands with postal address P.O. Box 712, Grand Cayman, KY1-9006, Cayman Islands, and the phone number of our registered office is +886-2-55820008. We maintain a corporate website at https://www.starboxholdings.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this prospectus. Our agent for service of process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, NY 10168.

 

Corporate Structure

 

We are a Cayman Islands exempted company limited by shares incorporated on September 13, 2021. Exempted companies are Cayman Island companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Act (as amended) of the Cayman Islands (the “Cayman Companies Act”).

 

The following diagram illustrates our corporate structure upon completion of our initial public offering (“IPO”) based on a proposed number of 5,000,000 Ordinary Shares being offered, assuming no exercise of the underwriters’ over-allotment option. For more details on our corporate history, please refer to “Corporate History and Structure.”

 

 

  (1) Represents 12,600,000 Ordinary Shares indirectly held by Choo Teck Hong, the 100% beneficial owner of ZYZ Group Holdings Limited, as of the date of this prospectus.
     
  (2) Represents 3,600,000 Ordinary Shares indirectly held by Zhang Yong, the 100% beneficial owner of ZY Sales & Distribution Sdn. Bhd., as of the date of this prospectus.
     
  (3) Represents 3,600,000 Ordinary Shares indirectly held by Liu Jun, the 100% beneficial owner of Liu Marketing (M) Sdn. Bhd., as of the date of this prospectus.
     
  (4) Represents 3,600,000 Ordinary Shares indirectly held by Chen Han-Chen, the 100% beneficial owner of EVL Corporation Limited, as of the date of this prospectus.
     
  (5) Represents 3,600,000 Ordinary Shares indirectly held by Wang Jian Guo, the 100% beneficial owner of WJG Group Holding Ltd., as of the date of this prospectus.
     
  (6) Represents 3,600,000 Ordinary Shares indirectly held by Chen Chao, the 100% beneficial owner of CC Growth Edge Sdn. Bhd., as of the date of this prospectus.
     
  (7) Represents an aggregate of 8,600,000 Ordinary Shares held by seven shareholders, each one of which holds less than 5% of our Ordinary Shares, as of the date of this prospectus.

 

4
 

 

Impact of the COVID-19 Pandemic on Our Operations and Financial Performance

 

The COVID-19 pandemic has adversely affected our business operations. Specifically, significant governmental measures implemented by the Malaysian government, including various stages of lockdowns, closures, quarantines, and travel bans, led to the store closure of some of our offline Merchants. As a result, our cash rebate service business was negatively affected to a certain extent, because the number of offline sales transactions between retail shoppers and retail merchants facilitated by us did not grow as much as we expected, leading to a lower amount of cash rebate service revenue than we expected during the fiscal years ended September 30, 2021 and 2020. However, our digital advertising service revenue was not significantly affected by the COVID-19 pandemic, because more people have opted to use various online services since the beginning of the COVID-19 pandemic. As more advertisers used our digital advertising services through our websites and mobile apps and third-party social media channels to target their audiences, our revenue from digital advertising services increased significantly from fiscal year 2020 to fiscal year 2021. However, any resurgence of the COVID-19 pandemic could negatively affect the execution of customer contracts and the collection of customer payments. The extent of any future impact of the COVID-19 pandemic on our business is still highly uncertain and cannot be predicted as of the date of this prospectus. Any potential impact to our operating results will depend, to a large extent, on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities to contain the spread of the COVID-19 pandemic, almost all of which are beyond our control.

 

See “Risk Factors—Risks Related to Our Business and Industry—The ongoing effects of the COVID-19 pandemic in Malaysia may have a material adverse effect on our business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Pandemic Affecting Our Results of Operations.”

 

Implications of Our Being an “Emerging Growth Company”

 

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act.” An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies. In particular, as an emerging growth company, we:

 

  may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;
     
  are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”;
     
  are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
     
  are not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency,” and “say-on-golden-parachute” votes);
     
  are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure;
     
  are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and
     
  will not be required to conduct an evaluation of our internal control over financial reporting until our second annual report on Form 20-F following the effectiveness of our initial public offering.

 

5
 

 

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

 

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions until we no longer meet the definition of an emerging growth company. The JOBS Act provides that we would cease to be an “emerging growth company” at the end of the fiscal year in which the fifth anniversary of our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended (the “Securities Act”) occurred, if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our Ordinary Shares held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

 

Foreign Private Issuer Status

 

We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

 

  we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;
     
  for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;
     
  we are not required to provide the same level of disclosure on certain issues, such as executive compensation;
     
  we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;
     
  we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; and
     
  we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

 

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

 

The Nasdaq listing rules provide that a foreign private issuer may follow the practices of its home country, which for us is the Cayman Islands, rather than the Nasdaq rules as to certain corporate governance requirements, including the requirement that the issuer have a majority of independent directors, the audit committee, compensation committee, and nominating and corporate governance committee requirements, the requirement to disclose third-party director and nominee compensation, and the requirement to distribute annual and interim reports. A foreign private issuer that follows a home country practice in lieu of one or more of the listing rules is required to disclose in its annual reports filed with the SEC each requirement that it does not follow and describe the home country practice followed by the issuer in lieu of such requirements. Although we do not currently intend to take advantage of these exceptions to the Nasdaq corporate governance rules, we may in the future take advantage of one or more of these exemptions. See “Risk Factors—Risks Relating to this Offering and the Trading Market—Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.”

 

6
 

 

THE OFFERING

 

Securities offered by us   5,000,000 Ordinary Shares
     
Over-allotment option   We have granted the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an aggregate of 750,000 additional Ordinary Shares at the initial public offering price, less underwriting discounts.
     
Price per Ordinary Share   We currently estimate that the initial public offering price will be in the range of $4.00 to $5.00 per Ordinary Share.
     
Ordinary Shares outstanding prior to completion of this offering  

40,000,000 Ordinary Shares

See “Description of Share Capital” for more information.

     
Ordinary Shares outstanding immediately after this offering  

45,000,000 Ordinary Shares assuming no exercise of the underwriters’ over-allotment option and excluding 350,000 Ordinary Shares underlying the Representative’s Warrants

 

45,750,000 Ordinary Shares assuming full exercise of the underwriters’ over-allotment option and excluding 402,500 Ordinary Shares underlying the Representative’s Warrants

     
Listing   We have applied to have our Ordinary Shares listed on the Nasdaq Capital Market.
     
Proposed Ticker symbol   “[●]”
     
Transfer Agent   Transhare Corporation
     
Use of proceeds   We intend to use the proceeds from this offering to expand our business into other countries in Southeast Asia, upgrade our software and system, and promote our brands in Malaysia. See “Use of Proceeds” on page 30 for more information.
     
Lock-up   All of our directors and officers have agreed, subject to certain exceptions, not to sell, transfer, or dispose of, directly or indirectly, any of our Ordinary Shares or securities convertible into or exercisable or exchangeable for our Ordinary Shares for a period of 180 days after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.
     
Risk factors   The Ordinary Shares offered hereby involve a high degree of risk. You should read “Risk Factors” beginning on page 8 for a discussion of factors to consider before deciding to invest in our Ordinary Shares.

 

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RISK FACTORS

 

An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations, or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below and discussed in other parts of this prospectus are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.

 

Risks Related to Our Business and Industry

 

If advertisers stop purchasing digital advertising services from us or decrease the amount they are willing to spend on marketing campaigns and promotional activities, or if we are unable to establish and maintain new relationships with advertisers, our business, financial condition, and results of operations could be materially adversely affected.

 

A substantial majority of our revenue is derived from providing digital advertising services to retail merchant advertisers. Our digital advertising services are designed to help advertisers drive consumer demand, increase sales, and achieve operating efficiencies. Thus, our relationships with advertisers primarily depend on our ability to deliver quality advertising services at attractive volumes and prices. If advertisers are dissatisfied with the effectiveness of the advertising campaigns run through us, they may stop purchasing our digital advertising services or decrease the amount they are willing to spend on marketing campaigns and promotional activities. Our agreements with advertisers are largely short-term agreements, and advertisers may cease purchasing our digital advertising services at any time with no prior notice.

 

In addition to the quality of our digital advertising services, the willingness of retail merchant advertisers to spend their digital advertising budget through us, which is critical to our business and our ability to generate our revenue, can be influenced by a variety of factors, including:

 

macro-economic and social factors: domestic, regional, and global social, economic, and political conditions; economic and geopolitical challenges; and economic, monetary, and fiscal policies (such as concerns over a severe or prolonged slowdown in Malaysia’s economy and threats of political unrest);

 

industry-related factors: the trends, preferences, and habits of audiences towards digital advertising and the development of varying forms of digital advertising and content; and

 

advertiser-specific factors: an advertiser’s specific development strategies, business performance, financial condition, and sales and marketing plans.

 

In view of the above, we cannot ensure you that our advertisers will continue to purchase our services or that we will be able to replace, in a timely and effective manner, departing advertisers with potential new and quality advertisers. Neither can we guarantee the amount of digital advertising services our advertisers will purchase from us, or that we will be able to attract new advertisers or increase the amount of revenue we earn from advertisers over time. If we are unable to maintain existing relationships with our advertisers or continue to expand our advertiser base, the demand for our advertising services will not grow and may even decrease, which could materially and adversely affect our revenue and profitability.

 

If we fail to retain and expand our Merchant and Member bases, our revenue and business will be harmed.

 

Our revenue is derived largely from the digital advertising services we provided primarily on our websites and mobile apps. The effectiveness of our digital advertising services, in turn, depends on (i) a large repository of Merchant and Member data we have been collecting from the GETBATS website and mobile app, which enables more precise and targeted marketing by leveraging our business data analysis technology; and (ii) the Internet traffic on our GETBATS website and mobile app and SEEBATS website and mobile app, where we place our advertisements, which largely decides the number of audiences who may view our advertisements. As such, maintaining and timely updating our composite database of Merchants and Members, and maintaining sufficiently high website traffic on the GETBATS website and mobile app and the SEEBATS website and mobile app are both vital to our business operations.

 

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We must continue to retain and acquire Members on the GETBATS website and mobile app that purchase products or services through cash rebates offered by our Merchants, in order to maintain both the Internet traffic on the website and mobile app and our composite database for direct marketing. If our Members do not perceive the cash rebates offered through the GETBATS website and mobile app to be attractive or if we fail to introduce new and more relevant deals, we may not be able to retain or acquire Members at levels necessary to grow our business, which may not only affect the quality of our digital advertising services, but also comprise the number of audiences who may view our advertisements. This, in turn, may adversely affect the effectiveness of our digital advertising services, reduce our revenue from sales of digital advertising services, and thereby result in a material adverse impact on our financial performance and business prospects.

 

Moreover, we depend on our ability to attract and retain Merchants that are prepared to offer products or services with compelling cash rebates through our website and mobile app and provide our Members with a great experience. Our GETBATS website and mobile app currently feature cash rebates from retail merchants (both online and offline) in over 20 industries, such as automotive, beauty and health, books and media, electronics, fashion, food and beverages, groceries and pets, home and living, and sports and entertainment. After a merchant fills out an application form and agrees with our Merchant terms and conditions and the rate of blanket cash rebates, it becomes an authorized GETBATS Merchant and remains one indefinitely, unless the status is terminated by us or the Merchant by notice in writing. During the fiscal years ended September 30, 2021 and 2020, the GETBATS website and mobile app had 723 and 478 Merchants, respectively, and had total transaction amount of $2,501,913 and $74,867, respectively. For more details, see “Business—Cash Rebates—The Merchants.” If we are unsuccessful in our efforts to introduce services to Merchants as part of our cash rebates operating system, we will not experience a corresponding growth in our Merchant pool that is sufficient to offset the cost of these initiatives. We must continue to attract and retain Merchants to maintain our business ecosystem, where we leverage business data analysis technology to provide more precise and targeted advertisements based on our composite database of Merchants and Members on our website and mobile app. If new merchants do not find our marketing and promotional services effective, or if existing Merchants do not believe that utilizing our services provides them with a long-term increase in customers, revenue, or profits, they may stop making offers through our website and mobile app. In addition, we may experience attrition in our Merchants in the ordinary course of business, resulting from several factors, including losses to competitors and Merchant closures or bankruptcies. If we are unable to attract new merchants or if too many Merchants are unwilling to offer products or services with compelling cash rebates through our website and mobile app, we may not be able to retain or acquire Merchants in sufficient numbers to maintain our business ecosystem that relies both on our composite database of consumer spending behaviors and our website traffic. As a result, our business, financial condition, and results of operations may be adversely affected.

 

Our limited operating history in rapidly evolving industries makes it difficult to accurately forecast our future operating results and evaluate our business prospects.

 

As we launched our cash rebates and digital advertising services business in 2019, we only have a limited operating history. Members of our management team have been working together only for a short period of time and are still in the running-in period. They may still be in the process of exploring approaches to running our Company and reaching consensus among themselves, which may affect the efficiency and results of our operation. Due to our limited operating history, our historical growth rate may not be indicative of our future performance. Our future performance may be more susceptible to certain risks than a company with a longer operating history in a different industry. Many of the factors discussed below could adversely affect our business and prospects and future performance, including:

 

our ability to maintain, expand, and further develop our relationships with advertisers to meet their increasing demand;

 

our ability to introduce and manage the development of new digital advertising services;

 

the continued growth and development of the cash rebates industry and the digital advertising industry;

 

our ability to keep up with the technological developments or new business models of the rapidly evolving cash rebates industry and digital advertising industry;

 

our ability to attract and retain qualified and skilled employees;

 

our ability to effectively manage our growth; and

 

our ability to compete effectively with our competitors in the cash rebates industry and the digital advertising industry.

 

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We may not be successful in addressing the risks and uncertainties listed above, among others, which may materially and adversely affect our business, results of operations, financial condition, and future prospects.

 

We have significantly unstable operating revenue, anticipate increases in our operating expenses in the future, and may not achieve or sustain profitability on a consistent basis. If we cannot achieve and sustain profitability, our business, financial condition, and operating results may be adversely affected.

 

We have had significantly unstable and volatile operating revenue since our inception—specifically, our total revenue increased significantly by $3,012,365, or approximately 1,957.82%, to $3,166,228 for the fiscal year ended September 30, 2021 from $153,863 for the fiscal year ended September 30, 2020, primarily due to increased revenue from providing digital advertising services and cash rebate services to customers. As a result, we reported net income of $1,447,650 for the fiscal year ended September 30, 2021, representing a significant increase of $1,652,804 from a net loss of $205,154 for the fiscal year ended September 30, 2020. However, we cannot assure you that we will achieve or maintain profitability on a consistent basis. Our revenue growth may slow or our revenue may decline for a number of reasons, including reduced demand for our digital marketing services, increased competition, or our failure to capitalize on growth opportunities. Meanwhile, we expect our overall selling, general, and administrative expenses, including marketing expenses, salaries, and professional and business consulting expenses, to continue to increase in the foreseeable future, as we plan to hire additional personnel and incur additional expenses in connection with the expansion of our business operations. In addition, we also expect to incur significant additional legal, accounting, and other expenses as a newly public company. These efforts and additional expenses may be more costly than we currently expect, and there is no assurance that we will be able to maintain sufficient operating revenue to offset our operating expenses. Any failure to increase revenue or to manage our costs as we continue to grow and invest in our business would prevent us from achieving or maintaining profitability or maintaining positive operating cash flow at all, or on a consistent basis, which would cause our business, financial condition, and results of operations to suffer.

 

The markets in which we operate are highly competitive, and we may not be able to compete successfully against existing or new competitors, which could reduce our market share and adversely affect our competitive position and financial performance.

 

The cash rebates industry and the digital advertising industry in Malaysia are highly-competitive and rapidly evolving, with many new companies joining the competition in recent years and few leading companies. We compete directly with other cash rebate platforms for members and merchants and other providers of digital advertising services for advertisers and advertising revenue. Competition can be increasingly intensive and is expected to increase significantly in the future. Increased competition may result in price reductions for cash rebate offers and advertising services and thus reduced margins and loss of our market share. We compete for members, merchants, and advertisers on the following bases:

 

  breadth of member and merchant bases;
     
  brand recognition;
     
  quality of services;
     
  effectiveness of sales and marketing efforts;
     
  creativity in design and contents of advertisements;
     
  pricing and discount policies; and
     
  hiring and retention of talented staff.

 

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Our competitors may operate with different business models, have different cost structures, and may ultimately prove to be more successful or more adaptable to new regulatory, technological, and other developments. They may in the future achieve greater market acceptance and recognition and gain a greater market share. It is also possible that potential competitors may emerge and acquire a significant market share. If existing or potential competitors develop or offer services that provide significant performance, price, creative optimization, or other advantages over those offered by us, our business, results of operations, and financial condition would be negatively affected. Our existing and potential competitors may enjoy competitive advantages over us, such as longer operating history, greater brand recognition, larger advertiser base, and significantly greater financial, technical, and marketing resources. In addition, our clients often have a vast array of advertising choices—for example, we compete with traditional forms of media, such as newspapers, magazines, and radio and television broadcast, for advertisers and advertising revenue. If we are unable to sustain sufficient interest in our digital advertising services in comparison to other advertising forms, including new forms of marketing campaigns and promotional activities that may emerge in the future, our business model may no longer be viable.

 

If we fail to compete successfully, we could lose out in acquiring Members and Merchants or procuring advertisers, which could result in an adverse impact on our financial performance and business prospects. We cannot assure you that our strategies will remain competitive or that they will continue to be successful in the future. Increasing competition may result in pricing pressure and loss of our market share, either of which could have a material adverse effect on our financial condition and results of operations.

 

Our major clients generate a significant portion of our revenue. Any interruption in operations in such major clients may have an adverse effect on our business, financial condition, and results of operations.

 

During the fiscal years ended September 30, 2021 and 2020, we derived most of our revenue from a few clients. Specifically, for the fiscal year ended September 30, 2021, three clients accounted for approximately 21.7%, 10.8%, and 10.8% of our total revenue, respectively. As of September 30, 2021, two clients accounted for approximately 52.6% and 26.3% of our total accounts receivable, respectively. For the fiscal year ended September 30, 2020, one client accounted for approximately 91.6% of our total revenue and approximately 85.4% of our total accounts receivable. All of these significant customers were advertisers who used our digital advertising services during the fiscal years ended September 30, 2021 and 2020. These clients are generally able to reduce or cancel spending on our services on short notice for any reason. There are a number of factors, including our performance, that could cause the loss of, or decrease in the volume of business from, a client. Even though we have a strong record of performance, we cannot assure you that we will continue to maintain the business cooperation with these clients at the same level, or at all. The loss of business from one or more of these significant clients could materially and adversely affect our revenue and profitability. Furthermore, if any significant advertiser terminates its relationship with us, we cannot assure you that we will be able to secure an alternative arrangement with comparable advertiser in a timely manner, or at all.

 

We have licensed all of the movies and television series on our SEEBATS website and mobile app from a third-party content provider. Any interruption in the operations of the content provider or our licensing partnership may have an adverse effect on our business, financial condition, and results of operations.

 

Our success will depend, in large part, on the website traffic on our SEEBATS website and mobile app, which in turn depends on our ability to continually provide attractive and entertaining movies and television series across various genres to meet the evolving needs of viewers. Currently, we have licensed all of the movies and television series on our SEEBATS website and mobile app from Shenzhen Yunshidian Information Technology Ltd., a third-party content provider, pursuant to a Service and Licensing Agreement dated November 1, 2021. However, as the license will expire on October 31, 2023, and although we currently expect to renew the license when it expires, we cannot assure you that we will be able to maintain such license partnership at the same level, or at all. Such third-party content provider is subject to its own unique operational and financial risks, which are beyond our control. If the content provider breaches, terminates, or decides to not renew its licensing contract with us or experiences significant disruption to its operations, we will be required to find a substitute content provider for sufficient entertainment offerings in order to continually attract and retain viewers on our SEEBATS website and mobile app. If we are unable to do so in a timely or cost-effective manner, our SEEBATS website and mobile app could lose their appeal to our advertisers as a marketing platform due to the decreased website traffic. As a result, our business, financial condition, and results of operations may be adversely affected.

 

If the relevant Malaysian regulatory agency were to determine that a Film Distribution License was required for the operations of our SEEBATS website and mobile app prior to April 11, 2022, our business, financial condition, and results of operations could be adversely affected.

 

Pursuant to Section 22(1) of the Perbadanan Kemajuan Filem Nasional Malaysia Act 1981 (Unofficial Translation: the National Film Development Corporation Malaysia Act 1981) (the “FINAS Act”), “no person shall engage in any of the activities of production, distribution, or exhibition of films or any combination of those activities as specified in subsection 21(1) unless there is in force a license authorizing him to do the same.” Section 2 of the FINAS Act defines film distribution as “including the renting, hiring, and loaning of films for profit or otherwise, the importation and distribution of films produced abroad, and the distribution of films produced locally.” One of our subsidiaries, StarboxSB, operates our SEEBATS website and mobile app, on which viewers may watch movies and television series through OTT streaming, and StarboxSB obtained the Film Distribution License from the National Film Development Corporation Malaysia (the “FINAS”) on April 11, 2022. However, since we conducted our business operations through our SEEBATS website and mobile app without holding the Film Distribution License prior to April 11, 2022, we may be subject to penalty if the FINAS were to determine that a Film Distribution License was required. As of the date of this prospectus, we have not received any penalty notice from the relevant Malaysian regulatory agency.

 

Our Malaysia legal counsel, GLT Law, has advised us that, based on their understanding of the FINAS Act and their discussion with the Director of Licensing and Enforcement of the FINAS, StarboxSB is not required to obtain a Film Distribution License for “film distribution” for the following reasons: (i) as our SEEBATS website and mobile app allow viewers to access movies and television series through the Internet, this online streaming mode does not, at its strict interpretation, fall within the scope of “renting, hiring, and loaning of films” under the FINAS Act, and (ii) no enforcement actions are currently being taken towards online streaming service providers who do not have the Film Distribution License.

 

There remains uncertainty, however, inherent in relying on an opinion of counsel or the opinion of an officer at the relevant department in connection with whether we would be required to obtain a license under the FINAS Act for the business of StarboxSB. The issue of whether the Film Distribution License is required for the operations of our SEEBATS website and mobile app will be subject to future revisions of the FINAS Act and different interpretations by higher-level officers within FINAS. If FINAS were to determine that a Film Distribution License was required prior to April 11, 2022, FINAS may take enforcement action to collect from us the penalty and late fee charges in respect of unlicensed activities of StarboxSB prior to such date, which could adversely affect our business, financial condition, and results of operations. For details about the penalty for failure to comply with the FINAS Act, see “Regulations—Regulations Relating to Film Distribution.”

 

Our payment solution service business relies on our cooperation with VE Services. Any interruption in the operations of VE Services or its cooperation with us may have an adverse effect on our business, financial condition, and results of operations.

 

We provide payment solution services to merchants by referring them to VE Services for payment processing. As we merely act as a recruitment and onboarding agent during this type of transaction, our payment solution service business is highly dependent on the quality of the services provided by VE Services, and its ability to comply with the relevant laws and regulations. Since we do not have control over the operations of VE Services, if VE Services breaches the terms of its contracts with the relevant merchants, or the relevant laws and regulations, our payment solution services and our reputation may be severely impacted. In addition, if VE Services breaches or terminates the Appointment Letter with us or experiences significant disruption to its operations, we may lose our current payment solution service customers in the event that the customers discontinue the services provided by us, and we will be unable to continue providing payment solution services unless we find substitute payment solution service providers. As a result, our business, financial condition, and results of operations may be adversely affected.

 

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If we fail to improve our services to keep up with the rapidly changing demands, preferences, advertising trends, or technologies in the digital advertising industry, our revenue and growth could be adversely affected.

 

We consider the digital advertising industry to be dynamic, as we face (i) constant changes in audiences’ interests, preferences, and receptiveness over different advertisement formats, (ii) evolution of the needs of advertisers in response to shifts in their business needs and marketing strategies, and (iii) innovations in the means on digital advertising. As a result, our success depends not only on our ability to offer proper choices of media, deliver effective optimization services, and provide creative advertising ideas, but also on our ability to adapt to rapidly changing online trends and technologies to enhance the quality of existing services and to develop and introduce new services to address advertisers’ changing demands.

 

We may experience difficulties that could delay or prevent the successful development, introduction, or marketing of our new services. Any new service or enhancement will need to meet the requirements of our existing and potential advertisers and may not achieve significant market acceptance. If we fail to keep pace with changing trends and technologies, continue to offer effective optimization services and creative advertising ideas to the satisfaction of our advertisers, or introduce successful and well-accepted services for our existing and potential advertisers, we may lose our advertisers and our revenue and growth could be adversely affected.

 

Our failure to anticipate or successfully implement new technologies could render our technologies or advertising services unattractive or obsolete and reduce our revenue and market share.

 

The majority of our revenue is derived from our digital advertising services, which in turn depend on our advanced business data analysis technology for advertisements. We have built a large repository of data regarding Merchants and Members through the GETBATS website and mobile app, where we facilitate transactions between Merchants and Members, in which Merchants offer certain cash rebates to incentivize or attract Members to shop online or offline. With the data collected through our cash rebate website and mobile app, we have utilized our business data analysis capabilities to better understand and anticipate consumer spending behaviors, which enables more precise and targeted advertisement delivery by Merchants.

 

With our digital advertising services primarily driven by a composite database of consumer spending behaviors, we operate in businesses that require sophisticated data collection, processing, and software for analysis and insights. Some of the digital advertising strategy technologies, which support the industry we serve, are changing rapidly. We will be required to continue to adapt to changing technologies, either by developing new services or by enhancing our existing services, to meet client demand. We need to invest significant resources, including financial resources, in research and development to keep pace with technological advances in order to make our digital advertising services competitive in the market. Our continued success will depend on our ability to anticipate and adapt to changing technologies, manage and process increasing amounts of data and information, and improve the performance, features, and reliability of our existing services in response to changing client and industry demand.

 

However, development activities are inherently uncertain, and our investment in research and development may not generate corresponding benefits. Given the fast pace with which the online marketing strategy technology has been and will continue to be developed, we may not be able to timely upgrade our business data analysis technology, or the algorithm or engines required thereby, in an efficient and cost-effective manner, or at all. New technologies in programming or operations could render our technologies or products or services that we are developing or expect to develop in the future obsolete or unattractive, thereby limiting our ability to recover the costs relating to the design, development, testing, or marketing of our digital advertising services, and resulting in a decline in our revenue and market share.

 

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If we fail to retain and expand the user base for our payment solution service business or if our partner fails to implement and maintain a reliable and convenient payment solution system, our payment solution service business may not be successful, and our business, financial condition, and results of operations may be adversely affected.

 

We started to provide payment solution services to merchants in May 2021 by referring them to VE Services for payment processing. Since we have relatively limited operating history and experience regarding our payment solution service business, we may encounter difficulties as we advance our business operations, such as in marketing, selling, and deploying our payment services.

 

The payments industry is highly competitive. We compete against other payment solution service providers in the market, many of which have greater customer bases, volume, scale, resources, and market share than we do, which may provide significant competitive advantages. Because one of the biggest concerns for the payment solution users, is the system’s security vulnerabilities such as the threat of cyber-attacks and data breaches, users tend to choose an established brand having a relatively large market share and proven reputation. For that reason, we may incur substantial expenses in retaining and expanding our merchant user base through robust marketing campaigns and promotional activities, and we cannot assure you that these promotional efforts will be effective. To be competitive in the constantly evolving payments industry, we must keep pace with rapid technological developments to provide new and innovative payment solution services. Our payment solution service business relies, in large part, on VE Services for access to new or evolving payment technologies, but we cannot assure you that we will continue to maintain the business cooperation with it at the same level, or at all. In addition, we cannot predict the effects of technological changes on our business, which technological developments or innovations will become widely adopted, or how those technologies may be regulated. New services and technologies will continue to emerge and may render the technologies VE Services currently uses in its system obsolete. If we are unable to attract new merchant users in sufficient numbers or if VE Services fails to keep pace with the new payment technology to maintain a reliable and resilient payment system, our payment solutions service business may not be successful, leading to a waste of our substantial investment in promoting our payment solution service business as well as the diversion of management’s attention and resources. As a result, our business, financial condition, and results of operations may be adversely affected.

 

If we fail to manage our growth or execute our strategies and future plans effectively, we may not be able to take advantage of market opportunities or meet the demand of our advertisers.

 

Our business has grown substantially since our inception, and we expect it to continue to grow in terms of the scale and diversity of operations. For example, in order to diversify our business and revenue stream for future growth, we have utilized our cash rebate website and mobile app, in addition to our digital advertising service business, to facilitate transactions between Merchants and Members, in which Merchants offer certain cash rebates to incentivize or attract Members to shop online or offline, and we have provided payment solution services to Merchants. This expansion increases the complexity of our operations and may cause strain on our managerial, operational, and financial resources. We must continue to hire, train, and effectively manage new employees. If our new hires perform poorly or if we are unsuccessful in hiring, training, managing, and integrating new employees, our business, financial condition, and results of operations may be materially harmed. Our expansion will also require us to maintain the consistency of our service offerings to ensure that our market reputation does not suffer as a result of any deviations, whether actual or perceived, in the quality of our services.

 

Our future results of operations also depend largely on our ability to execute our future plans successfully. In particular, our continued growth may subject us to the following additional challenges and constraints:

 

  we face challenges in recruiting, training, and retaining highly skilled personnel, including areas of sales and marketing, advertising concepts, optimization skills, and information technology for our growing operations;
     
  we face challenges in responding to evolving industry standards and government regulations that impact our business and the cash rebates industry and the digital advertising industry in general, particularly in the areas of content dissemination;

 

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  we may have limited experience for certain new service offerings, and our expansion into these new service offerings may not achieve broad acceptance among advertisers;
     
  the execution of our future plan will be subject to the availability of funds to support the relevant capital investment and expenditures; and
     
  the successful execution of our strategies is subject to factors beyond our control, such as general market conditions, economic, and political development in Malaysia and globally.

 

All of these endeavors involve risks and will require significant management, financial, and human resources. We cannot assure you that we will be able to effectively manage our growth or to implement our strategies successfully. Besides, there is no assurance that the investment to be made by our Company as contemplated under our future plans will be successful and generate the expected return. If we are not able to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially and adversely affected.

 

The ongoing effects of the COVID-19 pandemic in Malaysia may have a material adverse effect on our business.

 

Our business operations could be materially and adversely affected by the ongoing COVID-19 pandemic. The COVID-19 pandemic has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. Such governmental actions, together with the further development of the COVID-19 pandemic, could materially disrupt our business and operations, slow down the overall economy, curtail consumer spending, and make it difficult to adequately staff our operations.

 

Specifically, in response to the COVID-19 pandemic and its spread, the Malaysian government has implemented intermittent lockdowns in various stages such as (i) imposing full movement control orders (“MCO”), under which, quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia were made mandatory; (ii) easing MCO to a Conditional Movement Control Order (“CMCO”) under which most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia; and (iii) further easing CMCO to Recovery Movement Control Order. On January 12, 2021, due to a resurgence of COVID-19 cases, the Malaysian government declared a state of emergency nationwide to combat COVID-19. On February 16, 2021, the government announced that a National COVID-19 Immunization Plan will be implemented for one year after February 2021, in which 80% of the Malaysian population will be vaccinated to achieve herd immunity. On March 5, 2021, lockdowns in most parts of the country were eased to a CMCO, however, COVID-19 cases in the country continued to rise. On May 12, 2021, the Malaysian government re-imposed a full lockdown order nationwide, until the earlier of when (i) daily COVID-19 infection cases in the country fall below 4,000; (ii) intensive care unit wards start operating at a moderate level; or (iii) 10% of the Malaysian population is fully vaccinated. The total number of COVID-19 cases in the country surpassed three million on February 13, 2022, and the number of daily cases hit a record high of 33,406 on March 5, 2022.

 

In response to efforts to contain the spread of COVID-19, we have implemented temporary measures and adjustments of work schemes to allow employees to work from home and collaborate remotely. We have taken measures to reduce the impact of the COVID-19 pandemic, including upgrading our telecommuting system, monitoring employees’ health on a daily basis, and optimizing the technology system to support potential growth in user traffic. The Malaysian government has recently eased its restrictive policies due to a decrease in COVID-19 infection cases. The government ended the nationwide state of emergency on August 1, 2021, and COVID-19 infection started to drop below the 10,000 mark daily, beginning October 3, 2021. Interstate and international travel restrictions were lifted, effective October 11, 2021, for residents who had been fully vaccinated against COVID-19, as the country achieved its target of inoculating 90% of its adult population. The government is preparing to shift into an endemic COVID-19 phase, where it will not impose wide lockdowns even if cases rise. As of March 3, 2022, over 78% of the country’s population had been fully vaccinated.

 

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However, there have been occasional outbreaks of COVID-19 in various cities in Malaysia, and the Malaysian government may again take measures to keep COVID-19 in check. Consumers may have less disposable income and the merchants’ advertising budget may experience a general decline or fluctuate depending on factors beyond our control, such as the shelter-in-place restrictions due to the COVID-19 pandemic. Substantially all our revenue is concentrated in Malaysia. Consequently, our results of operations will likely be adversely, and may be materially, affected, to the extent that the COVID-19 pandemic or any other epidemic harms the Malaysia and global economy in general. Specifically, significant governmental measures implemented by the Malaysian government, including various stages of lockdowns, closures, quarantines, and travel bans, led to the store closure of some of our offline Merchants. As a result, our cash rebate service business was negatively affected to a certain extent, because the number of offline sales transactions between retail shoppers and retail merchants facilitated by us did not grow as much as we expected, leading to a lower amount of cash rebate service revenue than we expected during the fiscal years ended September 30, 2021 and 2020. However, our digital advertising service revenue was not significantly affected by the COVID-19 pandemic, because more people have opted to use various online services since the beginning of the COVID-19 pandemic. As more advertisers used our digital advertising services through our websites and mobile apps and third-party social media channels to target their audiences, our revenue from digital advertising services increased significantly from fiscal year 2020 to fiscal year 2021. However, any resurgence of the COVID-19 pandemic could negatively affect the execution of customer contracts and the collection of customer payments. The extent to which the COVID-19 pandemic may impact us will depend on future developments, which are highly uncertain and cannot be predicted, including new information on the effectiveness of the mitigation strategies, the duration, spread, severity, and recurrence of COVID-19 and any COVID-19 variants and related travel advisories and restrictions, and the efficacy of COVID-19 vaccines, which may also take an extended period of time to be widely and adequately distributed.

 

Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions.

 

Substantially all of our current operations are located in Malaysia. Due to this geographic concentration, our financial condition and operating results are subject to greater risks from changes in general economic and other conditions in Malaysia, than the operations of more geographically diversified competitors. These risks include:

 

  changes in economic conditions and unemployment rates;
     
  changes in laws and regulations;
     
  changes in the competitive environment; and
     
  adverse weather conditions and natural disasters.

 

As a result of the geographic concentration of our business, we face a greater risk of a negative impact on our business, financial condition, results of operations, and prospects in the event that Malaysia is more severely impacted by any such adverse condition, as compared to other countries.

 

We may be unsuccessful in expanding and operating our business internationally, which could adversely affect our results of operations.

 

We plan to selectively launch our cash rebate and digital advertising services in other countries in Southeast Asia during the next three years, starting from markets such as the Philippines, Thailand, and Indonesia. For details, see “—Liquidity and Capital Resources” The entry and operation of our business in these markets could cause us to be subject to unexpected, uncontrollable, and rapidly changing events and circumstances outside Malaysia. As we grow our international operations in the future, we may need to recruit and hire new product development, sales, marketing, and support personnel in the countries in which we will launch our services or otherwise have a significant presence. Entry into new international markets typically requires the establishment of new marketing channels. Our ability to continue to expand into international markets involves various risks, including the possibility that our expectations regarding the level of returns we will achieve on such expansion will not be achieved in the near future, or ever, and that competing in markets with which we are unfamiliar may be more difficult than anticipated. If we are less successful than we expect in a new market, we may not be able to realize an adequate return on our initial investment and our operating results could suffer.

 

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Our international operations may also fail due to other risks inherent in foreign operations, including:

 

  varied, unfamiliar, unclear, and changing legal and regulatory restrictions, including different legal and regulatory standards applicable to digital advertising;
     
  compliance with multiple and potentially conflicting regulations in other countries in Southeast Asia;
     
  difficulties in staffing and managing foreign operations;
     
  longer collection cycles;
     
  different intellectual property laws that may not provide consistent and/or sufficient protections for our intellectual property;
     
  proper compliance with local tax laws, which can be complex and may result in unintended adverse tax consequences;
     
  localized spread of infection resulting from the COVID-19 pandemic, including any economic downturns and other adverse impacts;
     
  difficulties in enforcing agreements through foreign legal systems;
     
  fluctuations in currency exchange rates that may affect service demand and may adversely affect the profitability in MYR of services provided by us in foreign markets where payment for our services is made in the local currency;
     
  changes in general economic, health, and political conditions in countries where our services are provided;
     
  disruptions caused by acts of war;

 

  potential labor strike, lockouts, work slowdowns, and work stoppages; and
     
  different consumer preferences and requirements in specific international markets.

 

Our current and any future international expansion plans will require management attention and resources and may be unsuccessful. We may find it impossible or prohibitively expensive to continue expanding internationally or we may be unsuccessful in our attempt to do so, and our results of operations could be adversely impacted.

 

Any negative publicity about us, our services, and our management may materially and adversely affect our reputation and business.

 

We may from time to time receive negative publicity about us, our management, or our business. Any such negative publicity may be the result of malicious harassment or unfair competition acts by third parties. We may also be subject to government or regulatory investigations (including investigations relating to advertising materials that are alleged to be illegal) as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to defend ourselves against such third-party conduct, and we may not be able to conclusively refute any such allegations within a reasonable period of time, or at all. Harm to our reputation and confidence of advertisers and media can also arise for other reasons, including misconduct of our employees or any third-party business partners. Our reputation may be materially and adversely affected as a result of any negative publicity, which in turn may cause us to lose market share, advertising customers, industry partners, and other business partnerships.

 

The proper functioning of our websites and mobile apps is essential to our business. Any disruption to our information technology systems could materially affect our ability to maintain the satisfactory performance of our websites and mobile apps.

 

The proper functioning of our websites and mobile applications is essential to our business. The satisfactory performance, reliability, and availability of our information technology systems are critical to our ability to drive more Internet traffic to our advertising websites and mobile apps and provide effective digital advertising services for brands and retailers. Our technology or infrastructure, however, may not function properly at all times. Any system interruptions caused by computer viruses, hacking, or other attempts to harm the systems could result in the unavailability or slowdown of our websites or mobile apps and compromise the quality of the digital advertising services provided thereon. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions, which could lead to system interruptions, website or mobile application slowdowns or unavailability, or loss of data. Any of such occurrences could cause severe disruption to our daily operations. As such, our reputation may be materially and adversely affected, our market share could decline, and we could be subject to liability claims.

 

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If we sustain cyber-attacks or other privacy or data security incidents that result in security breaches, we could be subject to increased costs, liabilities, reputational harm, or other negative consequences.

 

Through our business operations, we collect large amounts of data regarding our Merchants and Members on the GETBATS website and mobile app and create a composite database of consumer spending behaviors by leveraging business data analysis technology. We also provide data management for micro, small, and medium-sized online and offline merchants to accurately organize their own customer data and accurate advertising. As such, our systems and the data stored thereon may be subject to security breach incidents. For example, our information technology may be subject to cyber-attacks, viruses, malicious software, break-ins, theft, computer hacking, phishing, employee error or malfeasance, or other security breaches. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automatic hacks. Experienced computer programmers and hackers may be able to penetrate our security controls, misappropriate or compromise sensitive proprietary or confidential information, or create system disruptions or cause shutdowns. They also may be able to develop and deploy malicious software programs that attack our systems or otherwise exploit any security vulnerabilities. The composite database stored in our systems may be vulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities, misplaced or lost data, human errors, or other similar events that could negatively affect our systems and the data stored on or transmitted by those systems, including the data of our Merchants and Members on the GETBATS website and mobile app, as well as the data and information regarding our advertiser clients who have purchased our digital advertising services on the GETBATS website and mobile app and the SEEBATS website and mobile app before, and the participating merchants and consumers who have used our payment solution services.

 

Although we have taken measures to protect sensitive data from unauthorized access, use, or disclosure, our protective measures may not be effective and our information technology may still be vulnerable to attacks. In the event of such attacks, the costs to eliminate or address the foregoing security threats and vulnerability before or after a cyber-incident could potentially be significant. Our remediation efforts may not be successful and could result in interruptions or delays of services. As threats related to cyber-attacks develop and grow, we may also find it necessary to take further steps to protect our data and infrastructure, which could be costly and therefore impact our results of operations. In the event that we are unable to prevent, detect, and remediate the foregoing security threats and vulnerabilities in a timely manner, our operations could be interrupted, or we could incur financial, legal, or reputational losses arising from misappropriation, misuse, leakage, falsification, or intentional or accidental release or loss of information maintained in our systems. The number and complexity of these threats continue to increase over time. Although we inspect our systems on a regular basis to prevent these events from occurring, the possibility of these events occurring cannot be eliminated entirely.

 

Compliance with Malaysia’s Personal Data Protection Act 2010, Personal Data Protection Order 2013, and any such existing or future data-privacy related laws, regulations, and governmental orders may entail significant expenses and could materially affect our business.

 

Our business and operations in Malaysia are subject to laws and regulations regarding data privacy and data protection pursuant to the Personal Data Protection Act 2010 (the “PDPA 2010”). In particular, the PDPA 2010 applies to any person who processes or has control over, or authorizes the processing of, any personal data regarding commercial transactions, except for any personal data processed outside of Malaysia and not intended to be further processed in Malaysia. Under the PDPA 2010, any person engaged in processing personal data shall take measures to protect the personal data from any loss, misuse, modification, unauthorized or accidental access, or disclosure, alteration, or destruction of personal data and to maintain the integrity and competence of the personnel having access to the personal data processed. Such personal data should not be kept longer than necessary for the fulfilment of the purpose for which it was to be processed and shall be destroyed or permanently deleted if it is no longer required. In addition, a data user who belongs to any of the classes of data users prescribed under the Personal Data Protection (Class of Data Users) Order 2013 (the “Order 2013”) shall be registered under the PDPA 2010 in order to process personal data. See “Regulations—Regulations Relating to Personal Data Protection.”

 

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Interpretation, application, and enforcement of such laws, rules, regulations, and governmental orders, such as the PDPA 2010 and the Order 2013, evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation, and changes in enforcement. Compliance with the PDPA 2010 and/or related implementing regulations and governmental orders could significantly increase the cost of providing our service offerings, require significant changes to our operations, or even prevent us from providing certain service offerings in Malaysia. Despite our efforts to comply with applicable laws, regulations, and other obligations relating to privacy, data protection, and information security, it is possible that our practices could fail to meet all of the requirements imposed on us by the PDPA 2010 and/or related implementing regulations and government orders. Any failure on our part to comply with such laws, rules, regulations, governmental orders, or any other obligations relating to privacy, data protection, or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension, or other penalties by Malaysian government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition, and results of operations. Even if our practices are not subject to legal challenges, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition, and results of operations. Moreover, the legal uncertainty created by the PDPA 2010 and/or related implementing regulations and governmental orders could materially and adversely affect our ability, on favorable terms, to raise capital, including engaging in offerings of our securities in the U.S. market.

 

Seasonal fluctuations in advertising activities could have a material impact on our revenue, cash flow, and operating results.

 

Our revenue, cash flow, operating results, and other key operating and performance metrics may vary from quarter to quarter, due to the seasonal nature of our advertisers’ budgets and spending on advertising campaigns. For example, advertising spending tends to rise in holiday seasons with consumer holiday spending, or closer to end-of-year in fulfilment of their annual advertising budgets, which may lead to an increase in our revenue and cash flow during such periods. Moreover, advertising inventory in holiday seasons may be more expensive, due to increased demand for advertising inventory. While our historical revenue growth may have, to some extent, masked the impact of seasonality, if our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a material impact on our revenue, cash flow, and operating results from period to period.

 

Unauthorized use of our intellectual property by third parties and expenses incurred in protecting our intellectual property rights may adversely affect our business, reputation, and competitive edge.

 

We regard our trademarks, domain names, and similar intellectual property as important to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-disclosure agreements to protect our proprietary rights. For details, please see “Business—Intellectual Property.”

 

Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented, or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. It may be difficult to maintain and enforce intellectual property rights in Malaysia. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in all jurisdictions.

 

Policing unauthorized use of our proprietary technology and other intellectual property is difficult and expensive, and litigation may be necessary in the future to enforce their intellectual property rights. Future litigation could result in substantial costs and diversion of our resources and could disrupt our business, as well as materially adversely affect our financial condition and results of operations. Further, despite the potentially substantial costs, we cannot assure you that we will prevail in such litigation.

 

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Third parties may claim that we infringe their proprietary intellectual property rights, which could cause us to incur significant legal expenses and prevent us from promoting our services.

 

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how, or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. For example, we may face intellectual property infringement claims or other allegations by third parties for information or content displayed on, retrieved from or linked to, recorded, stored, or make accessible on our websites and mobile apps—in particular the SEEBATS website and mobile app, which feature movies and television series we have licensed from a third-party content provider, and we are unable to verify if the third-party content provider has lawfully obtained or licensed all movies and television series that it has licensed to us. Otherwise, we may be subject to allegations that we have infringed on the trademarks, copyrights, patents, and other intellectual property rights of third parties, including our competitors, or that we are involved in unfair trade practices. In addition, there may be third-party trademarks, patents, copyrights, know-how, or other intellectual property rights that are infringed by our products, services, or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in various jurisdictions.

 

If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits. Additionally, the application and interpretation of intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how, or other intellectual property rights are evolving and may be uncertain, and we cannot assure you that courts or regulatory authorities would agree with our analysis. Such claims, even if they do not result in liability, may harm our reputation. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and financial performance may be materially and adversely affected.

 

If we fail to attract, recruit, or retain our key personnel, including our executive officers, senior management, and key employees, our ongoing operations and growth could be affected.

 

Our success also depends, to a large extent, on the efforts of our key personnel, including our executive officers, senior management, and other key employees who have valuable experience, knowledge, and connection in the cash rebates industry and the digital advertising industry. There is no assurance that these key personnel will not voluntarily terminate their employment with us. We do not carry, and do not intend to procure, key person insurance on any of our senior management team. The loss of any of our key personnel could be detrimental to our ongoing operations. Our success will also depend on our ability to attract and retain qualified personnel to manage our existing operations as well as our future growth. We may not be able to successfully attract, recruit, or retain key personnel, and this could adversely impact our growth. Moreover, we rely on our sales and marketing team to source new advertisers for our business growth. We have four sales and marketing personnel in total, as of the date of this prospectus, who are responsible for pitching and soliciting advertisers to purchase our digital advertising services or merchants to join our cash rebate website and mobile app. If we are unable to attract, retain, and motivate our sales and marketing personnel, our business may be adversely affected.

 

Future acquisitions may have an adverse effect on our ability to manage their business.

 

We may acquire businesses, technologies, services, or products that are complementary to our digital advertising business. Future acquisitions may expose us to potential risks, including risks associated with the integration of new operations, services, and personnel, unforeseen or hidden liabilities, the diversion of resources from our existing business and technology, our potential inability to generate sufficient revenue to offset new costs, the expenses of acquisitions, or the potential loss of or harm to relationships with both employees and customers resulting from our integration of new businesses.

 

Any of the potential risks listed above could have a material adverse effect on our ability to manage our business, revenue, and net income. We may need to raise additional debt funding or sell additional equity securities to make such acquisitions. The raising of additional debt funding by our Company, if required, would result in increased debt service obligations and could result in additional operating and financing covenants, or liens on their assets, that would restrict their operations. The sale of additional equity securities could result in additional dilution to our shareholders.

 

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We may from time to time be subject to claims, controversies, lawsuits, and legal proceedings, which could adversely affect our business, prospects, results of operations, and financial condition.

 

We may from time to time become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. However, claims and threats of lawsuits are subject to inherent uncertainties, and we are uncertain whether any of these claims would develop into a lawsuit. Lawsuits, or any type of legal proceeding, may cause our Company to incur defense costs, utilize a significant portion of our resources, and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against our Company could have a material adverse impact on our financial condition, results of operations, and cash flows. In addition, negative publicity regarding claims or judgments made against our Company may damage our reputation and may result in a material adverse impact on us.

 

We may be the subject of allegations, harassment, or other detrimental conduct by third parties, which could harm our reputation and cause us to lose market share, Members, or Merchants.

 

We may be subject to allegations by third parties or purported former employees, negative Internet postings, and other adverse public exposure on our business, operations, and staff compensation. We may also become the target of harassment or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous, or otherwise, to regulatory agencies, media, or other organizations. We may be subject to government or regulatory investigation or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against our Company, may be posted on the Internet, including social media platforms, by anyone on an anonymous basis. Any negative publicity about our Company or our management can be quickly and widely disseminated. Social media platforms and devices immediately publish the content of their users’ posts, often without filters or checks on the accuracy of the content posted. The information posted may be inaccurate and adverse to our Company, and it may harm our reputation, business, or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose market share, Members, or Merchants.

 

Our current insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

 

We believe we maintain insurance coverage that is customary for businesses of our size and type. However, we may be unable to insure against certain types of losses or claims, or the cost of such insurance may be prohibitive. Uninsured losses or claims, if they occur, could have a material adverse effect on our reputation, business, results of operations, financial condition, or prospects.

 

Risks Relating to this Offering and the Trading Market

 

There has been no public market for our Ordinary Shares prior to this offering, and you may not be able to resell our Ordinary Shares at or above the price you pay for them, or at all.

 

Prior to this offering, there has not been a public market for our Ordinary Shares. We have applied to have our Ordinary Shares listed on the Nasdaq Capital Market. An active public market for our Ordinary Shares, however, may not develop or be sustained after the offering, in which case the market price and liquidity of our Ordinary Shares will be materially and adversely affected.

 

The initial public offering price for our Ordinary Shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile.

 

The initial public offering price for our Ordinary Shares will be determined by negotiations between us and the underwriters, and may not bear a direct relationship to our earnings, book value, or any other indicia of value. We cannot assure you that the market price of our Ordinary Shares will not decline significantly below the initial public offering price. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our Ordinary Shares may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations.

 

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You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.

 

The initial public offering price of our Ordinary Shares is substantially higher than the (pro forma) net tangible book value per share of our Ordinary Shares. Consequently, when you purchase our Ordinary Shares in the offering, upon completion of the offering you will incur immediate dilution of $4.03 per share if the underwriters do not exercise the over-allotment option and $3.97 if the underwriters exercise the over-allotment option in full, assuming an initial public offering price of $4.50, which is the midpoint of the estimated range of the initial public offering price shown on the front cover of this prospectus. See “Dilution.” In addition, you may experience further dilution to the extent that Preferred Shares are converted into Ordinary Shares or upon the exercise of outstanding options we may grant from time to time.

 

If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that have been identified, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.

 

Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the fiscal years ended September 30, 2021 and 2020, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board, and other control deficiencies. The material weaknesses identified included (i) a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements; (ii) certain audit adjustments proposed by the auditor and recorded by the Company into the financial statements; and (iii) a lack of independent directors and an audit committee. Following the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance. However, the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, and the trading price of our Ordinary Shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

 

Upon completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending September 30, 2023. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.

 

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We will incur substantial increased costs as a result of being a public company.

 

Upon consummation of this offering, we will incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies.

 

Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costlier. We will incur additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers.

 

We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior March 31, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

 

After we are no longer an “emerging growth company,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures.

 

We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

 

Substantial future sales of our Ordinary Shares or the anticipation of future sales of our Ordinary Shares in the public market could cause the price of our Ordinary Shares to decline.

 

Sales of substantial amounts of our Ordinary Shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our Ordinary Shares to decline. An aggregate of 40,000,000 Ordinary Shares are outstanding before the consummation of this offering and 45,000,000 Ordinary Shares will be outstanding immediately after the consummation of this offering if the underwriters do not exercise their over-allotment option, and 45,750,000 Ordinary Shares will be outstanding immediately after the consummation of this offering if the underwriters exercise their over-allotment option in full. Sales of these shares into the market could cause the market price of our Ordinary Shares to decline.

 

We do not intend to pay dividends for the foreseeable future.

 

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

 

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If securities or industry analysts do not publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline.

 

Any trading market for our Ordinary Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.

 

The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

 

The initial public offering price for our Ordinary Shares will be determined through negotiations between the underwriters and us and may vary from the market price of our Ordinary Shares following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our initial public offering. The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

 

  actual or anticipated fluctuations in our revenue and other operating results;
     
  the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
     
  actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors;
     
  announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

 

  price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
     
  lawsuits threatened or filed against us; and
     
  other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

 

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

 

Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance our results of operations or the price of our Ordinary Shares.

 

We anticipate that we will use the net proceeds from this offering to expand our business into other countries in Southeast Asia, upgrade our software and system, and promote our brands in Malaysia. Our management will have significant discretion as to the use of the net proceeds to us from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the market price of our Ordinary Shares.

 

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If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.

 

We expect to qualify as a foreign private issuer upon the completion of this offering. As a foreign private issuer, we will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we will not be required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer immediately following the completion of this offering, we may cease to qualify as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse effect on our results of operations.

 

Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.

 

Nasdaq listing rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of the Company, it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, Nasdaq listing rules also require U.S. domestic issuers to have a compensation committee, a nominating and corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Nasdaq listing rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, certain ordinary share issuances. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such matters and to appoint a nominating and corporate governance committee. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain corporate governance standards which may afford less protection to investors.

 

If we cannot continue to satisfy the listing requirements and other rules of the Nasdaq Capital Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

 

We have applied to have our Ordinary Shares listed on the Nasdaq Capital Market upon consummation of this offering. It is a condition to the closing of this offering that our Ordinary Shares qualify for listing on a national securities exchange. Following this offering, in order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum stockholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

 

If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:

 

  a limited availability for market quotations for our securities;
     
  reduced liquidity with respect to our securities;

 

24
 

 

  a determination that our Ordinary Shares are a “penny stock,” which will require brokers trading in our Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares;
     
  limited amount of news and analyst coverage; and
     
  a decreased ability to issue additional securities or obtain additional financing in the future.

 

Anti-takeover provisions in our articles of association may discourage, delay, or prevent a change in control.

 

Some provisions of our articles of association may discourage, delay or prevent a change in control of our Company or management that shareholders may consider favorable, including, among other things, the following:

 

  provisions that authorize our board of directors to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and
     
  provisions that restrict the ability of our shareholders to call shareholder meetings.

 

Our board of directors may decline to register transfers of Ordinary Shares in certain circumstances.

 

Our board of directors may, in its sole discretion, decline to register any transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any Ordinary Share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares transferred are free of any lien in favor of us; or (vi) a fee of such maximum sum as the Nasdaq Capital Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof.

 

If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

 

This, however, is unlikely to affect market transactions of the Ordinary Shares purchased by investors in the public offering. Once the Ordinary Shares have been listed, the legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s register of members will remain with the Depository Trust Company. All market transactions with respect to those Ordinary Shares will then be carried out without the need for any kind of registration by the directors, as the market transactions will all be conducted through the Depository Trust Company systems.

 

We are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this will make it more difficult to compare our performance with other public companies.

 

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This will make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

25
 

 

Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and our Ordinary Shares.

 

For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile. See “Implications of Our Being an ‘Emerging Growth Company.’”

 

You may have difficulty enforcing judgments against us.

 

We are incorporated under the laws of the Cayman Islands as an exempted company limited by shares. Currently, the vast majority of our operations are conducted in Malaysia, and almost all of our assets are and will be located outside of the United States. In addition, almost all of our officers and directors are nationals and residents of a country other than the United States, and almost all of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe we have violated your rights, either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of Malaysia may not allow you to enforce a judgment against our assets or the assets of our directors and officers. See “Enforceability of Civil Liabilities.”

 

The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

 

Our corporate affairs are governed by our memorandum and articles of association, by the Cayman Companies Act and by the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders, and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors, or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

 

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

 

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. These rights, however, may be provided in a company’s articles of association. Our articles of association allow our shareholders holding shares which carry in aggregate not less than one-third of all votes attaching to all of our issued and outstanding shares, to requisition a general meeting of our shareholders, in which case our chairman or a majority of our directors are obliged to call such meeting. Advance notice of at least seven calendar days is required for the convening of any general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder, present in person or by proxy, holding shares which carry in aggregate not less than one-third of all votes attaching to all of our shares in issue and entitled to vote at such meeting.

 

26
 

 

If we are classified as a passive foreign investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.

 

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either:

 

  at least 75% of our gross income for the year is passive income; or
     
  the average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.

 

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

 

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

 

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our 2022 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year.

 

For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.

 

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Material Income Tax Consideration—United States Federal Income Taxation—PFIC.”

 

Our pre-IPO shareholders will be able to sell their shares after the completion of this offering subject to restrictions under Rule 144 under the Securities Act, which could impact the trading price of our Ordinary Shares.

 

40,000,000 of our Ordinary Shares are issued and outstanding as of the date of this prospectus. Our pre-IPO shareholders may be able to sell their Ordinary Shares under Rule 144 after the completion of this offering. See “Shares Eligible for Future Sale” below. Because these shareholders have paid a lower price per Ordinary Share than participants in this offering, when they are able to sell their pre-IPO shares under Rule 144, they may be more willing to accept a lower sales price than the IPO price, which could impact the trading price of our Ordinary Shares following the completion of the offering, to the detriment of participants in this offering. Under Rule 144, before our pre-IPO shareholders can sell their shares, in addition to meeting other requirements, they must meet the required holding period. We do not expect any of the Ordinary Shares to be sold pursuant to Rule 144 during the pendency of this offering.

 

Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

 

If we are forced to enter into an insolvency liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and our Company to claims, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable for a fine of $18,292.68 and to imprisonment for five years in the Cayman Islands.


 

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may,” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results, and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

  assumptions about our future financial and operating results, including revenue, income, expenditures, cash balances, and other financial items;
     
  our ability to execute our growth, and expansion, including our ability to meet our goals;
     
  current and future economic and political conditions;
     
  our capital requirements and our ability to raise any additional financing which we may require;
     
  our ability to attract clients and further enhance our brand recognition;
     
  our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business;
     
  the COVID-19 pandemic;
     
  trends and competition in the cash rebates industry and the digital advertising industry; and
     
  other assumptions described in this prospectus underlying or relating to any forward-looking statements.

 

We describe certain material risks, uncertainties, and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

 

Industry Data and Forecasts

 

This prospectus contains data related to the cash rebates industry and the digital advertising industry in Southeast Asia. This industry data includes projections that are based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The cash rebates industry and the digital advertising industry may not grow at the rate projected by industry data, or at all. The failure of the industries to grow as anticipated is likely to have a material adverse effect on our business and the market price of our Ordinary Shares. In addition, the rapidly changing nature of the cash rebates industry and the digital advertising industry subjects any projections or estimates relating to the growth prospects or future condition of our industries to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

We are incorporated under the laws of the Cayman Islands as an exempted company limited by shares. We are incorporated under the laws of the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions, and the availability of professional and support services. The Cayman Islands, however, has a less developed body of securities laws as compared to the United States and provides significantly less protection for investors than the United States. Additionally, Cayman Islands companies may not have standing to sue in the Federal courts of the United States.

 

Substantially all of our assets are located in Malaysia. In addition, most of our directors and officers are nationals or residents of Malaysia and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

 

We have appointed Cogency Global Inc. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

 

Mourant Ozannes (Cayman) LLP, our counsel with respect to the laws of the Cayman Islands, and GLT Law, our counsel with respect to Malaysian law, have advised us that there is uncertainty as to whether the courts of the Cayman Islands or Malaysia would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in the Cayman Islands or Malaysia against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

 

Mourant Ozannes (Cayman) LLP has further advised us that there are currently no statutory enforcement laws in the Cayman Islands nor any treaty between the United States and the Cayman Islands providing for enforcement of judgments. A judgment obtained in the United States, however, may be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination on the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment: (i) is given by a foreign court of competent jurisdiction; (ii) is final; (iii) is not in respect of taxes, a fine or a penalty; and (iv) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or public policy of the Cayman Islands. Furthermore, it is uncertain that Cayman Islands courts would enforce: (1) judgments of U.S. courts obtained in actions against us or other persons that are predicated upon the civil liability provisions of the U.S. federal securities laws; or (2) original actions brought against us or other persons predicated upon the Securities Act. Mourant Ozannes (Cayman) LLP has informed us that there is uncertainty with regard to Cayman Islands law relating to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature.

 

GLT Law has further advised us that there are currently no statutes, treaties, or other forms of reciprocity between the United States and Malaysia providing for the mutual recognition and enforcement of court judgments. Under Malaysian laws, a foreign judgment cannot be directly or summarily enforced in Malaysia. The judgment must first be recognized by a Malaysian court either under applicable Malaysian laws or in accordance with common law principles. For Malaysian courts to accept the jurisdiction for recognition of a foreign judgment, the foreign country where the judgment is made must be a reciprocating country expressly specified and listed in the Reciprocal Enforcement of Judgments Act 1958, Maintenance Orders (Facilities for Enforcement) Act 1949 or Probate and Administration Act 1959. As the United States is not one of the countries specified under the statutory regime where a foreign judgment can be recognized and enforced in Malaysia, a judgment obtained in the United States must be enforced by commencing fresh proceedings in a Malaysian court. The requirements for a foreign judgment to be recognized and enforceable in Malaysia are: (i) the judgment must be a monetary judgment; (ii) the foreign court must have had jurisdiction accepted by a Malaysian court; (iii) the judgment was not obtained by fraud; (iv) the enforcement of the judgment must not contravene public policy in Malaysia; (v) the proceedings in which the judgment was obtained were not opposed to natural justice, and (vi) the judgment must be final and conclusive.

 

29
 

 

USE OF PROCEEDS

 

Based upon an assumed initial public offering price of $4.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, we estimate that we will receive net proceeds from this offering, after deducting the estimated underwriting discounts and the estimated offering expenses payable by us, of approximately $19,685,001 if the underwriters do not exercise their over-allotment option, and $22,956,744 if the underwriters exercise their over-allotment option in full.

 

We plan to use the net proceeds we receive from this offering for the following purposes:

 

  approximately 60% for expanding our business into other countries in Southeast Asia, including (i) establishing representative offices or appointing local partners and hiring key marketing employees who are familiar with local languages and cultures, (ii) integrating our websites and mobile apps with the representative offices or local partners, and (iii) promoting our brands in these countries;
     
  approximately 20% for upgrading our software and systems; and
     
  approximately 20% for promoting our brands in Malaysia.

 

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

 

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DIVIDEND POLICY

 

Since our inception, we have not declared or paid cash dividends on our Ordinary Shares. Any decision to pay dividends in the future will be subject to a number of factors, including our financial condition, results of operations, the level of our retained earnings, capital demands, general business conditions, and other factors our board of directors may deem relevant. We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the operation, development, and growth of our business, and, as a result, we do not expect to pay any dividends in the foreseeable future. Consequently, we cannot give any assurance that any dividends may be declared and paid in the future.

 

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business.

 

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Malaysia subsidiary, Starbox Berhad. Starbox Berhad will rely on payments made from its subsidiaries, StarboxGB, StarboxSB, and StarboxPB. Under the Malaysian Companies Act 2016, dividends must be paid out of profit and no dividend shall be paid out if the payment will cause the company to be insolvent. As a result, in the event that Starbox Berhad or its subsidiaries incur debt on their own behalves in the future, the instruments governing the debt may restrict any such entity’s ability to pay dividends or make other distributions to us.

 

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. Malaysia is under a single-tier tax system. Dividends are exempt from income tax in the hands of shareholders. Our Malaysia subsidiary, Starbox Berhad, is not required to deduct tax from dividends paid to its shareholder, Starbox Group, and no tax credits will be available for offsetting against the recipient’s tax liability. A corporate shareholder, such as Starbox Berhad, receiving exempt single-tier dividends from its subsidiaries, StarboxGB, StarboxSB, and StarboxPB, can, in turn, distribute such dividends to its own shareholder, Starbox Group, who is also exempt on such receipts. Further, Malaysia does not impose any withholding tax (i.e., 0%) on dividends paid by Malaysian companies to non-residents. Hence, Starbox Berhad is not required to withhold any sum from its dividends for tax withholding purposes. See “Material Income Tax Consideration—Malaysian Enterprise Taxation.”

 

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EXCHANGE RATE INFORMATION

 

Our business is conducted by our subsidiaries, StarboxPB, StarboxGB, and StarboxSB in Malaysia using MYR. Capital accounts of our financial statements are translated into U.S. dollars from MYR at their historical exchange rates when the capital transactions occurred. No representation is made that the MYR amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. The following table sets forth information concerning exchange rates between MYR and the U.S. dollar for the periods indicated. Assets and liabilities are translated at the exchange rates as of the balance sheet date.

 

Balance sheet items, except for equity accounts  September 30,
2021
   September 30,
2020
 
MYR:USD  1:4.1869   1:4.1576 

 

Items in the statements of operations and comprehensive income (loss), and statements cash flows are translated at the average exchange rate of the period.

 

   Fiscal years ended 
   September 30,
2021
   September 30,
2020
 
MYR:USD   1:4.1243    1:4.2163 

 

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CAPITALIZATION

 

The following table sets forth our capitalization as of September 30, 2021:

 

  on an actual basis; and
     
  on an as adjusted basis to reflect the issuance and sale of the Ordinary Shares by us in this offering at the assumed initial public offering price of $4.50 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts, and the estimated offering expenses payable by us.

 

    September 30, 2021  
    Actual    

As

adjusted (Over-

allotment

option not exercised)

   

As

adjusted (Over-

allotment

option exercised

in full)

 
    $     $     $  
Shareholders’ Equity:                        
Preferred Shares, $0.001125 par value, 5,000,000 shares authorized, none issued and outstanding*           —        —   
Ordinary Shares, $0.001125 par value, 883,000,000 Ordinary Shares authorized, 40,000,000 Ordinary Shares issued and outstanding as of September 30, 2021*; 45,000,000 Ordinary Shares issued and outstanding, as adjusted assuming the over-allotment option is not exercised, and 45,750,000 Ordinary Shares issued and outstanding, as adjusted assuming the over-allotment option is exercised in full     45,000       50,625       51,469  
Additional paid-in capital(1)     155,024       19,834,400       23,105,299  
Retained earnings     1,082,642       1,082,642       1,082,642  
Accumulated other comprehensive loss     (21,433 )     (21,433 )     (21,433 )
Total Shareholders’ Equity     1,261,233       20,946,234       24,217,977  
Total Capitalization     1,261,233       20,946,234       24,217,977  

 

* Retrospectively restated for the effect of a 1-for-11.25 reverse share split on June 8, 2022

 

(1) Additional paid-in capital reflects the sale of Ordinary Shares in this offering at an assumed initial public offering price of $4.50 per share, and after deducting the estimated underwriting discounts, and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. We estimate that such net proceeds will be approximately $19,685,001 ($22,500,000 gross offering proceeds, less underwriting discounts and non-accountable expense allowance of $1,773,838, and offering expenses of approximately $1,041,161) if the underwriters’ over-allotment option is not exercised, or $22,956,744 ($25,875,000 gross offering proceeds, less underwriting discounts and non-accountable expense allowance of $2,041,476, and offering expenses of approximately $1,041,161) if the underwriters’ over-allotment option is exercised in full.

 

If the underwriters’ over-allotment option is not exercised, a $1.00 increase (decrease) in the assumed initial public offering price of $4.50 per share would increase (decrease) each of additional paid-in capital, total shareholders’ equity, and total capitalization by approximately $4.6 million, assuming the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts, and estimated expenses payable by us.

 

If the underwriters’ over-allotment option is exercised in full, a $1.00 increase in the assumed initial public offering price of $4.50 per share would increase each of additional paid-in capital, total shareholders’ equity, and total capitalization by approximately $5.1 million, and a $1.00 decrease in the assumed initial public offering price of $4.50 per share would decrease each of additional paid-in capital, total shareholders’ equity, and total capitalization by approximately $5.5 million, assuming the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts, and estimated expenses payable by us.

 

33
 

 

DILUTION

 

Unless otherwise indicated, all share amounts and per share amounts in this prospectus have been presented giving effect to a reverse split of our Ordinary Shares and Preferred Shares at a ratio of 1-for-11.25 shares approved by our shareholders on June 8, 2022.

 

If you invest in our Ordinary Shares, your interest will be diluted for each Ordinary Share you purchase to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.

 

Our net tangible book value as of September 30, 2021, was $1,261,233, or $0.03 per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting the net tangible book value per Ordinary Share (as adjusted for the offering) from the initial public offering price per Ordinary Share and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.

 

After giving effect to our sale of 5,000,000 Ordinary Shares offered in this offering based on an assumed initial public offering price of $4.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deduction of the estimated underwriting discounts and the estimated offering expenses payable by us, our as adjusted net tangible book value as of September 30, 2021, would have been $20,946,234, or $0.47 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of $0.44 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of $4.03 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only.

 

The following table illustrates such dilution:

 

   

No

Exercise of Over-

Allotment Option

   

Full

Exercise of Over-

Allotment Option

 
Assumed Initial public offering price per Ordinary Share   $ 4.50     $ 4.50  
Net tangible book value per Ordinary Share as of September 30, 2021   $ 0.03     $ 0.03  
Increase in net tangible book value per Ordinary Share attributable to payments by new investors   $ 0.44     $ 0.50  
Pro forma net tangible book value per Ordinary Share immediately after this offering   $ 0.47     $ 0.53  
Amount of dilution in net tangible book value per Ordinary Share to new investors in the offering   $ 4.03     $ 3.97  

 

The following tables summarize, on a pro forma as adjusted basis as of September 30, 2021, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share before deducting the estimated underwriting discounts and the estimated offering expenses payable by us.

 

   Ordinary Shares
purchased
   Total consideration   Average
price per
Ordinary
 
Over-allotment option not exercised  Number   Percent   Amount   Percent   Share 
     
Existing shareholders   40,000,000    88.89%  $200,024    0.88%  $0.01 
New investors   5,000,000    11.11%  $22,500,000    99.12%  $4.50 
Total   45,000,000    100.00%  $22,700,024    100.00%  $0.50 

 

   Ordinary Shares
purchased
   Total consideration   Average
price per
Ordinary
 
Over-allotment option exercised in full  Number   Percent   Amount   Percent   Share 
     
Existing shareholders   40,000,000    87.43%  $200,024    0.77%  $0.01 
New investors   5,750,000    12.57%  $25,875,000    99.23%  $4.50 
Total   45,750,000    100.00%  $26,075,024    100.00%  $0.57 

 

The pro forma as adjusted information as discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our Ordinary Shares and other terms of this offering determined at the pricing.

 

34
 

 

CORPORATE HISTORY AND STRUCTURE

 

Our Corporate History

 

Starbox Berhad was established on July 24, 2019, as a limited liability company organized under the laws of Malaysia. Starbox Berhad holds 100% of the equity interests in the following entities: (i) StarboxSB, which was established in Kuala Lumpur, Malaysia on July 23, 2019; (ii) StarboxGB, which was established in Kuala Lumpur, Malaysia on July 24, 2019; and (iii) StarboxPB, which was formed in Kuala Lumpur, Malaysia, on May 21, 2019.

 

In connection with this offering, we have undertaken a reorganization of our corporate structure (the “Reorganization”) in the following steps:

 

  on September 13, 2021, we incorporated Starbox Group as an exempted company limited by shares under the laws of the Cayman Islands;
     
  on November 17, 2021, Starbox Group acquired 100% of the equity interests in Starbox Berhad from its original shareholders. Consequently, Starbox Group, through a restructuring which is accounted for as a reorganization of entities under common control, became the ultimate holding company of all other entities mentioned above; and
     
  on June 8, 2022, we undertook a series of corporation actions, including a reverse split of our outstanding Ordinary Shares, a reverse split of our authorized and unissued Preferred Shares, and an increase in our authorized share capital. See “Description of Share Capital—History of Share Issuances.”

 

Our Corporate Structure

 

The following diagram illustrates our corporate structure as of the date of this prospectus and upon completion of our IPO based on a proposed number of 5,000,000 Ordinary Shares being offered, assuming no exercise of the underwriters’ over-allotment option.

 

 

  (1) Represents 12,600,000 Ordinary Shares indirectly held by Choo Teck Hong, the 100% beneficial owner of ZYZ Group Holdings Limited, as of the date of this prospectus.
     
  (2) Represents 3,600,000 Ordinary Shares indirectly held by Zhang Yong, the 100% beneficial owner of ZY Sales & Distribution Sdn. Bhd., as of the date of this prospectus.
     
  (3) Represents 3,600,000 Ordinary Shares indirectly held by Liu Jun, the 100% beneficial owner of Liu Marketing (M) Sdn. Bhd., as of the date of this prospectus.
     
  (4) Represents 3,600,000 Ordinary Shares indirectly held by Chen Han-Chen, the 100% beneficial owner of EVL Corporation Limited, as of the date of this prospectus.
     
  (5) Represents 3,600,000 Ordinary Shares indirectly held by Wang Jian Guo, the 100% beneficial owner of WJG Group Holding Ltd., as of the date of this prospectus.
     
  (6) Represents 3,600,000 Ordinary Shares indirectly held by Chen Chao, the 100% beneficial owner of CC Growth Edge Sdn. Bhd., as of the date of this prospectus.
     
  (7) Represents an aggregate of 8,600,000 Ordinary Shares held by seven shareholders, each one of which holds less than 5% of our Ordinary Shares, as of the date of this prospectus.

 

For details of our principal shareholders’ ownership, please refer to the beneficial ownership table in the section captioned “Principal Shareholders.”

 

35
 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

 

Unless otherwise indicated, all share amounts and per share amounts in this prospectus have been presented giving effect to a reverse split of our Ordinary Shares and Preferred Shares at a ratio of 1-for-11.25 shares approved by our shareholders on June 8, 2022.

 

Overview

 

We are building a cash rebate, digital advertising, and payment solution business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. Through our subsidiaries in Malaysia, we connect retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants, provide digital advertising services to advertisers, and provide payment solution services to merchants. Substantially all of our current operations are located in Malaysia.

 

Our cash rebate business is the foundation of the business ecosystem we are building. We have cooperated with retail merchants, which have registered on the GETBATS website and mobile app as Merchants, to offer cash rebates on their products or services, which have attracted retail shoppers to register on the GETBATS website and mobile app as Members in order to earn cash rebates for shopping online and offline. As the number of Members grows and sales of the existing Merchants increase, more retail merchants are willing to cooperate with us. As of September 30, 2021 and 2020, the GETBATS website and mobile app had 514,167 and 66,580 Members, respectively, and 723 and 478 Merchants, respectively. During the fiscal years ended September 30, 2021 and 2020, we facilitated 295,393 and 1,759 transactions through the GETBATS website and mobile app, respectively. We generate revenue by keeping an agreed-upon portion of the cash rebates offered by Merchants on the GETBATS website and mobile app.

 

Making use of the vast Member and Merchant data we have collected from the GETBATS website and mobile app, we help advertisers design, optimize, and distribute advertisements through online and digital channels. We primarily distribute advertisements through (i) our SEEBATS website and mobile app, on which viewers can watch movies and television series for free through OTT streaming, which is a means of providing television and film content over the Internet at the request and to suit the requirements of the individual consumer, (ii) our GETBATS website and mobile app to its Members, and (iii) social media, mainly consisting of accounts of influencers and bloggers. During the fiscal years ended September 30, 2021 and 2020, we served 25 and two advertisers, respectively. We generate revenue through service fees charged to the advertisers.

 

To diversify our revenue sources and supplement our cash rebate and digital advertising service businesses, we started to provide payment solution services to merchants in May 2021 by referring them to VE Services for payment processing. Pursuant to the Appointment Letter with VE Services, we serve as its independent merchant recruitment and onboarding agent and refer merchants to VE Services for payment processing. We referred 11 merchants to VE Services during the fiscal year ended September 30, 2021. We generate insignificant revenue through commissions from VE Services for our referrals and such revenue has been reported as revenue from a related party in our consolidated financial statements.

 

For the fiscal years ended September 30, 2021 and 2020, we had total revenue of $3,166,228 and $153,863, respectively, and net income of $1,447,650 and a net loss of $205,154, respectively. Revenue derived from digital advertising services accounted for approximately 99.75% and 99.53% of our total revenue for those fiscal years, respectively. Revenue derived from cash rebate services accounted for approximately 0.20% and 0.47% of our total revenue for those fiscal years, respectively. Revenue derived from payment solution services accounted for approximately 0.05% and 0.00% of our total revenue for those fiscal years, respectively.

 

For the fiscal years ended September 30, 2021 and 2020, approximately 99.95% and 100.00% of our revenue was generated from providing services to third-party customers, respectively, and only approximately 0.05% and 0.00% of our revenue was generated from providing payment solution services to a related-party customer, respectively.

 

36
 

 

Key Factors that Affect Our Results of Operations

 

We believe the following key factors may affect our financial condition and results of operations:

 

Our Ability to Retain and Expand Our Merchant and Member Bases

 

Our revenue growth largely depends on our ability to retain our current Members and Merchants and attract new Members and Merchants effectively, including our ability to form relationships with and manage an increasing number of Members and Merchants. In order to maintain the high growth momentum of our business, we must continuously dedicate significant resources to our Member and Merchant acquisition efforts. If we are unable to attract new Members and Merchants to register with us or if our current Members and Merchants do not continue to use our services, we may be unable to increase our revenue as we expect, and our business and results of operations may be adversely affected.

 

Our Ability to Increase Awareness of Our Brands and Develop Customer Loyalty

 

Our brands are integral to our sales and marketing efforts. We believe that maintaining and enhancing our brand name recognition in a cost-effective manner is critical to achieving widespread acceptance of our current and future service offerings and is an important element in our effort to expand our Member and Merchant bases. Successful promotion of our brand name will depend largely on our marketing efforts and our ability to provide reliable and quality services at competitive prices. Brand promotion activities may not necessarily yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in marketing activities. If we fail to successfully promote and maintain our brands, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract new Members and Merchants or retain our existing Members and Merchants, in which case our business, operating results, and financial condition would be materially and adversely affected.

 

Number of Advertisers for Our Digital Advertising Services and Our Service Fees Charged

 

Substantially all of our revenue is derived from providing digital advertising services to advertisers. Some of these advertisers have also registered through our GETBATS website and mobile app as Merchants. Our digital advertising services are designed to help advertisers drive consumer demand, increase sales, and achieve operating efficiencies. Thus, our relationships with advertisers primarily depend on our ability to deliver quality digital advertising services at attractive prices. If advertisers are dissatisfied with the effectiveness of the advertising campaigns run through our digital channels, they may stop purchasing our digital advertising services or decrease the amount they are willing to spend on marketing campaigns and promotional activities. For the fiscal year ended September 30, 2021, we provided digital advertising services to 25 advertisers, among which 13 had registered with us as Merchants as of September 30, 2021 and the remaining 12 advertisers did not. For the fiscal year ended September 30, 2020, we provided digital advertising services to two advertisers, none of which registered with us as Merchants. For the fiscal year ended September 30, 2021, three advertisers accounted for approximately 21.7%, 10.8%, and 10.8% of our total revenue, respectively. For the fiscal year ended September 30, 2020, one advertiser accounted for approximately 91.6% of our total revenue. Our dependence on a small number of advertisers for our digital advertising services could expose us to the risk of substantial losses if a single advertiser stops purchasing our digital advertising services, decreases its advertising spending, or goes out of business and we cannot find substitute customers on equivalent terms. If any of our significant customers reduces advertising spending or stops purchasing digital advertising services from us, our net revenue could be materially and adversely affected. However, as we plan to increase our marketing efforts to expand our advertiser network and provide digital advertising services to advertisers in other countries in Southeast Asia, we believe such customer concentration will diminish in the foreseeable future.

 

In addition, our results of operations are directly affected by the level of service fees we charge to advertisers. We determine the service fees based on services provided to each advertiser to satisfy its needs. Demand for our services is sensitive to prices. Many factors, including our advertisers’ satisfaction or dissatisfaction with our services, the cost of our services and the cost of services offered by our competitors, reductions in our advertisers’ spending levels, or the introduction by competitors of attractive advertising features and functionality, can significantly affect our pricing strategies. There can be no assurance that we will not be forced to engage in price-cutting initiatives, or to increase our advertising and other expenses to attract and retain advertisers in response to competitive pressures, either of which could have a material adverse effect on our revenue, operating results, and resources.

 

37
 

 

Our Ability to Increase the Transaction Volume under the Cash Rebate Programs Offered by Merchants

 

We utilize our GETBATS website and mobile app to connect Merchants and Members and facilitate Members to purchase consumer products or services from Merchants online and offline under cash rebate programs offered by Merchants. Our revenue from cash rebate services is largely affected by the volume of transactions facilitated by us between Members and Merchants. The level of our rebate service revenue depends upon many factors, including our ability to attract Merchants that are prepared to offer products or services with compelling cash rebates through our website and mobile app, to provide our Members with a great cash rebate experience, and to manage an increasing number of Members and Merchants and optimize our Members and Merchants network. If our marketing efforts fail to convince Members to use the cash rebate programs, or if we are unable to increase the volume of transactions, our net revenue would decline and our growth prospects would be severely impaired.

 

Our Ability to Expand our Payment Solution Service Business

 

We started to generate revenue from our payment solution service business in May 2021. Our revenue growth in this business largely depends on our ability to expand our network with more third-party payment service providers and refer more merchants to them to process the payments and our ability to keep pace with the new technological trends and advances in the payment area. If we are unable to attract new merchant users in sufficient numbers or if we fail to maintain long-term business partnership with third-party payment service providers, our payment solution service business may not be successful. As a result, our business, financial condition, and results of operations may be adversely affected.

 

Our Ability to Control Costs and Expenses and Improve Our Operating Efficiency

 

Our business growth is dependent on our ability to improve our operating efficiency, which is determined by our abilities to monitor and adjust costs and expenses. Specifically, we consider our ability to monitor and adjust staffing costs (including payroll and employee benefit expenses) and administrative expenses essential to the success of our business. As our Member and Merchant bases expand, if we enter into more service agreements with customers for our digital advertising services and payment solution services, or if we facilitate more transactions between Members and Merchants under the cash rebate program arrangements, our staffing costs are likely to rise. If our staffing costs and administrative expenses exceed our estimated budget and we are unable to increase our revenue as expected, our operational efficiency might decrease, having an adverse impact on our business, results of operation, and financial condition.

 

Our Geographic Concentration in Malaysia

 

Our main operations are located in Malaysia. Accordingly, our business, financial condition, and results of operations may be influenced by changes in political, economic, social, regulatory, and legal environments in Malaysia, as well as by the general state of the economy in Malaysia. Although we have not experienced losses from these situations and believe that we are in compliance with existing laws and regulations, such experience may not be indicative of future results.

 

Our Ability to Compete Successfully

 

The cash rebates industry and the digital advertising industry in Malaysia are rapidly evolving and highly competitive, and we expect competition in these industries to persist and intensify. We face competition in each of our service segments. With respect to cash rebate services, we primarily compete with other cash rebate platforms. With respect to digital advertising services, we compete directly with other digital advertising service providers in terms of brand recognition, quality of services, effectiveness of sales and marketing efforts, creativity in design and content of advertisements, pricing and discount policies, and hiring and retention of talented staff. We also face competition from other types of advertising media, such as newspapers, magazines, yellow pages, billboards, television, and radio. Significant competition could reduce our operating margins and profitability and result in a loss of market share. Some of our existing and potential competitors may have competitive advantages, such as significantly greater brand recognition and financial, marketing, or other resources that may be devoted to the development, promotion, sales, and support of their platforms. Significant competition could lead to lower prices and decreased revenue, gross margins, and profits, any of which could have a material and adverse effect on our results of operations.

 

38
 

 

COVID-19 Pandemic Affecting Our Results of Operations

 

Our operations may be further affected by the ongoing COVID-19 pandemic. In response to the COVID-19 pandemic, Malaysia has been put through various stages of lockdowns, quarantines, travel restrictions, and the temporary closure of stores and facilities nationwide, and most business sectors were only allowed to operate under strict rules and standard operating procedures mandated by the government of Malaysia. Substantially all of our revenue is concentrated in Malaysia. Consequently, our results of operations may be adversely and materially affected, to the extent that the COVID-19 pandemic or any other epidemic harms the Malaysian economy and global economy in general. The COVID-19 pandemic has adversely affected our business operations. Specifically, significant governmental measures implemented by the Malaysian government, including various stages of lockdowns, closures, quarantines, and travel bans, led to the store closure of some of our offline Merchants. As a result, our cash rebate service business was negatively affected to a certain extent, because the number of offline sales transactions between retail shoppers and retail merchants facilitated by us did not grow as much as we expected, leading to a lower amount of cash rebate service revenue than we expected during the fiscal years ended September 30, 2021 and 2020. However, our digital advertising service revenue was not significantly affected by the COVID-19 pandemic, because more people have opted to use various online services since the beginning of the COVID-19 pandemic. As more advertisers used our digital advertising services through our websites and mobile apps and third-party social media channels to target their audiences, our revenue from digital advertising services increased significantly from fiscal year 2020 to fiscal year 2021. However, any resurgence of the COVID-19 pandemic could negatively affect the execution of customer contracts and the collection of customer payments. The extent of any future impact of the COVID-19 pandemic on our business is still highly uncertain and cannot be predicted as of the date of this prospectus. Any potential impact to our operating results will depend, to a large extent, on future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities to contain the spread of the COVID-19 pandemic, almost all of which are beyond our control.

 

Key Financial Performance Indicators

 

In assessing our financial performance, we consider a variety of financial performance measures, including the number of customers for our services, the service fees we charge, our ability to collect the service fees in a timely manner, and our ability to improve our operating efficiency over time. We timely review these indicators to respond promptly to competitive market conditions and different demands and preferences from our customers. The key measures that we use to evaluate the performance of our business are set forth below and are discussed in greater detail under “Results of Operations.”

 

   For the fiscal years ended September 30, 
   2021   2020 
   % of total revenue 
Revenue from digital advertising services   99.75%   99.53%
Revenue from cash rebate services   0.20%   0.47%
Revenue from payment solution services   0.05%   0.00%
Total operating revenue   100.00%   100.00%
           
Number of advertisers for digital advertising services          
Number of repeat advertisers   2    - 
Number of new advertisers   23    2 
Total number of advertisers   25    2 
           
Average advertising spending per advertiser  $126,341   $76,573 
           
           
Number of Merchants offering cash rebates   63    32 
Number of Members who received cash rebates   3,418    532 
Number of sales transactions facilitated under the cash rebate programs   295,393    1,759 
Total sales transaction amount facilitated under the cash rebate programs  $2,501,913   $74,867 
Total cash rebates offered by Merchants  $36,087   $5,479 
           
Number of merchants for payment solution services   11    - 

 

39
 

 

Revenue

 

Revenue from digital advertising services accounted for approximately 99.75% and 99.53% of our total revenue for the fiscal years ended September 30, 2021 and 2020, respectively. Our digital advertising services are to (i) provide advertisement design and consultation services to help advertisers precisely shape their digital advertising strategies and optimize the design, content, and layout of their advertisements and (ii) the displaying of advertisers’ advertisements of products and services on our websites and mobile apps and third-party social media channels over a particular period of time and in a variety of forms, such as logos, banners, push notifications, and posts by accounts of influencers and bloggers, in order to help advertisers promote their products and services and enhance their brand awareness. This allows the advertisers to connect with our Members who are likely to have demand for the products and services provided by the advertisers. Our digital advertising service fees are determined by the different levels of design and consultation services requested by the advertisers and are dependent on the service scope and duration of the advertisement display period. Advertisement engagement with larger scope and longer duration normally requires us to put in more efforts to manage the workflow in order to satisfy our contracted performance obligations, for which we charge higher digital advertising service fees than those with shorter durations and smaller scope. Depending on the service mix, our average digital advertising service fee may be different for each reporting period. Our advertisement design and consultation services are normally rendered within a short period of time, ranging from a few days to a month. Our stand-alone selling price ranges from approximately $2,400 to approximately $10,000 for each of the service commitments for advertisement design and consultation services, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the ads. Advertisers may elect to use any agreed-upon combination of services in one package, depending on their specific needs. For advertisements display through logos, banners, push notifications, and posts by accounts of influencers and bloggers, the advertisement display duration normally ranges from a few weeks up to a few months. Depending on different advertisement distribution channels and the duration of the advertisement display, we charge digital advertising service fees in the range of approximately $5,000 to approximately $240,000 for designated services.

 

Revenue from cash rebate services accounted for approximately 0.20% and 0.47% of our total revenue for the fiscal years ended September 30, 2021 and 2020, respectively. We utilize our GETBATS website and mobile app to connect Merchants and Members and facilitate Members to purchase consumer products or services from Merchants online and offline under cash rebate programs offered by Merchants. Total cash rebates offered by Merchants range approximately from 0.25% to 25% based on the sales price of the products or services, among which approximately 86% of such cash rebates are awarded to Members, and we are entitled to receive and retain the remaining approximately 14% as rebate revenue for facilitating the online and offline sales transactions. We merely act as an agent in this type of transaction. Our revenue from cash rebate services is largely affected by the volume of the sales transactions facilitated by us through our GETBATS website and mobile app.

 

Revenue from payment solution services accounted for approximately 0.05% and 0.00% of our total revenue for the fiscal years ended September 30, 2021 and 2020, respectively. In May 2021, we started to provide payment solution services to merchants by referring them to VE Services for payment processing. VE Services first charges the merchants a service fee, with such fee rate ranging from 1.50% to 2.50% based on the processed payment amount and payment processing method used, and we are entitled to receive a portion of the service fees as commissions for our referrals. The commission rate ranges from 0.15% to 0.525% based on the total service fees collected by VE Services from merchants referred by us, with an average commission rate of approximately 0.338% for the fiscal year ended September 30, 2021.

 

40
 

 

Operating Costs

 

Our operating costs primarily consist of costs incurred to conduct our business, marketing expenses, and general and administrative expenses. Our operating costs primarily include employee salaries, welfare, website and facility maintenance expenses, marketing and promotional expenses, and professional fees.

 

Results of Operations

 

The following table summarizes the results of our operations during the fiscal years ended September 30, 2021 and 2020, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such years.

 

   For the fiscal years ended September 30, 
   2021   2020   Variances 
   Amount   % of total revenue   Amount   % of total revenue   Amount   % 
Revenue                        
Revenue from digital advertising service  $3,158,520    99.75%  $153,145    99.53%  $3,005,375    1962.44%
Revenue from cash rebate services   6,214    0.20%   718    0.47%   5,496    765.46%
Revenue from payment solution services – related party   1,494    0.05%   -    0.00%   1,494    100.00%
Total operating revenue   3,166,228    100.00%   153,863    100.00%   3,012,365    1957.82%
                               
Operating costs                              
Cost, selling, general and administrative expenses   1,026,339    32.42%   344,026    223.59%   682,313    198.33%
Total operating costs   1,026,339    32.42%   344,026    223.59%   682,313    198.33%
                               
Income (loss) from operations   2,139,889    67.58%   (190,163)   -123.59%   2,330,052    -1225.29%
                               
Other income                              
Other income(expenses), net   166    0.01%   -    0.00%   166    100.00%
Total other income, net   166    0.01%   -    0.00%   166    100.00%
                               
Income (loss)before income tax   2,140,055    67.59%   (190,163)   -123.59%   2,330,218    -1225.38%
                               
Provision for income tax expenses   692,405    21.87%   14,991    9.74%   677,414    4518.80%
                               
Net income (loss)  $1,447,650    45.72%  $(205,154)   -133.34%  $1,652,804    -805.64%

 

Revenue

 

Our total revenue increased by $3,012,365, or 1,957.82%, to $3,166,228 for the fiscal year ended September 30, 2021 from $153,863 for the fiscal year ended September 30, 2020. The increase in our revenue was primarily due to increases in the revenue from digital advertising services and from cash rebate services.

 

41
 

 

Our different revenue sources for fiscal years 2021 and 2020 were as follows:

 

   For the fiscal years ended September 30, 
   2021   2020   Change 
   Amount   %   Amount   %   Amount   % 
Revenue by service types:                              
Revenue from digital advertising services  $3,158,520    99.75%  $153,145    99.53%  $3,005,375    1,962.44%
Revenue from cash rebate services   6,214    0.20%   718    0.47%   5,496    765.46%
Revenue from payment solution services – related party   1,494    0.05%   -    0.00%   1,494    100.00%
Total operating revenue  $3,166,228    100.00%  $153,863    100.00%  $3,012,365    1,957.82%

 

Revenue from Digital Advertising Services

 

Our revenue from digital advertising services increased significantly by $3,005,375, or approximately 1,962.44%, from $153,145 in the fiscal year ended September 30, 2020 to $3,158,520 in the fiscal year ended September 30, 2021. The significant increase was due to increases in the number of advertisers and the average advertising spending per advertiser in fiscal year 2021. The total number of advertisers that used our digital advertising services was 25 in fiscal year 2021 (including two repeat advertisers and 23 new advertisers). Among the 25 advertisers, 13 had registered with us as Merchants as of September 30, 2021 and the remaining 12 had not. The total number of advertisers that used our digital advertising services was two in fiscal year 2020 (including 0 repeat advertiser and two new advertisers, who did not register with us as Merchants). The average advertising spending per advertiser was $126,341 and $76,573, for the fiscal years ended September 30, 2021 and 2020, respectively.

 

During the fiscal year ended September 30, 2021, 11 advertisers used our advertisement design and consultation services and we charged the advertising service fees in the range of approximately $2,400 to $10,000 for designated services. We generated revenue of $384,061 from providing advertisement design and consultation services in fiscal year 2021.

 

In addition, all 25 advertisers in fiscal year 2021 further used our services for advertisement display on our websites and mobile apps and third-party social media channels. Depending on the different advertisement distribution channels and the duration of the advertisement display, we charged advertising service fees in the range of approximately $5,000 to approximately $240,000 for designated services. Our revenue associated with advertisement display amounted to $2,774,459 (after deducting discount of $147,478) in fiscal year 2021.

 

In comparison, during the fiscal year ended September 30, 2020, no advertiser used our advertisement design and consultation services. The two advertisers only used our services for advertisement display on our websites and mobile apps and third-party social media channels, and we generated advertising service revenue of $153,145 in fiscal year 2020.

 

The following table presents the breakdown of our revenue from digital advertising services for the fiscal years ended September 30, 2021 and 2020:

 

   For the fiscal years ended September 30, 
   2021   2020 
Advertisement design and consultation services  $384,061   $- 
Advertisement display services, net of discount of $147,478 and nil, respectively   2,774,459    153,145 
Total revenue from digital advertising services, net  $3,158,520   $153,145 

 

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Revenue from Cash Rebates Offered by Retail Merchants

 

Our rebate service revenue increased significantly by approximately 765.46% from $718 in the fiscal year ended September 30, 2020 to $6,214 in the fiscal year ended September 30, 2021. The revenue increased due to the increased number of Merchants offering cash rebates to attract our Members to shop online and offline when total sales transactions facilitated through our GETBATS website and mobile app increased in fiscal year 2021 as compared to fiscal year 2020. For the fiscal year ended September 30, 2021, 63 Merchants offered total cash rebates of $36,087 to attract 3,418 Members to purchase products and services from these Merchants, with a sales transaction amount of $2,501,913. For the fiscal year ended September 30, 2020, 32 Merchants offered total cash rebates of $5,479 to attract 532 Members to purchase products and services from Merchants with a sales transaction amount of $74,867. The number of sales transactions facilitated through our GETBATS website and mobile app was 295,393 in fiscal year 2021 and 1,759 in fiscal year 2020. Cash rebates offered by Merchants to Members were $29,873 and $4,761 for the fiscal years ended September 30, 2021 and 2020, respectively.

 

Revenue from Payment Solution Services – Related Party

 

We started to provide payment solution services to merchants in May 2021. During the fiscal year ended September 30, 2021, we referred 11 merchants to VE Services for payment processing and earned commission fees of $1,494. Since VE Services is an entity controlled by one of our beneficial shareholders, our revenue of $1,494 from payment solution services in fiscal year 2021 was reported as revenue from a related party. As we plan to expand our network with more third-party payment service providers and refer more merchants to them to process the payments, we do not expect to derive a substantial amount of payment solution service revenue from related parties in future periods.

 

Operating Costs

 

The following table sets forth the breakdown of our operating costs for the fiscal years ended September 30, 2021 and 2020:

 

   For the fiscal years ended September 30, 
   2021   2020   Variances 
   Amount   %   Amount   %   Amount   % 
                         
Salary and employee benefit expenses  $191,981    18.71%  $41,988    12.21%  $149,993    357.23%
Professional and consulting service fees   365,774    35.64%   5,172    1.50%   360,602    6972.20%
Marketing and promotional expenses   167,803    16.35%   159,852    46.47%   7,951   4.97%
License costs   

50,000

    

4.87

%   

60,000

    

17.44

%   

(10,000

)   

-16.67

%
Website and facility maintenance expenses   185,757    18.10%   43,936    12.77%   141,821    322.79%
Depreciation   2,568    0.25%   1,948    0.57%   620    31.83%
Utility and office expenses   19,185    1.87%   3,213    0.93%   15,972    497.11%
Business travel and entertainment expenses   6,003    0.58%   25    0.01%   5,978    

23,912.00

%
Others   37,268    3.63%   27,892    8.10%   9,376    33.62%
Total operating costs  $1,026,339    100.00%  $344,026    100.00%  $

682,313

    

198.33

%

 

Our operating costs accounted for approximately 32.42% and 223.59% of our total revenue for the fiscal years ended September 30, 2021 and 2020, respectively. Although our operating costs as a percentage to our total revenue decreased significantly from 223.59% in fiscal year 2020 to 32.42% in fiscal year 2021 due to significantly increased total revenue, our operating costs increased significantly by $682,313, or approximately 198.33%, from $344,026 in fiscal year 2020 to $1,026,339 in fiscal year 2021. The significant increase was due to the following major reasons:

 

(1) Our salary and employee benefit expenses increased significantly by $149,993, or approximately 357.23%, from $41,988 in fiscal year 2020 to $191,981 in fiscal year 2021, primarily due to an increased number of employees from four in 2020 to 17 in 2021 in order to handle increased business activities associated with our digital advertising services and cash rebate services.

 

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(2) Our professional and consulting service fees increased significantly by $360,602, or approximately 6,972.20%, from $5,172 in fiscal year 2020 to $365,774 in fiscal year 2021, primarily due to increased professional expenses we paid to third-party professionals for business strategy and planning purposes and increased audit fees in connection with our proposed IPO.

 

(3)

Our marketing and promotional expenses primarily included expenses incurred to develop members, merchants, and advertisers, and to broaden our brand awareness. Our marketing and promotional expenses slightly increased by $7,951, or approximately 4.97%, from $159,852 in fiscal year 2020 to $167,803 in fiscal year 2021, the increase was a result of our increased marketing efforts to develop new merchants and advertisers for our services.

 

(4) License costs represented service fees paid to third-party content providers to license movies and television series and put such licensed movies and television series on our SEEBATS website and mobile app to drive traffic. License costs decreased by $10,000, from $60,000 in fiscal year 2020 to $50,000 in fiscal year 2021, because we paid a higher amount of service fees to third-party content providers in fiscal year 2020 as compared to fiscal year 2021. On July 29, 2019 and August 5, 2019, we entered into a Distribution and Ad Sales Deal Agreement with third-party content providers Dooya Media Group (“DMG”) and Super Runway Inc. (“SRI”), respectively, in order to license movies and television series from them and put such licensed movies and television series on our SEEBATS website and mobile app to drive traffic. Pursuant to these agreements, each with effective terms from August 2019 to July 31, 2021, we were required to pay a flat fee of $10,000 and a monthly fee of $2,500 to DMG and a monthly fee of $2,500 to SRI. See “Business—Digital Advertising Services—Ads Distribution Channels— Distribution through Our SEEBATS Website and Mobile App” for more details.
   
(5)

Website and facility maintenance expenses increased significantly by $141,821, or approximately 322.79%, from $43,936 in fiscal year 2020 to $185,757 in fiscal year 2021. In order to carry out businesses, we use (i) the GETBATS website and mobile app to connect our Members and Merchants and (ii) our websites and mobile apps and third-party social media channels to provide digital advertising services to advertisers. As of September 30, 2021 and 2020, there were an aggregate of 514,167 and 66,580 retail shoppers registered with us as Members and 723 and 478 retail merchants registered with us as Merchants, respectively.

 

Due to the increased number of Members and Merchants registered with us for our cash rebate and digital advertising services during fiscal year 2021, we incurred higher website and facility maintenance expenses to support our expanded business activities.

 

In order to support our business activities, we also conduct research and development activities to optimize and implement our websites and mobile apps (such as leveraging browser caching, improving server response time, removing render-blocking JavaScript, reducing redirects, and optimizing images), to improve their performance and drive more traffic. Research and development costs are expensed as incurred. Research and development expenses included in website and facility maintenance expenses amounted to $147,296 and $38,925 for the fiscal years ended September 30, 2021 and 2020, respectively.

   
(6) Utility and office expenses increased significantly by $15,972, or approximately 497.11%, from $3,213 in fiscal year 2020 to $19,185 in fiscal year 2021, primarily due to increased utility and office supply expenses incurred when we leased a new office in fiscal year 2021.

 

We expect our overall operating costs, including marketing expenses, salaries, and professional and business consulting expenses, to continue to increase in the foreseeable future, as we plan to hire additional personnel and incur additional expenses in connection with the expansion of our business operations. We expect our professional fees for legal, audit, and advisory services to increase when we become a public company upon the completion of this offering.

 

Provision for Income Taxes

 

Our provision for income taxes was $692,405 in fiscal year ended September 30, 2021, a significant increase of $677,414 from $14,991 in fiscal year ended September 30, 2020, primarily due to our increased taxable income generated from our digital advertising services. Our subsidiaries Starbox Berhad, StarboxGB, StarboxSB, and StarboxPB are governed by the income tax laws of Malaysia. The income tax provision in respect of operations in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations, and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified 24% enterprise income tax rate, while preferential tax rates, tax holidays, and tax exemptions may be granted on a case-by-case basis. The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less, and gross income of not more than MYR50 million) is 17% for the first MYR600,000 (or approximately $150,000) taxable income for the fiscal years ended September 30, 2021 and 2020, with the remaining balance being taxed at the 24% rate. For the fiscal years ended September 30, 2021 and 2020, the tax saving as the result of the favorable tax rates and tax exemption amounted to $10,183 and $(13,311), respectively, and per share effect of the favorable tax rate and tax exemption was $0.00 and $(0.00), respectively. Other than StarboxSB, which generated taxable income through providing digital advertising services to customers, Starbox Berhad, StarboxGB, and StarboxPB have each reported recurring operating losses since their inception. Management concluded that the chances for these three entities that suffered recurring losses in prior periods to become profitable in the foreseeable future and to utilize their net operating loss carry forwards were remote. Accordingly, we provided valuation allowance of $137,932 and $40,949 for the deferred tax assets of these subsidiaries for the fiscal years ended September 30, 2021 and 2020, respectively.

 

Net Income

 

As a result of the foregoing, we reported net income of $1,447,650 for the fiscal year ended September 30, 2021, representing a significant increase of $1,652,804 from a net loss of $205,154 for the fiscal year ended September 30, 2020.

 

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Liquidity and Capital Resources

 

We were incorporated in the Cayman Islands as a holding company and our Cayman Islands holding company did not have active business operations as of September 30, 2021 and as of the date of this prospectus. Our consolidated assets and liabilities and consolidated revenue and net income are the operation results of our subsidiaries in Malaysia. Our Malaysian subsidiaries’ ability to transfer funds to us in the form of loans or advances or cash dividends is not materially restricted by regulatory provisions in accordance with laws and regulations in Malaysia. Our subsidiaries in Malaysia are free to remit divestment proceeds, profits, dividends, or any income arising from our investment in Malaysia, as long as the payment is made in foreign currency, instead of Malaysian Ringgit, and in accordance with the Foreign Exchange Notices issued by the Bank Negara Malaysia (the Central Bank of Malaysia). As of September 30, 2021 and 2020, none of the net assets of our consolidated subsidiaries in Malaysia were restricted net assets and there were no funds transferred from our Malaysia subsidiaries to us in the form of loans, advances, or cash dividends during the fiscal years ended September 30, 2021 and 2020.

 

As of September 30, 2021 and as of the date of this prospectus, there were no cash transfers between our Cayman Islands holding company and our subsidiaries in Malaysia, in terms of loans or advances or cash dividends. Funds were transferred among our Malaysian subsidiaries, Starbox Berhad, StarboxGB, StarboxSB, and StarboxPB, as intercompany loans, and used for working capital purposes and amounted to approximately $0.48 million and $Nil during the fiscal years ended September 30, 2021 and 2020, respectively. We have not been notified of any restrictions which could limit our Malaysian subsidiaries’ ability to transfer cash among one another.

 

As of September 30, 2021, we had $2,295,277 in cash and cash on hand as compared to $371,252 as of September 30, 2020. We also had $1,362,417 and $281,593 in accounts receivable as of September 30, 2021 and September 30, 2020, respectively. Our accounts receivable included balances due from advertisers for digital advertising services rendered, where our performance obligations had been satisfied and our fees had been billed but had not been collected as of the balance sheet date. Approximately 99.9% of both the September 30, 2021 and 2020 accounts receivable balances have been collected as of the date of this prospectus. The following table summarizes our outstanding accounts receivable and subsequent collection by aging bucket:

 

Accounts Receivable by aging bucket 

Balance as of September 30,

2021

  

Subsequent

collection

  

% of

subsequent

collection

 
Less than 6 months  $1,362,342   $1,362,289    99.9%
From 7 to 9 months   12    -    0.0%
From 10 to 12 months   -    -    0.0%
Over 1 year   63    47    74.6%
Total gross accounts receivable   1,362,417    1,362,336    99.9%
Allowance for doubtful accounts   -    -    - 
Accounts Receivable, net  $1,362,417   $1,362,336    99.9%

 

Accounts Receivable by aging bucket 

Balance as of September 30,

2020

  

Subsequent

collection

  

% of

subsequent

collection

 
Less than 6 months  $208,218   $208,061    99.9%
From 7 to 9 months   73,375    73,359    99.9%
From 10 to 12 months   -    -    -%
Over 1 year   -    -    -%
Total gross accounts receivable   281,593    281,419    99.9%
Allowance for doubtful accounts   -    -    - 
Accounts Receivable, net  $281,593   $281,419    99.9%

 

As of September 30, 2021, we had deferred revenue of $800,492, which primarily consisted of digital advertising service fees received from customers before we perform the services. Such balance represented service consideration received in advance for our performance obligations that were not satisfied at the end of the year. Due to the generally short-term duration of the contracts, the majority of our unfulfilled performance obligations are satisfied in the following reporting period.

 

As of September 30, 2021, we had taxes payable of $874,834, due to our increased taxable income. We have made partial payment to settle the September 30, 2021 taxes payable balance during January to March 2022 and we originally planned to fully settle the remaining tax liabilities with local tax authorities before May 2022 when we file the 2021 annual tax returns. Due to the extension of the 2021 annual tax return filing deadline to August 31, 2022, we now expect to fully settle the remaining tax liabilities by July 2022. We plan to use our cash on hand and cash generated from our operations to settle our current tax liabilities.

 

The balance due to a related party was $756,478 as of September 30, 2021, representing a loan advance from Choo Keam Hui, our former director and one of the directors of Starbox Berhad, and was used as working capital during our normal course of business. Such advance was non-interest bearing and due on demand.

 

45
 

 

As of September 30, 2021, our working capital balance amounted to approximately $1.2 million. In assessing our liquidity, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue in the future, and our operating and capital expenditure commitments.

 

To further grow our advertiser, member, and merchant bases and increase our future revenue and cash flows, we plan to selectively launch our cash rebate and digital advertising services in other countries in Southeast Asia during the next three years, starting from markets such as the Philippines, Thailand, and Indonesia. We intend to focus on expanding into the Philippines and Thailand between July 2022 and June 2023 and become operational in these countries around April to June 2023 and to further expand into Indonesia, Brunei, Singapore, and other countries in Southeast Asia between July 2023 and June 2025.

 

To accomplish such expansion plan, we will need to establish representative offices or appoint local partners, hire new sales, marketing, and support personnel in the countries in which we will launch our services, improve or upgrade our websites and mobile apps to adapt to local languages and cultures, and promote our brands in these countries. We estimate the total related capital investment and expenditures to be approximately $12 million, among which approximately $2 million will be required within the next 12 months to support our expansion into the Philippines and Thailand, based on management’s best estimate as of the date of this prospectus. We will also need approximately $0.87 million to fully settle our September 30, 2021 tax liabilities, making the total estimated required capital expenditure within the next 12 months to be approximately $3 million. Currently, we plan to use our own cash to support our short-term business growth goal. We believe that our current cash and cash flows provided by operating activities will be sufficient to meet our working capital needs in the next 12 months from the date of this prospectus.

 

However, we may incur additional capital needs in the long term and we may use part of the proceeds from this offering to support our long-term business expansion. We may also seek additional financing, to the extent required, and there can be no assurance that such financing will be available on favorable terms, or at all. All of our business expansion endeavors involve risks and will require significant management, human resources, and capital expenditure. There is no assurance that the investment to be made by us as contemplated under our future plans will be successful and generate the expected return. If we are not able to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially and adversely affected. See “Risk Factors—Risks Related to Our Business and Industry—If we fail to manage our growth or execute our strategies and future plans effectively, we may not be able to take advantage of market opportunities or meet the demand of our advertisers” and “Risk Factors—Risks Related to Our Business and Industry—We may be unsuccessful in expanding and operating our business internationally, which could adversely affect our results of operations.”

 

The following table sets forth summary of our cash flows for the fiscal years indicated:

 

   For the Fiscal Years Ended September 30, 
   2021   2020 
Net cash provided by (used in) operating activities  $1,883,895   $(342,348)
Net cash used in investing activities   (5,203)   (8,198)
Net cash provided by financing activities   74,125    707,064 
Effect of exchange rate change on cash and restricted cash   (28,792)   5,102 
Net increase in cash   1,924,025    361,620 
Cash, beginning of year   371,252    9,632 
Cash, end of year  $2,295,277   $371,252 

 

Operating Activities

 

Net cash provided by operating activities was $1,883,895 for the fiscal year ended September 30, 2021, and primarily consisted of the following:

 

  net income of $1,447,650 for the year;

 

  an increase in accounts receivable of $1,100,053. Our accounts receivable included balances due from customers for digital advertising services, cash rebate services, and payment solution services rendered, where our performance obligations had been satisfied, and our fees had been billed but had not been collected as of the balance sheet dates. Approximately 99.9% of the September 30, 2021 accounts receivable balance has been collected as of the date of this prospectus;
     
  an increase in outstanding taxes payable of $870,528 due to our increased taxable income. We plan to fully settle the tax liabilities with local tax authorities by July 2022; and

 

  an increase in deferred revenue of $688,979. Our customers are typically required to make certain prepayments to us before we provide digital advertising services to them. We record such prepayment as deferred revenue when our performance obligations associated with the delivery of digital advertising services to customers had not been satisfied as of the balance sheet date. Due to the generally short-term duration of the contracts, the majority of our unfulfilled performance obligations are satisfied in the following reporting period.

 

Net cash used in operating activities was $342,348 for the fiscal year ended September 30, 2020, and primarily consisted of:

 

  a net loss of $205,154 for the year;

 

  an increase in accounts receivable of $277,543. 100% of the September 30, 2020 accounts receivable balance has been collected as of the date of this prospectus; and
     
  an increase in deferred revenue of $120,961.

 

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Investing Activities

 

Cash used in investing activities was $5,203 for the fiscal year ended September 30, 2021, which primarily included purchases of property and equipment of $5,203 and cash advances made to Zenapp Sdn Bhd (“Zenapp”), an entity previously controlled by Choo Keam Hui, our former director and one of the directors of Starbox Berhad, of $387,945, offset by a collection of cash advances to Zenapp of $387,945 during the year.

 

Cash used in investing activities was $8,198 for the fiscal year ended September 30, 2020, which was primarily related to purchases of property and equipment in the same amount.

 

Financing Activities

 

Cash provided by financing activities was $74,125 for the fiscal year ended September 30, 2021, consisted of capital contributions from shareholders of $200,000 and repayment of borrowings from Zenapp of $125,875.

 

Cash provided by financing activities amounted to $707,064 for the fiscal year ended September 30, 2020, consisted of borrowings from Zenapp of $707,064 to support our working capital needs.

 

Contractual Obligation and Off-Balance Sheet Arrangements

 

Contractual Obligations

 

Prior to August 2021, we had not directly entered into any office lease agreements. The lease expenses were paid by Zenapp on behalf of us, with an estimated amount of $4,200 for the fiscal year ended September 30, 2020, and approximately $3,850 for the period from October 2020 to August 2021. On August 20, 2021, our main operating subsidiaries in Malaysia started to lease office spaces from Zenapp, with an aggregate area of approximately 4,800 square feet, pursuant to three sub-tenancy agreements, each with a lease term from September 1, 2021 to August 31, 2023, and monthly rent of MYR10,000 (approximately $2,424). The sub-tenancy agreements may be renewed for successive two-year terms. The operating lease expenses for the fiscal year ended September 30, 2021 were $7,274.

 

The following tables summarize our contractual obligations as of September 30, 2021.

 

12 months ending September 30,  Lease
payment
 
2022  $85,982 
2023   85,982 
2024   85,982 
2025   78,817 
Total future minimum lease payments   336,763 
Less: imputed interest   (31,499)
Total  $305,264 

 

Off-balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of September 30, 2021 and 2020.

 

Trend Information

 

Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenue, income from continuing operations, profitability, liquidity, or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

 

Inflation

 

Inflation does not materially affect our business or the results of our operations.

 

Seasonality

 

Our revenue, cash flow, operating results, and other key operating and performance metrics may vary from quarter to quarter, due to the seasonal nature of our advertisers’ budgets and spending on advertising campaigns. For example, advertising spending tends to rise in holiday seasons with consumer holiday spending, or closer to end-of-year in fulfilment of their annual advertising budgets, which may lead to an increase in our revenue and cash flow during such periods. Moreover, advertising inventory in holiday seasons may be more expensive, due to increased demand for advertising inventory. While our historical revenue growth may have, to some extent, masked the impact of seasonality, if our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a material impact on our revenue, cash flow, and operating results from period to period.

 

47
 

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe that the critical accounting policies as disclosed in this prospectus reflect the more significant judgments and estimates used in preparation of our consolidated financial statements. Further, we elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements.

 

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:

 

Uses of Estimates

 

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include the valuation of accounts receivable, useful lives of property and equipment, the recoverability of long-lived assets and investments, provision necessary for contingent liabilities and revenue recognition. Actual results could differ from those estimates.

 

Accounts Receivable, Net

 

Accounts receivable primarily consist of service fees generated from providing digital advertising services and payment solution services to retail merchants.

 

Accounts receivable are presented net of allowance for doubtful accounts. We determine the adequacy of allowance for doubtful accounts based on individual account analysis, historical collection trend, and best estimate of specific losses on individual exposures. We establish a provision for doubtful receivables when there is objective evidence that we may not be able to collect the amounts due. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of September 30, 2021 and 2020, there was no allowance for doubtful accounts recorded, as we consider all of the outstanding accounts receivable fully collectible.

 

Revenue Recognition

 

On October 1, 2019, we adopted Accounting Standards Codification (“ASC”) 606 using the modified retrospective approach. The adoption of this standard did not have a material impact on our consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary.

 

To determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

 

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We currently generate our revenue from the following main sources:

 

Revenue from Digital Advertising Services

 

Our digital advertising service revenue is derived principally from advertising contracts with advertisers, which allow customers to place advertisements on our websites and mobile apps and third-party social media channels over a particular period of time. The advertising contracts specify the related fees and payment terms and provide evidence of the arrangements. Our digital advertising services are to (i) provide advertisement design and consultation services to help advertisers precisely shape their digital advertising strategies and optimize the design, content, and layout of their advertisements and (ii) the displaying of advertisers’ advertisement products and services on our websites and mobile apps and third-party social media channels over a particular period of time and in a variety of forms, such as logos, banners, push notification, and posts by accounts of influencers and bloggers, to help promote the sales of their products and services and enhance their brand awareness. Advertisers may elect to engage with us for only advertisement display services or both of our advertisement design and consultation services and advertisement display services.

 

In connection with these digital advertising services, we charge advertisers nonrefundable digital advertising service fees. For advertisement design and consultation services, our stand-alone selling price ranges from approximately $2,400 to approximately $10,000 for each of the service commitments, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the ads. Advertisers may elect to use any agreed-upon combination of services in one package, depending on their specific needs. For advertisement display services, we charge advertisers service fees with a range from approximately $5,000 to approximately $240,000, depending on the distribution channels used and the duration of the advertisement display. We act as a principal in providing digital advertising services to customers, have latitude in establishing prices, and are responsible for fulfilling the promise to provide customers the specified services. We recognize revenue for the amount of fees we receive from advertisers, after deducting discounts and net of service taxes under ASC 606.

 

We identify advertisement design and consultation services and advertisement display services as two separate performance obligations, as each are services that are capable of being distinct and distinct in the context of advertising contracts. Each of the service commitments in advertisement design and consultation services, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the ads, are not distinct in the context of advertising contracts, because they are inputs to deliver the combined output of advertisements to be displayed as specified by the customer. Therefore, advertisement design and consultation services are identified as a single performance obligation. We allocate revenue to each performance obligation based on its stand-alone selling price, which is specified in the contracts.

 

Our advertisement design and consultation services are normally rendered within a short period of time, ranging from a few days to a month. As all the benefits enjoyed by the advertisers can be substantially realized at the time when such design and consultation services are completed, we recognize revenue at the point when designated services are rendered and accepted by the advertisers. We do not provide rights of return, credits or discounts, price protection, or other similar privileges to advertising customers for such services and, accordingly, no variable consideration are included in such services.

 

The majority of our digital advertising contracts are for the provision of the advertisement displayed on our websites and mobile apps and third-party social media channels for a fixed period of time (ranging from a few weeks to a few months) without a guaranteed minimum impression level. In instances where certain discounts are provided to advertisers for advertisement displays, such discounts are reported as deduction of revenue. Revenue from advertisement display services is recognized over the period the advertisement is displayed. Advances from customers are deferred first and then recognized as revenue upon the completion of the contract. There are no future obligations after the completion of the contract and no rights of refund related to the impression levels.

 

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Revenue from Cash Rebate Services

 

We utilize our GETBATS website and mobile app to connect Merchants and Members and facilitate Members to purchase consumer products or services from Merchants online and offline under cash rebate programs offered by Merchants. The total cash rebates offered by Merchants range from 0.25% to 25% based on the sales price of their products or services, among which approximately 86% are awarded to Members, and we are entitled to receive and retain the remaining approximately 14% as rebate revenue for facilitating the sales transactions between Members and Merchants. There is a single performance obligation in the contract, as the performance obligation is to facilitate the sales transaction between Members and Merchants.

 

We merely act as an agent in this type of transaction. We do not have control of the goods or services facilitated in the sales transaction, have no discretion in establishing prices, and do not have the ability to direct the use of the goods or services to obtain substantially all the benefits. We recognize rebate revenue at the point when Merchants and Members are connected and the sales transactions are facilitated and completed. Revenue is reported net of service taxes.

 

Revenue from Payment Solution Services – Related Party

 

In May 2021, we started to provide payment solution services to merchants by referring them to VE Services, an entity controlled by one of our beneficial shareholders, for payment processing. VE Services uses multiple payment methods to process the payments and charges the merchants a service fee ranging from 1.50% to 2.50%, based on the processed payment amount and payment processing methods used, and we are entitled to receive a portion of the service fees as commissions for our referrals. The commission rate ranges from 0.15% to 0.525% based on the total service fees collected by VE Services from the merchants. We merely act as an agent in this type of transaction. We have no discretion in establishing prices and do not have the ability to direct the use of the services to obtain substantially all the benefits. Such revenue is recognized at the point when the payment is processed and our performance obligations are satisfied.

 

Contract Assets and Liabilities

 

We did not have contract assets as of September 30, 2021 and 2020.

 

A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration from the customers. Receipts in advance and deferred revenue, which relate to unsatisfied performance obligations at the end of the period, primarily consist of digital advertising service fees received from customers. Due to the generally short-term duration of the contracts, the majority of the performance obligations are satisfied in the following reporting period. Contract liabilities presented as deferred revenue in the consolidated balance sheets as of September 30, 2021 and 2020 amounted to $800,492 and $122,668, respectively. Revenue recognized for the fiscal years ended September 30, 2021 and 2020 that was included in the contract liabilities balance at the beginning of the period was $122,668 and nil, respectively. Deferred revenue of $800,492 as of September 30, 2021 is expected to be recognized as revenue within the next few months when we perform the designated digital advertising services.

 

We do not disclose information about remaining performance obligations pertaining to service contracts with an original expected term of one year or less.

 

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Disaggregation of Revenue

 

We disaggregate our revenue from contracts by service types, as we believe it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The summary of our disaggregation of revenue by service types for the fiscal years ended September 30, 2021 and 2020 was as follows:

 

   For the Fiscal Years Ended
September 30,
 
   2021   2020 
         
Revenue from advertising services:          
Advertisement design and consultation services  $384,061   $- 
Advertisement display services    2,921,937    153,145 
Gross revenue from advertising services   3,305,998    153,145 
Less: discount to customers for advertisement displays   (147,478)   - 
Sub-total of net revenue from advertising services   3,158,520    153,145 
Revenue from cash rebate services   6,214    718 
Revenue from payment solution services – related party   1,494    - 
Total operating revenue  $3,166,228   $153,863 

 

Income Tax

 

We account for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the fiscal years ended September 30, 2021 and 2020. We do not believe there was any uncertain tax provision as of September 30, 2021 and 2020.

 

Our operating subsidiaries in Malaysia are subject to the income tax laws of Malaysia. No significant income was generated outside Malaysia for the fiscal years ended September 30, 2021 and 2020. As of September 30, 2021, all of the tax returns of our Malaysian subsidiaries remained open for statutory examination by relevant tax authorities.

 

Recent Accounting Pronouncements

 

We consider the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.

 

Recently Adopted Accounting Pronouncements

 

On October 1, 2019, we adopted ASC 606 using the modified retrospective approach. The adoption of this standard did not have a material impact on our consolidated financial statements.

 

On October 1, 2020, we adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”), using the modified retrospective basis and did not restate comparative periods as permitted under ASU 2018-11. ASC 842 requires that lessees recognize right-of-use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. Upon the adoption of the new guidance on October 1, 2020, we recognized operating lease right-of-use assets and operating lease liabilities of approximately $0.3 million.

 

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Recent Accounting Pronouncements Not Yet Adopted

 

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. In November 2019, the FASB issued ASU 2019-10, which extends the effective date for adoption of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11 to clarify its new credit impairment guidance in ASU 326. Accordingly, for public entities that are not smaller reporting entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, we plan to adopt this guidance effective October 1, 2023. We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements.

 

In December 2020, the FASB issued ASU 2020-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (“ASU 2020-12”). ASU 2020-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2020-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. We do not expect adoption of the new guidance to have a significant impact on our consolidated financial statements.

 

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The amendments in this ASU represent changes to clarify the ASC or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this ASU affect a wide variety of Topics in the ASC and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for annual periods beginning after December 15, 2020 for public business entities. Early application is permitted. The amendments in this ASU should be applied retrospectively. We are currently evaluating the impact of pending adoption of this ASU on our consolidated financial statements.

 

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INDUSTRY

 

All the information and data presented in this section have been derived from the industry report of Frost & Sullivan Limited (“Frost & Sullivan”) commissioned by us in April 2022 entitled “Cash Rebate and Coupon Market and Digital Advertising Market Study in Southeast Asia” (the “Frost & Sullivan Report”) unless otherwise noted. Frost & Sullivan has advised us that the statistical and graphical information contained herein is drawn from its database and other sources. The following discussion contains projections for future growth, which may not occur at the rates that are projected or at all.

 

Market Size of E-commerce Industry in Southeast Asia

 

In 2021, the number of Internet users in Southeast Asia exceeded 480 million, as compared to 315.6 million in 2016. Multiple factors have collectively propelled the development of the e-commerce industry in this region, including the rapid economic development, an increasing Internet penetration rate, and the COVID-19 pandemic, which led to the implementation of various pandemic prevention and control policies, such as social distancing and quarantine measures, and subsequently prompted citizens to switch from brick-and-mortar purchase to e-commerce platform purchase.

 

The market size of the e-commerce industry in Southeast Asia significantly increased from approximately $9.3 billion to approximately $82.0 billion from 2016 to 2021, representing a compound annual growth rate (“CAGR”) of approximately 72.3%. The thriving development of leading e-commerce platforms, such as Bukalapak and Tokopedia in Indonesia, Qoo10 in Singapore, Lelong in Malaysia, Tiki and Sendo in Vietnam, and PowerBuy and HomePro in Thailand, serves as an impetus to the continuous development of the e-commerce industry. Going forward, the market size of the e-commerce industry in Southeast Asia is expected to attain approximately $234.5 billion in 2026, representing a CAGR of approximately 19.9%.

 

 

Source: The Frost & Sullivan Report

 

Overview of Cash Rebate and Coupon Market in Southeast Asia

 

Definition and Classification

 

Cash rebates and coupon are rising trends in the e-commerce market. E-commerce platforms pay cash rebate and coupon service providers a commission for redirecting retail shoppers to their platforms if the redirected retail shoppers make purchases there. Cash rebate and coupon service providers then give a sizeable portion of this commission back to retail shoppers in the form of cash rebates and/or coupons when they make purchases through cash rebate and coupon service providers’ websites, mobile apps, or browser extensions. Offering cash rebates and coupons is on the rise among e-commerce platforms in Southeast Asia.

 

Cash rebates and coupon serve as a loyalty program that mainly encourages repeat customers by giving back a certain percentage of the amount spent and/or helping them save money on their next purchase. The more retail shoppers spend, the higher the cash rebate rate they earn, and oftentimes the cash rebates earned by retail shoppers can only be used at the merchant that issued the cash rebates. This encourages higher purchase values and incentivizes repeat purchases to use the cash rebates earned, which helps merchants retain customers while enhancing customer experience.

 

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Through their websites and apps, cash rebate and coupon service providers offer cash rebates and coupons on a wide range of products and services, including groceries, entertainment, dating services, online banking, and flights. Cash rebate sites sometimes have communities of users, who are often savvy buyers willing to share their experience and money-saving tips. This further enhances the shopping experiences of customers.

 

Market Size

 

The growing reliance on the Internet and web-based applications and the use of mobile devices has translated into the growth of the e-commerce industry in Southeast Asia. Currently, an increasing number of online shoppers would use cash rebates and coupons to make purchases. The increasing penetration of smartphones and the growing prevalence of mobile payments have made mobile shopping particularly popular, which in turn drives

 

The growth of the cash rebate and coupon industry in Southeast Asia has been driven by the growth of the e-commerce industry, an increasing smartphone penetration rate, and the growing prevalence of mobile payments in Southeast Asia. In 2021, the market size of the cash rebate and coupon industry in Southeast Asia was approximately $2,132.0 million, representing a CAGR of approximately 58.4% from approximately $213.9 million in 2016. Going forward, cash rebates and coupons are expected to remain powerful incentives for retail shoppers to return and spend more on their favorite online stores. It is expected that the market size of the cash rebate and coupons industry in Southeast Asia would reach approximately $7,035.0 million by 2026, representing a CAGR of approximately 23.1% from 2022 to 2026.

 

 

Source: The Frost & Sullivan Report

 

Overview of Digital Advertising Industry in Southeast Asia

 

Definition, Classification, and Types of Digital Advertising

 

With the growing number of Internet users, corporations have placed greater importance on digital advertising. Digital advertising channels, including websites, apps, mobile sites, search engines, and social media platforms, serve as marketing tools for targeting and interacting with specific audience groups directly. The types of digital advertising include (i) display advertising, (ii) social advertising, (iii) third-party redirecting, (iv) search engine marketing, (v) social media management, (vi) online monitoring, (vii) search engine optimization, (viii) app development, (ix) email and instant messaging marketing, and (x) video marketing.

 

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Source: The Frost & Sullivan Report

 

Digital advertising enables merchants to expand their reach to different consumers for greater exposure. Combining the data collected from the Internet and each marketing campaign, digital advertising service providers are able to provide valuable feedback to help companies better understand their target market and develop more specific strategies to grow their business.

 

Unlike traditional marketing services, digital advertising services provide more effective marketing solutions that target and interact with specific audience groups. For example, when Internet users use keywords to search for specific information, these digital advertising services would enable the search result pages to display the relevant information in the most effective and customized manner on the respective platforms, thus resulting in an increase in traffic driven to the advertisers’ websites or marketing campaigns. The types of services offered by digital advertising service providers can be divided into six main categories:

 

  Search engine marketing: an efficient method in bidding for advertisement spaces on the search result pages to display advertisers’ advertisements, which could be shown in the form of websites and images;
     
  Search engine optimization: the improvement of rankings of the advertisers’ websites on the organic search result pages;
     
  Video Internet advertising: the creation and publishing of video advertisements on search engine platforms;
     
  Social media marketing: the creation and publishing of relevant content on social media platforms, including creating and managing the profile pages of advertisers, online-to-offline marketing campaigns, and regular posting of the latest updates of advertisers;
     
  Display Internet advertising: the creation and publishing of online banners on search engine platforms; and
     
  Other types of Internet advertising: the creation and publishing of advertising materials through other Internet media, such as email.

 

The global market, including Southeast Asia, of search engine platforms is dominated by a handful of market players, with Google being the predominant market leader, followed by Yahoo and Bing. The market of search engine platforms on video content is dominated by YouTube. The market of social media platforms is dominated by Facebook, Instagram, and WeChat. In addition, global tech giants, such as Amazon and Alibaba, have been growing in prevalence in recent years as the search engines for consumer products. More recently, tech giants in China have been active in increasing their presence in the Southeast Asia market through investment activities, demonstrating great potential in this region.

 

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Value Chain Analysis

 

The upstream in the value chain of the digital advertising industry consists of merchants that would like to promote their products or services through digital media. As merchants increasingly realize the potential of digital advertising, they have become more willing to spend their marketing budget on digital advertising campaigns in recent years. Global brands usually form a partnership with multinational media agencies to support the brand’s marketing campaigns globally. However, in order to market themselves to the local market effectively, it is common for brands to acquire marketing services from local agencies, due to their local knowledge and expertise.

 

The midstream in the value chain of the digital advertising industry consists of digital advertising service providers and third-party Internet platforms, such as online search engines, social media platforms, and messenger apps. Digital advertising service providers assist merchants to manage their marketing campaigns and work with different Internet platforms in developing new advertising products and understanding consumers’ evolving needs. After a marketing campaign launches, Internet platforms will be able to provide data to the digital advertising service providers regarding the performances of the marketing campaign.

 

The downstream in the value chain of the digital advertising industry is Internet users that that actively browse different webpages and social media pages.

 

 

Source: The Frost & Sullivan Report

 

Market Size of Digital Advertising Industry in Southeast Asia

 

The economic prosperity, favorable regional and local government policies, and the continuous development in network infrastructure serve as an integral impetus to the development of the online business landscape. During the past few years, consumers have been restricted by COVID-19 pandemic prevention and control measures and therefore spent more time and resources on owned-media channels, such as websites, mobile apps, and customer-service channels, while on the supply end there has been a subsequent shift in marketing and advertising spending as merchants diversify their digital marketing across paid and owned media. Besides, as data and analytics are becoming increasingly pivotal in formulating targeted and personalized strategies, the overall structural shifts in consumer behavior and marketing activities have greatly spurred the demand for digital advertising services. As a result, the market size of the digital advertising industry in Southeast Asia increased from approximately $5.3 billion to approximately $10.0 billion from 2016 to 2021, representing a CAGR of approximately 13.4%. Moving forward, it is expected that the online business model will continue to be a growing trend, and the market size of the digital advertising industry in Southeast Asia will reach approximately $15.9 billion in 2026, representing a CAGR of approximately 9.3% from 2022 to 2026. In Malaysia, the market size of the digital advertising industry increased from approximately $0.5 billion to approximately $0.9 billion from 2016 to 2021, representing a CAGR of approximately 18.1%. Given the rising Internet penetration rate and average time spent by customers on online media and the rapid development of various digital platforms in Malaysia, it is expected that the market size of the digital advertising industry in Malaysia will reach approximately $1.5 billion in 2026, representing a CAGR of approximately 10.3%.

 

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Source: The Frost & Sullivan Report

 

Market Drivers

 

Advancement of technologies and analytic tools: While digital advertising service providers provide in-depth insights on formulating digital advertising strategies and execution plans, advanced technologies, such as big data and artificial intelligence, have become integral value-added tools for their daily operations in attaining efficiency and accuracy in terms of service provision. Leading digital advertising service providers are able to leverage artificial intelligence and machine learning to track customers’ information, such as their demographics, locations, purchasing patterns, and preferences, analyze the information collected, and recommend related advertising content to the end customers of merchants. With the aid of cloud-based and automated user analytics, digital advertising companies can differentiate their core audience and evaluate the effectiveness of marketing campaigns, so as to precisely shape their digital advertising strategies and deliver optimized results.

 

Supportive policies in promoting online eco-system: In December 2021, the Association of Southeast Asian Nations (“ASEAN”) countries entered into the ASEAN Agreement on Electronic Commerce, which has established common principles and rules to promote the growth of e-commerce in the region and to strengthen capacity to implement the corresponding policies. This agreement is intended to facilitate cross-border e-commerce transactions in the region and to establish a favorable environment for e-commerce development. Each member state will cooperate in areas such as information technology infrastructure, electronic payment, and settlement and trade facilitation. The favorable policy underpins the landscape of online platforms, thereby propelling the demand for digital advertising services.

 

Thriving economic conditions and increasing Internet penetration and usage: The steadily growing economy and transformation of the consumption-driven economy in Southeast Asia has propelled the digital advertising industry in Southeast Asia. The nominal GDP of Southeast Asia has increased steadily from approximately $2,559 billion to approximately $3,355 billion from 2016 to 2021, representing a CAGR of approximately 5.6%. The continuous elevation of income has precipitated an improved living standard and increased consumer spending on various goods and services. Further, the number of Internet users in Southeast Asia reached more than 420 million in 2021, while major economies such as Malaysia, Singapore, Thailand, the Philippines, and Indonesia all have Internet penetration rates exceeding 80%, which reflects significant progress compared with 2016. The increasing number of Internet users has translated into a potential customer base, where digital advertising companies may reach end customers in a more convenient and precise manner.

 

Emergence of programmatic advertisement buying in digital advertising industry: Programmatic advertisement buying involves automated buying and selling of digital advertising through real-time bidding on demand-side platforms, which are software used by advertisers to buy mobile, search, and video advertisements from a marketplace on which publishers list advertising inventory. Program advertisement buying has enabled digital advertising service providers to leverage data algorithms and insights with the aid of machine learning and artificial intelligence to deliver advertisements to a targeted and specific group of users at the right time. The development of such buy-and-sell programs can enhance operational efficiency, especially in promoting digital advertising campaigns to the right customers and thereby enhancing the profitability of merchants and digital advertising service providers.

 

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Market Trends

 

Accessibility and development 5G technology: The fifth-generation technology standard for broadband cellular networks (“5G”) facilitates the data processing and exchange at a higher speed, which results in reduction of Internet load time and traffic delays on Internet devices. As the standard of marketing and advertising has been developing towards more appealing content, such as videos with a higher frame rate, 5G has become conducive to enhancing the promotional effectiveness of such types of advertisement. As a result, the improvement of mobile networks is expected to propel the engagement of customers, as well as the content delivery through Internet platforms, such as social media and search engine platforms, which in turn elevates the value and effectiveness of digital advertising services in Southeast Asia.

 

Increasing varieties of marketing, such as content marketing and live streaming: In recent years, marketing in Southeast Asia has adopted a variety of new forms. For instance, content marketing, which is a marketing strategy used to attract, engage, and retain an audience by creating and sharing relevant articles, videos, podcasts, and other media, has become more prevalent for digital advertising service providers in generating leads and traffic. In addition, live streaming, which usually involves key opinion consumers, is conducive to reaching target consumers effectively through close engagement and interaction.

 

User experience-oriented services: User experience design combines different principles, such as visual design, information architecture, interaction design, usability, user search, and content strategy, to understand user needs and create products and services that provide a meaningful experience to customers. Facing an increasing demand for creative and experiential marketing content, digital advertising service providers that offer strategic advice and consultation to advertisers from the perspective of user experience design and are experienced in optimizing the layout of advertisements, are likely to have an advantage over competitors.

 

Competitive Landscape of Digital Advertising Industry in Southeast Asia

 

Overall, the digital advertising industry in Southeast Asia is fragmented and competitive with a large number of service providers serving different segments, including search engine marketing, database marketing, social media management, and display advertisement placement. The number of players in the digital advertising market in Southeast Asia is estimated to be approximately over 700.

 

The majority of local digital advertising providers in Southeast Asia are headquartered in Singapore. Moreover, the robust Singapore consumer market has attracted multinational media agencies to establish their Southeast Asia headquarters in Singapore to expand their businesses in Southeast Asia. As Singapore is the leader of technological innovation in the region, digital advertising providers with an established reputation in Singapore over the years are in a good position to expand into other countries in Southeast Asia. Meanwhile, the current top industry players in other Southeast Asian countries are mostly international firms, which offer multiple types of advertising services on top of digital advertising services, including brand consulting, design, production, and distribution services across different media, such as TV and print, to cater to the traditional advertising services demand. With the increasing prevalence of digital advertising and the cost effectiveness of the advertisers in Singapore attracting attention, advertisers in other Southeast Asian countries, including Malaysia, are likely to attempt to replicate such low advertising cost after seeing the success of digital advertising in Singapore.

 

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Entry Barriers

 

Domain knowledge: To derive effective marketing campaign results by search engine marketing, social media marketing, and search engine optimization, advertisers need to adopt different approaches for different industries, particularly in keyword selection and website coding, which are the main tools in achieving effective marketing campaigns. In support of advertisers, digital advertising service providers with expertise in big data analysis of a specific industry could offer valuable insights to new advertisers in related industries. Many digital advertising service providers have also developed in-house expertise in machine learning and artificial intelligence technologies, which allows for targeted marketing and enables them to set themselves apart from new market entrants due to high development costs.

 

Digital advertising specialists: As many countries in Southeast Asia are still at the beginning stage of adopting digital advertising, specialists with technical knowledge in the coding of websites and apps and experience in collaboration with search engine platforms are in high demand. New entrants to the digital advertising market may have to invest extra efforts in recruiting and training sufficient digital advertising specialists to ensure the consistent quality of their services. It is difficult to recruit experienced digital advertising specialists in Southeast Asia, due to a lack of such talents. As such, new market entrants also have to offer competitive salary packages to compete with existing digital advertising service providers.

 

Reputation and brand awareness: Many existing digital advertising service providers have established a sound reputation and strong brand awareness with their proven track records, which is hardly achieved by the new market entrants. Advertisers would prioritize well-known digital advertising service providers, since brand awareness and industry recognition are key selection criteria for new advertisers. Therefore, new market entrants to the digital advertising market may find it difficult to compete with existing digital advertising service providers with a strong reputation and brand awareness, which require effort and time to establish.

 

A proven track record and client portfolios: When selecting a digital advertising service provider, advertisers often evaluate the quality of a service provider’s previous marketing campaigns by checking its client portfolio and inquire about the service provider’s market reputation by discussing with its peers in the industry. Therefore, a lack of proven track records in the industry will create high entry barriers for new market entrants in pitching for new advertisers.

 

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BUSINESS

 

Overview

 

We are building a cash rebate, digital advertising, and payment solution business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. Through our subsidiaries in Malaysia, we connect retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants, provide digital advertising services to advertisers, and provide payment solution services to merchants. Substantially all of our current operations are located in Malaysia.

 

Our cash rebate business is the foundation of the business ecosystem we are building. We have cooperated with retail merchants, which have registered on the GETBATS website and mobile app as Merchants, to offer cash rebates on their products or services, which have attracted retail shoppers to register on the GETBATS website and mobile app as Members in order to earn cash rebates for shopping online and offline. As the number of Members grows and sales of the existing Merchants increase, more retail merchants are willing to cooperate with us. As of September 30, 2021 and 2020, the GETBATS website and mobile app had 514,167 and 66,580 Members, respectively, and 723 and 478 Merchants, respectively. During the fiscal years ended September 30, 2021 and 2020, we facilitated 295,393 and 1,759 transactions through the GETBATS website and mobile app, respectively. We generate revenue by keeping an agreed-upon portion of the cash rebates offered by Merchants on the GETBATS website and mobile app.

 

Making use of the vast Member and Merchant data we have collected from the GETBATS website and mobile app, we help advertisers design, optimize, and distribute advertisements through online and digital channels. We primarily distribute advertisements through (i) our SEEBATS website and mobile app, on which viewers can watch movies and television series for free through OTT streaming, which is a means of providing television and film content over the Internet at the request and to suit the requirements of the individual consumer, (ii) our GETBATS website and mobile app to its Members, and (iii) social media, mainly consisting of accounts of influencers and bloggers. During the fiscal years ended September 30, 2021 and 2020, we served 25 and two advertisers, respectively. We generate revenue through service fees charged to the advertisers.

 

To diversify our revenue sources and supplement our cash rebate and digital advertising service businesses, we started to provide payment solution services to merchants in May 2021 by referring them to VE Services. Pursuant to the Appointment Letter with VE Services, we serve as its independent merchant recruitment and onboarding agent and refer merchants to VE Services for payment processing. We referred 11 merchants to VE Services during the fiscal year ended September 30, 2021. We generate revenue through commissions from VE Services for our referrals.

 

For the fiscal years ended September 30, 2021 and 2020, we had total revenue of $3,166,228 and $153,863, respectively, and net income of $1,447,650 and a net loss of $205,154, respectively. Revenue derived from digital advertising services accounted for approximately 99.75% and 99.53% of our total revenue for those fiscal years, respectively. Revenue derived from cash rebate services accounted for approximately 0.20% and 0.47% of our total revenue for those fiscal years, respectively. Revenue derived from payment solution services accounted for approximately 0.05% and 0.00% of our total revenue for those fiscal years, respectively.

 

Competitive Strengths

 

We believe the following competitive strengths are essential for our success and differentiate us from our competitors:

 

Business Ecosystem Comprising Cash Rebate, Digital Advertising, and Payment Solution Services

 

We are developing a business ecosystem in Malaysia comprising three lines of business that are complementary to each other, including (i) a cash rebate business connecting Members to Merchants, (ii) a digital advertising business providing precise and effective digital advertising services to advertisers; and (iii) a payment solution service business, which ecosystem we plan to replicate to other parts of Southeast Asia and eventually globally.

 

Our business maintains sustainable growth owing to the dynamic and complementary relationships among our GETBATS website and mobile app, our SEEBATS website and mobile app, and our payment solution services. Although currently the revenue from the GETBATS website and mobile app only accounts for a small portion of our overall revenue, they play a crucial and strategic role in our business ecosystem, essentially functioning as a direct database marketing platform that enables us to collect a large amount of data regarding our Merchants and Members and create a composite database of consumer spending behaviors by leveraging our business data analysis system; the SEEBATS website and mobile app, in turn, drive website traffic back to the GETBATS website and mobile app, which have become an increasingly popular cash rebate platform; and our payment solution service business functions as a further supplementary piece to our business ecosystem to ensure the security and convenience of all the transactions conducted therein. As such, we endeavor to provide our advertisers with highly precise and effective digital advertising services while ensuring our Merchant and Members can also benefit from the transactions facilitated by us through our cash rebate system in a more secure payment environment.

 

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Capability of Providing Targeted Digital Advertising Services by Leveraging Business Data Analysis Technology

 

The ability to understand market traffic and pair potential consumers with suitable advertisements is key to converting the viewer’s interest into a purchase, thus enhancing the return of investment of marketing expenditures in the digital advertising industry. We are devoted to offering highly precise and effective digital advertising services for advertisers to help them improve the return of investment of their marketing expenditures by leveraging business data analysis technology and creating and refining marketing campaigns that could better reach the target audience and achieve better results.

 

Our large repository of Merchant and Member data and strong technological capabilities have enabled us to innovate and optimize our digital advertising services on an ongoing basis. Specifically, we collect and analyze vast Member spending behavioral data by leveraging our large user base on our GETBATS website and mobile app and our business data analysis capabilities. As of September 30, 2021, we had acquired information from 514,167 unique Members, including more than 3,300 spending Members, and 723 Merchants, and implemented a business data analysis system to study consumer spending behaviors. The size and number of available data sets have grown rapidly as data has been collected from mobile devices through our mobile app, computer peripherals from web browsers, and progressive web applications. We also collect analytic data from log files. We study our Members’ login patterns (such as time, date, and frequency of login), the deals, promotions, and advertisements they click, and the Merchant links that they share. In addition, we study viewers’ behaviors on our SEEBATS website and mobile app, including the types of movies they view and the time they spend on each movie, so that we can further relate and categorize them into different spending behavior category. In addition, we also help advertisers optimize their marketing campaigns by identifying the objectives and audience, formulating customized digital media strategies, designing brand positioning, and key messages, and improving the artistic value and attractiveness of the ads.

 

As of the date of this prospectus, we have two employees engaging in developing and maintaining business data analysis technology and one employee engaging in advertisement optimization. We believe our optimization capabilities, particularly driven by our advanced business data analysis, are recognized and valued by our advertisers, which has enabled us to obtain and sustain a solid advertiser base.

 

Solid Advertiser Base Spanning a Wide Range of Industries

 

Our advertiser base grew substantially during the fiscal years ended September 30, 2021 and 2020. Our revenue from digital advertising services increased from $153,145 in 2020 to $3,158,520 in 2021, while the number of advertisers we served grew from two in 2020 to 25 in 2021. The industries of our advertiser base include luxury property development, medical services, retail jewelry sales, and real estate agencies, among others.

 

We believe our diverse advertiser base helps us compete with other digital advertising services providers. Our relationships with advertisers of a broad industry spectrum have also enabled us to understand the demands and requirements of the advertisers and communicate with them in an accurate and efficient manner, which serves as our primary source to stay informed of the trends and evolutions of the digital advertising industry.

 

We believe our relationships with our advertisers has helped us build a reputation of high service quality, which helps attract and secure potential advertisers, thus creating a virtuous cycle for our growth and furthering our business development. As we continue to build and optimize our advertiser base, we are confident that we will be seen by merchants as the “go-to” place for advertisers who look for digital marketing of their products and services and a valuable source and channel to drive consumer demand, increase sales, and achieve operating efficiencies.

 

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Visionary and Experienced Management Team with Strong Technical and Operational Expertise