Society Pass Incorporated 10-Q for FY2024 Q2
Society Pass Incorporated. (SOPAQ)
About this 10-Q
Society Pass Incorporated filed this 10-Q on August 19, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.71M
- down 21.8% from $2.19M a year earlier
- Net loss
- $1.94M
- compared with a net loss of $3.32M a year earlier
- Diluted EPS
- -$0.73
- compared with -$1.77 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
Or
For the transition period from _____ to _____
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company”, in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yes ☐
No
As of August 16, 2024, there were
Table of Contents
i
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 AND DECEMBER 31, 2023
(Currency expressed in United States Dollars (“US$”))
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Deferred tax assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Plant and equipment, net | ||||||||
| Right of use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payables | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued liabilities and other payables | ||||||||
| Due to related parties | ||||||||
| Deferred tax liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Loan | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Operating lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Convertible preferred shares; $ | ||||||||
| Series A shares: | ||||||||
| Series B shares: | ||||||||
| Series B-1 shares: | ||||||||
| Series C shares: | ||||||||
| Series C-1 shares: | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Series X Super Voting Preferred Stock, $ | ||||||||
| Common shares; $ | ||||||||
| Subscription receivable | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Less: Common shares held in treasury, at cost; | ( | ) | ||||||
| Accumulated other comprehensive gain (loss) | ( | ) | ||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Total equity attributable to Society Pass Incorporated | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue, net | ||||||||||||||||
| Sales – online ordering | $ | $ | $ | |||||||||||||
| Sales – digital marketing | ||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||
| Sales – data | ||||||||||||||||
| Software sales | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cost of digital marketing | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cost of online ticketing and reservation | ( | ) | ( | ) | ||||||||||||
| Cost of data | ( | ) | ( | ) | ( | ) | ||||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross income | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Software development costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Dividend income | ||||||||||||||||
| Gain on early lease termination | ||||||||||||||||
| Gain on disposal of fixed assets | ||||||||||||||||
| Impairment loss | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Waiver of loan payable | ||||||||||||||||
| Written-off fixed assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Total other income (expense) | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ( | ) | ( | ) | ( | ) | ||||||||||
| NET LOSS ATTRIBUTABLE TO SOCIETY PASS INCORPORATED | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||
| TOTAL OTHER COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Foreign currency translation adjustment attributable to non-controlling interest | ||||||||||||||||
| Total other comprehensive loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to Society Pass Incorporated: | ||||||||||||||||
| – Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| – Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| – Basic | ||||||||||||||||
| – Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
Three and Six months ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
| Number
of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Subscription receivable | Additional Paid in Capital | other comprehensive income | Accumulated deficits | Non- controlling interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Balances at January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share issued for treasury stock | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchase during the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Sale of treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Shares issued for salaries | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for private placements | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for subsidiary acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fractional shares | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Sale of treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Three and Six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||
| Number
of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid in Capital | other comprehensive income | Accumulated deficits | Non- controlling interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Balances at January 1, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued upon the exercise options | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchase during the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balances at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Shares issued for services | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchase during the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) for the period | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Bad debts | ||||||||
| Depreciation and amortization | ||||||||
| Gain from early lease termination | ( | ) | ||||||
| Gain on disposal of fixed assets | ( | ) | ||||||
| Written-off of fixed assets | ||||||||
| Waiver of loan payable | ( | ) | ( | ) | ||||
| Stock based compensation for services | ||||||||
| Treasury stock | ||||||||
| Deferred tax assets | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Deposits, prepayments and other receivables | ( | ) | ||||||
| Contract assets | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ||||||
| Accounts payables | ||||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Advances to related parties | ||||||||
| Right of use assets | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of plant, and equipment | ( | ) | ||||||
| Cash from purchase of subsidiary and business operation | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from private placements | ||||||||
| Repurchase of common share | ( | ) | ( | ) | ||||
| Proceed from the sale of treasury stock | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect on exchange rate change on cash and cash equivalents | ( | ) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENT AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENT AT END OF YEAR | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Reconciliation to amounts on condensed unaudited consolidated balance sheets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
SOCIETY PASS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Currency expressed in United States Dollars (“US$”))
NOTE – 1 DESCRIPTION OF BUSINESS AND ORGANIZATION
Society Pass Incorporated (the “Company”)
was incorporated in the State of Nevada on
| ● | In February 2022, the Company
completed the acquisition of |
| ● | In May 2022, the Company completed
another acquisition of |
| ● | In July, 2022, the Company
and its wholly owned subsidiary Thoughtful Media Group Incorporated collectively acquired |
| ● | In July, 2022, the Company
acquired |
| ● | In August, 2022, the Company and its | |
| ● | In April, 2023, the Company’s | |
| ● | In April, 2023, the Company’s | |
| ● | In July, 2023, the Company’s |
On February 10, 2021,
5
On September 21, 2021,
The registration statement for the Company’s
Initial Public Offering became effective on November 8, 2021. On November 8, 2021, the Company entered into an underwriting agreement
with Maxim Group LLC (the “Underwriter”) related to the offering of
On February 8, 2022, the Company entered into
an underwriting agreement (the “Underwriting Agreement”) with the “Underwriter, related to the offering of
On June 30, 2023, NextGen Retail Inc., a Nevada
corporation (the “Buyer”), a wholly-owned subsidiary of the Company, entered into a Securities Purchase Agreement with Story-I
Ltd., an Australian corporation (“Story-I Australia”), Story-I Pte Ltd., a Singapore corporation (“Story-I Singapore”),
a wholly-owned subsidiary of Story-I Australia, and Michael Chan, to purchase
On May 1, 2024, the
The forward stock split and reverse stock split transactions described above had no effect on the stated value of the preferred stock and the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance with the respective certificate of designations. The number of authorized shares of preferred stock also remained unchanged.
6
Description of subsidiaries incorporated by the Company
|
Name | Place and date of incorporation | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||||
| Society Technology LLC | January 24, 2019 | % | ||||||||
| SOPA Cognitive Analytics Private Limited | February 5, 2019 | % | ||||||||
| SOPA Technology Pte. Ltd. | June 4, 2019 | % | ||||||||
| SOPA Technology Company Limited | October 1, 2019 | Registered: VND 2,307,300,000; Paid up: VND 1,034,029,911 | % | |||||||
| Thoughtful Media (Singapore) Pte. Ltd. (FKA: Hottab Pte Ltd. (HPL)) | January 17, 2015 | % | ||||||||
| Hottab Vietnam Co. Ltd | April 17, 2015 | % | ||||||||
| Thoughtful Media Group Co. Ltd (FKA: Hottab Asset Company Limited) | July 25, 2019 | % | ||||||||
| Nextgen Retail Inc (FKA: Leflair Incorporated) | December 7, 2021 | % | ||||||||
| SOPA Capital Limited | December 07, 2021 | % | ||||||||
| Thoughtful Media (Philippines) Incorporated (FKA: SOPA (Phil) Incorporated) | Jan 11, 2022 | % | ||||||||
| New Retail Experience Incorporated | Jan 16, 2020 | % | ||||||||
| Dream Space Trading Co. Ltd | May 23, 2018 | % | ||||||||
| Push Delivery Pte Ltd | January 7, 2022 | % | ||||||||
| Gorilla Networks Pte. Ltd. | September 3, 2019 | SGD 730,000 | % | |||||||
| Gorilla Connect Pte. Ltd. | May 18, 2022 | % | ||||||||
| Gorilla Mobile Singapore Pte. Ltd. | August 6, 2020 | % | ||||||||
| Gorilla Networks (VN) LLC | December 16, 2020 | % | ||||||||
| Thoughtful Media Group Incorporated | June 28,2022 | % | ||||||||
7
|
Name | Place and date of incorporation | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||||
| Thoughtful (Thailand) Co. Ltd | September 2, 2014 | % | ||||||||
| AdActive Media CA Inc. | April 12, 2010 | Common: US$4,032.7871 | % | |||||||
| PT Tunas Sukses Mandiri | February 8, 2010 | % | ||||||||
| Nusatrip Malaysia Sdn Bhd | March 1, 2017 | % | ||||||||
| Nusatrip Singapore Pte Ltd | December 6, 2016 | % | ||||||||
| Nusatrip International Pte Ltd | January 9, 2015 | % | ||||||||
| PT Thoughtful Media Group Indonesia (FKA: PT Wahana Cerita Indonesia) | January 14, 2022 | % | ||||||||
| Mekong Leisure Travel Company Limited | October 6, 2011 | % | ||||||||
| Vietnam International Travel and Service Joint Stock Company | November 16, 2012 | % | ||||||||
| Sopa Incorporated | May 22, 2023 | % | ||||||||
| Nusatrip Incorporated | May 22,2023 | % | ||||||||
| Thoughtful Media (Malaysia) Sdn Bhd | October 18, 2023 | % | ||||||||
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
On February 23, 2023,
Society Pass Incorporated acquired additional issued capital in Nusatrip International Pte Ltd of
On May 22, 2023, Thoughtful
Media Group Inc and Society Pass Inc acquired additional issued capital in Thoughtful (Thailand) Co Ltd of
On August 1, 2023, the
Company
On October 25, 2023,
the Company
During the year of 2023, certain operations were progressively discontinued following management’s decision based on operation performance, business strategy and future prospects. This is mainly online F&B and groceries delivery operations under online ordering segment includes “Handycart” under subsidiary Dream Space Trading Co., Ltd in Vietnam, and “Pushkart” and “Mangan” under subsidiary New Retail Experience Incorporated in the Philippines. There is also discontinued operation of local mobile in telecommunication reseller under subsidiary Gorilla Mobile Pte Ltd. In view of the operation results which are insignificant to the impact of the group and continued operation involvements are in place in all these operations, therefore no separate disclosure is considered necessary in accordance to the discontinued operation standards.
8
NOTE – 2 GOING CONCERN AND LIQUIDITY
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial
statements, the Company has suffered loss before income tax for period of $
| 1) | Cash and cash equivalents balance of $ |
| 2) | Continue business growth of digital marketing. |
While the Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance that it will be able to achieve these goals. As a result, the Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed to finance the Company’s business development activities, general and administrative expenses and growth strategy.
Global Events
The Russia-Ukraine war, Iran-Pakistan tension and the supply chain disruption have not affected any specific segment of our business.
NOTE – 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
| ● | Basis of presentation |
The Company has prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ equity and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent quarter or for the full year ending December 31, 2024 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the 2023 audited financial statements and accompanying notes filed with the SEC.
| ● | Emerging Growth Company |
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
9
| ● | Use of estimates and assumptions |
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, the incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on amounts due to related parties, inventory valuation, revenue recognition, the allocation of purchase consideration in business combinations, and deferred tax assets and the related valuation allowance.
| ● | Basis of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
| ● | Business combination |
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810, Consolidation (“ASC 810”). ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations. Under ASC 805, all business combinations are accounted for by applying the acquisition method. Accounting for the resulting goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company’s results of operations.
| ● | Noncontrolling interest |
The Company accounts for non-controlling interests in accordance with ASC Topic 810, which requires the Company to present non-controlling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to its non-controlling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
| ● | Segment reporting |
ASC Topic 280, Segment Reporting (“Topic 280”) establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. The Company currently operates in six reportable operating segments: (i) Online Grocery and Food and Groceries Deliveries, (ii) Digital marketing, (iii) Online ticketing and reservation, (iv) Telecommunications Reseller, (v) e-Commerce, (vi) Merchant Point of Sale (“merchant POS”).
| ● | Cash and cash equivalents |
Cash and
cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments. As of June 30, 2024 and December 31, 2023,
the cash and cash equivalents excluded restricted cash amounted to $
The Company
currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection
for bank deposits up to $
10
| ● | Restricted cash |
Restricted
cash refers to cash that is held by the Company for specific reasons and is, therefore, not available for immediate ordinary business
use. The restricted cash represented fixed deposit maintained in bank accounts that are pledged. As of June 30, 2024 and December 31,
2023, the restricted cash amounted to $
| ● | Accounts receivable |
Accounts receivables are recorded at the amounts that are invoiced to customers, do not bear interest, and are due within contractual payment terms, generally 30 to 90-days from completion of service or the delivery of a product. Credit is extended based on an evaluation of a customer’s financial condition, the customer’s creditworthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Quarterly, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company records bad debt expense and records an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to pursue all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Currently, the Company does not have any off-balance-sheet credit exposure related to its customers, and as of both June 30, 2024 and December 31, 2023, there was need for allowance for doubtful accounts.
| ● | Inventories |
Inventories
are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware
equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by customer demand. No allowance for obsolete inventories was
recorded by the Company during the three and six months ended June 30, 2024 and 2023. The inventories amounted to $
| ● | Plant and equipment |
| Expected useful lives | ||
| Computer equipment | ||
| Office equipment | ||
| Renovation |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
11
| ● | Impairment of long-lived assets |
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the three and six months ended June 30, 2024 and 2023 presented.
| ● | Revenue recognition |
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | Identify the contract with a customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to performance obligations in the contract; and | |
| ● | Recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities that correspond to our six business segments (business to consumer or “B2C”), grocery and food delivery (B2C), telecommunication reseller (B2C), online ticketing and reservations (B2C) and the services providing to merchants for their business growth (business to business or “B2B”), digital marketing (B2B) and online ticketing and reservations (B2B).
The Company’s performance obligations include providing connectivity between merchants and consumers, generally through an online ordering platform. The platform allows merchants to create an account, display a menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create an account and order from merchants on the consumer facing application. The platform allows a delivery company to accept an online delivery request and deliver or ship an order from a merchant to customer.
Lifestyle
The Company has developed an online lifestyle platform (the “Lifestyle Platform”) under its own brand name of “Leflair” to enable consumers to purchase high-end brands in many categories. Using the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company’s logistics center.
Grocery and Food Delivery
Other online platforms include online platforms in Vietnam, under the brand name of “Handycart”, and Philippines, under the brand names of “Pushkart” and “Mangan”, to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area. This business segment has been progressively ceasing yet the Company has maintained ongoing involvement in specific operational activities during the three and six months ended June 30, 2024.
12
Telecommunications
The Company operates a Singapore-based online telecommunication reseller platform under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting. More importantly, Gorilla enables its customers to convert unused mobile data into digital assets or Gorilla GO Tokens through its innovative proprietary blockchain-based SwitchBack feature. Gorilla GO Tokens in turn can be redeemed for eVouchers, to offset future bills, or be redeemed for other value-added services. Please visit https://gorilla.global/ for more information. During the three and six months ended June 30, 2024, the Company ceased its local mobile data service operation due to business restructuring to refocus on overseas internet data services.
Digital Marketing
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company’s e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG’s wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result,
Thoughtful Media’s content creator partners earn a larger share of advertising revenues from international consumer brands.
Travel
The Company purchased the NusaTrip Group, a leading Jakarta-based Online Travel Agency (“OTA”) in Indonesia and across SEA. The NusaTrip acquisition extended the Company’s business reach into SEA regional travel industry and marked the Company’s first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, NusaTrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, NusaTrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors. During the year, NusaTrip Group also acquired two Vietnam based companies having branding name of “VLeisure” and “VIT” selling air ticket, hotel reservation and providing hotel management software to local market.
The Company’s e-Commerce business is primarily conducted using Leflair’s Lifestyle Platform, as follows:
| 1) | When a customer places an order on either the Leflair website or app, a sales orders report will be generated in the system. The Company will either fulfill this order from its inventory or purchase the item from the manufacturer or distributor. Once the Company has the item in its distribution center, it will contract with a logistics partner delivered to the end customer. The sale is recognized when the delivery is completed by the logistics partner to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to any product warranty. The Company is considered the principal in this e-commerce transaction and reports revenue on a gross basis as the Company establishes the price of the product, has responsibility for fulfillment of the order and retains the risk of collection. |
During the three months
ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months
ended June 30, 2024 and 2023, the Company generated revenue of $
13
The Company’s Merchant POS offers both software and hardware products and services to vendors, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to obtain access to the Merchant Marketing Program. | |
| 2) | The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month. | |
| 3) | The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants. |
During the three months
ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months
ended June 30, 2024 and 2023, the Company generated revenue of $
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC Topic 606 when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfilment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606 are present in the arrangement, revenue is recognized net of related direct costs since in these instances we act as an agent.
Software subscription fee — The Company’s performance obligation includes providing customer access to our software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and the customer is entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with automatic one-year renewal. The subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
The Company
records its revenues, net of value added taxes (“VAT”), which is levied at the rate of
Grocery and food delivery consists of online grocery under brand name “Pushkart” and food delivery service under brand name “Handycart” as follows:
Customers place order for groceries and take-out food through our online platforms of “Pushkart”, “Mangan” and “Handcart” respectively. When the grocery or food merchant receives and order, our platform will assign a third-party delivery service to pick up and deliver the grocery and/or food order to the customer. Revenue is recognized when the grocery and/or food is delivered, at which time the customer pays for the grocery and /or food order with cash, at Net of merchant cost.
During the three months
ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months
ended June 30, 2024 and 2023, the Company generated revenue of $
14
As a telecommunication reseller we provide local mobile data and overseas internet data plans under the brand name of “Gorilla,” which is a group of company we acquired in May 2022. Our telecommunication revenues are recorded for ASC Topic 606 purposes as follows:
Local mobile plan - customers choose and subscribe to a monthly local mobile plan through our “Gorilla” online platform. The Company will proceed to register the sim card (effectively, the mobile telephone number activation card) and arrange delivery of that Sim card to the customer. Following Sim card activation, the system will capture the monthly data usage of each customer, calculated in accordance with the package data capacity and monthly subscription rate, which amounts are aggregated and recorded as revenue. Unused data will be converted to Rewards Points and carried forward to next month for potential subsequent data usage. As a result of the rewards points, the company also recognize revenue from Rewards Point redemption for subscription fees offset, voucher redemption, extra data purchases, that the customer chooses to use via our online platform.
Overseas internet data plan – a customer will place order for their desired overseas internet data plan through either the “Gorilla” online platform or third-party partner platforms. Subscription revenue is recognized when the Sim card is delivered and activated.
During the three months
ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months
ended June 30, 2024 and 2023, the Company generated revenue of $
Digital marketing revenues are recognized when the Company has negotiated the terms of the transaction, which includes determining either the overall price, or price for each performance obligation in the form of a service or a product, the service or product has been delivered to the customer, no obligation is outstanding regarding that service or product, and the Company is reasonably assured that funds have been or will be collected from the customer.
A summary of each of the Company’s revenue streams under ASC 606 is as follows:
Marketing services from customers
Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
The Company derives its revenue from the provision of digital marketing services to customers. The Company offers customers with a comprehensive suite of digital marketing services to enhance their social media presence and reach their target audiences, particularly Gen Z and Millennials, to achieve marketing goals. The customers can leverage the Company’s experience in building content and fanbases with creators, their creators’ creativity, engagement, and trust among creators’ loyal fanbases to increase their brand awareness and sell products. The Company offers customized digital marketing solution, including (i) advising on content strategy and budget and recommending specific creators; (ii) communicating with and managing selected creators; (iii) producing and engaging relevant content with creators to promote key messages for customers; (iv) uploading branded content on creators’ social media channels; (v) amplifying the reach of creators’ and customers’ content through precise media planning and buying via boosting marketing services on social media platforms, such as Google; and (vi) providing optimization services through data analysis and reporting.
The Company’s customers’ payment terms generally range from 30-60 days of fulfilling its performance obligations and recognizing revenue.
Campaign-based marketing services revenue is recognized as a distinct single performance obligation when the Company transfers services to customers, which occurs over time. The performance obligation may be a promise to place branded content on certain social media platforms and is satisfied upon delivery of such related services to customers. The duration of the service period is short, usually over 1-3 months. Such revenue is recognized at over time, for the amount the Company is entitled to receive, as and when the marketing services are provided and completed.
15
Marketing services from social media platforms (“platform revenue”)
The Company also derives its advertising revenue generated from its channel pages and posts on social media platforms, such as YouTube by monetizing its contents. The payments are usually received within 30 days upon completion of performance obligation for platform revenue services.
The Company recognizes revenue as performance obligations are satisfied as the creation of contents are published on the social media platforms, which occurs at a point in time. The advertisements are delivered primarily based on impressions of contents on social media platforms, hence the Company provided the advertising services by an on-going basis during the publication period and the outcome of the services can be received and consumed by the social media platform simultaneously.
The
Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months
ended June 30, 2024 and 2023, the Company generated revenue of $
Online ticketing and reservation provide information, prices, availability, booking services for domestic and international air ticket, hotels, car, train, and hotel technology as follows:
The Company’s revenues are substantially reported on a net basis as the travel supplier is primarily responsible for providing the underlying travel services and the Company does not control the service provided by the travel supplier to the traveler. Revenue from air ticketing services, air ticket commission, hotel reservation and ancillary services including insurance commissions and refund margin are substantially recognized at a point of time when the performance obligations that are satisfied. These revenues cover B2B and B2C sales channel segments.
The Company has a software subscription revenue generated from hotel in Vietnam, and online advertising revenue, reported in gross basis, providing a hotel booking management platform for hotel management purposes, and brand advertisement purpose. these revenues are recognized ratably over the time or upon relevant performance obligations being fulfilled.
Ticketing services
The Company
receives spread margin from B2B and B2C customers and commissions from travel suppliers for ticketing reservations through the Company’s
transaction and service platform under various services agreements. Spread margin and commissions from ticketing reservations rendered
are recognized when tickets are issued as this is when the Company’s performance obligation is satisfied. The Company is not entitled
to a spread margin and commission fee for the tickets canceled by the end users. Losses incurred from cancelations are immaterial due
to a historical low cancelation rate and minimal administrative costs incurred in processing cancelations. The Company presents revenues
from such transactions on a net basis in the statements of income as the Company, generally, does not control the service provided by
the travel supplier to the traveler and does not assume inventory risk for canceled ticketing reservations.
16
Hotel reservation services
The Company receives spread margin from B2B and B2C customers and commissions from travel suppliers for hotel room reservations through the Company’s transaction and service platform. Commissions from hotel reservation services rendered are recognized when the reservation becomes non-cancelable (when the cancelation period provided by the reservation expires) which is the point at which the Company has fulfilled its performance obligation (successfully booking a reservation, which includes certain post-booking services during the cancelation period). Contracts with certain travel suppliers contain incentive commissions typically subject to achieving specific performance targets. The incentive commissions are considered as variable consideration and are estimated and recognized to the extent that the Company is entitled to such incentive commissions. The Company generally receives incentive commissions from monthly arrangements with hotels based on the number of hotel room reservations where end users have completed their stay. The Company presents revenues from such transactions on a net basis in the statements of income and comprehensive income as the Company, generally, does not control the service provided by the travel supplier to the traveler and does not assume inventory risk for canceled hotel reservations.
Ancillary services
Ancillary revenues comprise primarily of the insurance commission and refund margin.
Insurance commission revenue received from B2B and B2C customers for selling of travel insurance through the Company’s transaction and service platform. Commission from travel insurance is recognized when the order is confirmed and paid which is the point at which the Company fulfilled its performance obligation. Refund margin revenue received from B2B and B2C customers for the spread arise from reservations cancellation fee between customers and travel suppliers. This is recognized upon the confirmation of refund amount by both customers and travel suppliers which is the point at which the Company fulfilled its performance obligation.
The Company presents revenues from ancillary service transactions on a net basis in the statements of income and comprehensive income as the Company, generally, does not control the service provided by the insurance supplier and travel supplier to the traveler.
During the three months ended June 30, 2024 and
2023, the Company generated revenue of $
During the six months ended June 30, 2023 and
2023, the Company generated revenue of $
Hotel technology platform software services
The Company receives subscription fee from travel suppliers for hotel room reservation and marketing system through the Company’s reservation and marketing platform.
Subscription fee from hotel technology platform software services rendered are recognized ratably over the fixed term of the agreement as services are provided throughout the contract period, where the performance obligations being fulfilled through the usage of our hotel technology platform software services.
The Company presents revenues from such transactions on a gross basis in the statements of income and comprehensive income as the Company, generally, control the service provided by the travel supplier to the traveler.
During the three months
ended June 30, 2024 and 2023, the Company generated revenue of $
During the six months ended June 30, 2024 and 2023, the Company generated
revenue of $
Principal vs Agent Considerations
In accordance with ASC Topic 606, Revenue Recognition: Principal Agent Considerations, the Company evaluates the terms in the agreements with its customers and vendors to determine whether or not the Company acts as the principal or as an agent in the arrangement with each party respectively. The determination of whether to record the revenue on a gross or net basis depends upon whether the Company has control over the goods prior to transferring it. This evaluation determined that the Company is not in control of establishing the transaction price, not managing all aspects of the terms, even though taking the risk of campaign results and default payment.
17
Contract assets
In accordance with ASC Topic 606, a contract asset arises when the Company transfers a good or performs a service in advance of receiving consideration from the customer as agreed upon. A contract asset becomes a receivable once the Company’s right to receive consideration becomes unconditional.
There were
contract assets balance was $
Contract liabilities
In accordance with ASC Topic 606, a contract liability represents the Company’s obligation to transfer goods or services to a customer when the customer prepays for a good or service or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract
liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of
annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition
of revenue. The Company’s contract liabilities balance was $
| ● | Software development costs |
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985, Software, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. These capitalized software costs are ratably amortized over the period of the software’s estimated useful life. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research
and development expenditures arising from the development of the Company’s own software are charged to operations as incurred. For
the six months ended June 30, 2024, and 2023, software development costs were $
| ● | Cost of sales |
Cost of revenue under online ordering consist of the cost of merchandises ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of revenue related to software sales and licensing consist of the cost of software and payroll costs, which are directly attributable to the sales and licensing of software. Cost of revenue related to hardware sales consist of the cost of hardware and payroll costs, which are directly attributable to the sales of hardware.
Cost of revenue related to grocery and food delivery consist of the cost of the outsourced delivery and the outsource payment gateway, which are directly attributable to the sales of grocery and food delivery.
Cost of revenue related to our telecommunication data reseller segment consist of the cost of the primary telecommunication service, which are directly attributable to the sales of telecommunication data.
18
Cost of revenue under digital marketing consist of the cost of primary digital marketing service, which are directly attributable to the sales of digital marketing.
| ● | Shipping and handling costs |
No shipping and handling costs are associated with the distribution of the products to the customers since those costs are borne by the Company’s suppliers or distributors for our merchant POS business.
The shipping and handling costs for all segments other than our e-commerce segment are recorded net in sales. For shipping costs related to our e-commerce business, those shipping costs are recorded in cost of revenue.
| ● | Sales and marketing expenses |
Sales and
marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel,
and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense
was $
| ● | Product warranties |
The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company’s suppliers, the Company has concluded that no warranty liability is required as of June 30, 2024 and December 31, 2023. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal, although it looks at this issue every quarter to continue to support its assertion.
| ● | Income tax |
The Company
adopted the ASC 740 Income Tax provisions, which addresses the determination of whether tax benefits claimed or expected to be claimed
on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph ASC Topic 740, the Company may
recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated
financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. On a quarterly basis, the Company reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances to reduce those amounts to the amounts management believes will be realized in future income tax returns.
In addition to U.S. income taxes, the Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax, there may be transactions and calculations for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
19
| ● | Foreign currencies translation and transactions |
The reporting currency of the Company is the United States Dollar (“US$”) and the accompanying consolidated unaudited condensed financial statements have been expressed in US$s. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore, India and Philippines and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”), Indian Rupee (“INR”), Philippines Pesos (“PHP”), Malaysian Ringgit (“MYR), Thailand Baht (“THB”) and Indonesian Rupiah (“IDR”), respectively, which are the functional currencies in which the subsidiary’s operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$s, in accordance with ASC Topic 830, “Translation of Financial Statement” (“ASC 830”) using the applicable exchange rates on the balance sheet date. Shareholders’ equity is translated using historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed statements of changes in shareholder’s equity.
Schedule of Foreign currencies translation and transactions:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end SGD$:US$ exchange rate | $ | $ | ||||||
| Period average SGD$:US$ exchange rate | $ | $ | ||||||
Translation of amounts from VND into US$ has been made at the following exchange rates for six months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end VND$:US$ exchange rate | $ | $ | ||||||
| Period average VND$:US$ exchange rate | $ | $ | ||||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the six months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end INR$:US$ exchange rate | $ | $ | ||||||
| Period average INR$:US$ exchange rate | $ | $ | ||||||
Translation of amounts from PHP into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end PHP:US$ exchange rate | $ | $ | ||||||
| Period average PHP:US$ exchange rate | $ | $ | ||||||
Translation of amounts from THB into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end THB:US$ exchange rate | $ | $ | ||||||
| Period average THB:US$ exchange rate | $ | $ | ||||||
20
Translation of amounts from MYR into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end MYR:US$ exchange rate | $ | $ | ||||||
| Period average MYR:US$ exchange rate | $ | $ | ||||||
Translation of amounts from IDR into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end IDR:US$ exchange rate | $ | $ | ||||||
| Period average IDR:US$ exchange rate | $ | $ | ||||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
| ● | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| ● | Earning per share |
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the years.
For the three and six months ended June 30, 2024 and 2023, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
21
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Options to purchase common stock (a) | ||||||||
| Warrants granted to underwriter | ||||||||
| Warrants granted with Series C-1 Convertible Preferred Stock | ||||||||
| Total of common stock equivalents | ||||||||
| (a) |
| ● | Leases |
The Company adopted Topic 842, Leases (“ASC 842”) to determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in plant and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
22
As
of June 30, 2024 and December 31, 2023, the Company recorded the right of use asset of $
| ● | Retirement plan costs |
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
| ● | Share-based compensation |
The Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee and non-employee), at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option pricing model to estimate the fair value of employee stock options at the date of grant. As of June 30, 2024, those shares issued and stock options granted for service compensation, vest 180 days after the grant date, and therefore these amounts are thus recognized as expense during the three and six months ended June 30, 2024 and 2023. Stock-based compensation is recorded in general and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss, with corresponding credits to common stock and accumulated paid-in capital.
| ● | Warrants |
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its preferred and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option pricing model to estimate the grant date fair value of the warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital (the accounting treatment for common stock issuance costs). All other warrants are recorded at the grant date fair value as an expense over the requisite service period, or at the date of issuance if the warrants vest immediately, with corresponding credits to additional paid-in capital.
| ● | Related parties |
The Company follows ASC 850-10, Related Party Disclosures (“ASC 850”) for the identification of related parties and the disclosure of related party transactions.
Pursuant to ASC 850, the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under ASC 825, Financial Instruments, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required by ASC 850. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
23
| ● | Commitments and contingencies |
The Company follows the ASC 450, Commitments, to account for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, which assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows if the current level of facts and circumstances changes in the future.
| ● | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
24
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties, operating lease liabilities and loan, approximate their fair values because of the short maturity of these instruments.
| ● | Recent Accounting Pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements (“ASU 2023-01”) that is intended to improve the guidance for applying Topic 842 to arrangements between entities under common control. This ASU requires all entities (that is, including public companies) to amortize leasehold improvements associated with common control leases over the useful life to the common control group. The standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the potential impact of ASU 2023-01 on its consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The disclosures requirements included in ASU 2023-07 are required for all public entities, including those with a single reportable segment. ASU 2023-07 is effective for annual periods beginning after December 15, 2024, on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the potential impact of ASU 2023-07 on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 720): Improvements to Income Tax Disclosures (“ASU 2023-09”), which prescribes standard categories for the components of the effective tax rate reconciliation and requires disclosure of additional information for reconciling items meeting certain quantitative thresholds, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the potential impact of the adoption of ASU 2023-09 on its consolidated financial statements.
All other recently issued, but not yet effective, 2024 Accounting Standards Updates are not expected to have an effect on the Company.
NOTE – 4 REVENUE
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| At a point in time: | ||||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – digital marketing | ||||||||
| Sales – online ticketing and reservation | ||||||||
| Sales – data | ||||||||
| Over a period of time: | ||||||||
| Sales – digital marketing | ||||||||
| Software subscription sales | ||||||||
| $ | $ | |||||||
25
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| At a point in time: | ||||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – digital marketing | ||||||||
| Sales – online ticketing and reservation | ||||||||
| Sales – data | ||||||||
| Over a period of time: | ||||||||
| Sales – digital marketing | ||||||||
| Software subscription sales | ||||||||
| $ | $ | |||||||
Contract liabilities recognized was related to online ticketing and reservation, digital marketing, telecommunication reseller and software sales and the following is reconciliation for the periods presented:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Contract liabilities, brought forward | $ | $ | ||||||
| Add: recognized as deferred revenue | ||||||||
| Less: recognized as revenue | ( | ) | ( | ) | ||||
| Contract liabilities, carried forward | $ | $ | ||||||
NOTE – 5 SEGMENT REPORTING
Currently,
the Company has
| (i) | e-Commerce – operates an online lifestyle platform under the brand name of “Leflair” covering a diversity of services and products, such as fashion and accessories, beauty and personal care, and home and lifestyle, all managed by SOPA Technology Company Ltd, |
| (ii) | Merchant point of sale (“POS”) – is involved in the sale of hardware and software to merchants and this segment is managed by Hottab group and SOPA entities except SOPA Technology Company Ltd, |
| (iii) | Online grocery and food deliveries – operate an online food delivery service under the “Handycart” and “Mangan” brand name, managed by Dream Space Trading Co Ltd and New Retail Experience Incorporated respectively and an online grocery delivery under the “Pushkart” brand name, managed by New Retail Experience Incorporated, and |
| (iv) | Telecommunication reseller – provide sales of local mobile phone plans and global internet data provider plans, both services managed by the Gorilla Group. |
| (v) | Digital marketing operates the digital marketing business with creator and digital marketing platform |
| (vi) | Online ticketing and reservation - operates the sale of domestic and overseas air ticket and global hotel reservations |
26
Schedule of Segment Reporting:
| Six months ended June 30, 2024 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cost of digital marketing | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ||||||||||||||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software cost | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| JV income | ||||||||||||||||||||||||||||
| Gain on early lease termination | ||||||||||||||||||||||||||||
| Gain on disposal of fixed assets | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||
| Waiver of loan payable | ||||||||||||||||||||||||||||
| Written-off of fixed assets | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||
| Total other income | ||||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
27
| Six months ended June 30, 2023 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cost of digital marketing | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| JV income | ||||||||||||||||||||||||||||
| Gain on early lease termination | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Waiver of loan payable | ( | ) | ||||||||||||||||||||||||||
| Written-off of fixed assets | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||
| Total other income (expense) | ||||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
28
| Three months ended June 30, 2024 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cost of digital marketing | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ||||||||||||||||||||||||||||
| Cost of data | ||||||||||||||||||||||||||||
| Software cost | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| JV income | ||||||||||||||||||||||||||||
| Gain on early lease termination | ||||||||||||||||||||||||||||
| Gain on disposal of fixed assets | ||||||||||||||||||||||||||||
| Impairment loss | ||||||||||||||||||||||||||||
| Interest income | ( | ) | ||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Waiver of loan payable | ||||||||||||||||||||||||||||
| Written-off of fixed assets | ||||||||||||||||||||||||||||
| Other income | ( | ) | ||||||||||||||||||||||||||
| Total other income | ||||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
29
| Three months ended June 30, 2023 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Revenue from external customers | ||||||||||||||||||||||||||||
| Sales – online ordering | ||||||||||||||||||||||||||||
| Sales – digital marketing | ||||||||||||||||||||||||||||
| Sales – online ticketing and reservation | ||||||||||||||||||||||||||||
| Sales – data | ||||||||||||||||||||||||||||
| Software sales | ||||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cost of digital marketing | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||||||||||
| Software cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| JV income | ||||||||||||||||||||||||||||
| Gain on early lease termination | ||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||
| Waiver of loan payable | ( | ) | ||||||||||||||||||||||||||
| Written-off of fixed assets | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other income | ( | ) | ||||||||||||||||||||||||||
| Total other income (expense) | ( | ) | ||||||||||||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
30
| June 30, 2024 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||||||||||
| Identifiable assets | ||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||
| Online F&B and Groceries Deliveries | Digital Marketing | Online Ticketing and reservation | e-Commerce | Telecommunication Reseller | Merchant POS | Total | ||||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||||||||||
| Identifiable assets | ||||||||||||||||||||||||||||
Schedule of geographic segments
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Indonesia | $ | $ | ||||||
| Vietnam | ||||||||
| Philippines | ||||||||
| Singapore | ||||||||
| United States | ||||||||
| Thailand | ||||||||
| Malaysia | ||||||||
| $ | $ | |||||||
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Indonesia | $ | $ | ||||||
| Vietnam | ||||||||
| Philippines | ||||||||
| Singapore | ||||||||
| United States | ||||||||
| Thailand | ||||||||
| Malaysia | ||||||||
| $ | $ | |||||||
31
NOTE – 6 DEPOSIT, PREPAYMENTS AND OTHER RECEIVABLES
June
30, | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Deposits | $ | $ | ||||||
| Prepayments | ||||||||
| Value added tax | ||||||||
| Interest receivable | ||||||||
| Other receivables (a) | ||||||||
| $ | $ | |||||||
| (a) | Including in other receivables is a security bond of $ |
NOTE – 7 INVENTORIES
June
30, | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Trading goods | $ | $ | ||||||
Finished
goods inventories were related to e-commerce business held by third party logistic and air ticket reservation. The cost of revenue incurred
amounted to $
NOTE – 8 INTANGIBLE ASSETS
| Useful life | June 30, 2024 | December 31, 2023 | ||||||||
| At cost: | ||||||||||
| Software platform | $ | $ | ||||||||
| Apps development | ||||||||||
| Computer software | ||||||||||
| Software system | ||||||||||
| Intellectual technology | ||||||||||
| Identifiable intangible asset | ||||||||||
| Other intangible assets | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
On November 1, 2018, the Company entered into
a software development agreement with CVO Advisors Pte Ltd (CVO) to design and build an App and Web-based platform for the total consideration
of $
The delivered platform was further developed by
the Company’s in-house technology team (based in Noida that Sopa is currently using for the loyalty platform. The platform can be
downloaded from Apple store or Googleplay store (i.e. SoPa App) and the Company’s web version is on www.sopa.asia. The platform
was completed developed on September 30, 2020 and has estimated life of
32
Further, the Company entered into a subscription
agreement with CVO to issue
Pursuant to the subscription agreement entered
into with CVO, the Company issued
Also, the owner of CVO entered into a call option
agreement with the CEO of the Company to sale all the shares of CVO for the sum of $
Amortization of these intangible assets was
$
Amortization of these intangible assets was
$
Apps development costs for the development stage
of mobile apps development with blockchain feature used by the subsidiaries under Telecommunications Reseller segment business amounted
to $
Computer software includes business and operating software and license acquired from third parties.
Software system is the existing apps development cost and potential software value estimated base on acquisition exercise of Mangan business unit under New Retail Experience Incorporated, through the finalization of Purchase Price Allocation. This has been written off during the year ended December 31, 2023.
Intellectual technology is the identified technology value concluded from acquisition of Pushkart business unit under New Retail Experience Incorporated, through the finalization of Purchase Price Allocation. This has been written off during the year ended December 31, 2023.
Identifiable intangible assets are the potential intangible assets as stakeholder values estimated based on acquisition exercise of TMG group, Nusatrip group and VLeisure, through the finalization of Purchase Price Allocation.
NOTE – 9 PLANT AND EQUIPMENT
| June 30, 2024 | December 31, 2023 | |||||||
| At cost: | ||||||||
| Computer | $ | $ | ||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Renovation | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
Depreciation expense
for the three months ended June 30, 2024 and 2023 were $
Depreciation expense
for the six months ended June 30, 2024 and 2023 were $
33
NOTE – 10 AMOUNTS DUE TO RELATED PARTIES
| June 30, 2024 | December 31, 2023 | |||||||
| Amounts due to related parties (a) | $ | $ | ||||||
| (a) |
NOTE – 11 ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER PAYABLES
| June 30, 2024 | December 31, 2023 | |||||||
| Accounts payables | $ | $ | ||||||
| Accrued liabilities and other payables (a) | ||||||||
| Total payables | $ | $ | ||||||
| (a) |
| June 30, 2024 | December 31, 2023 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued VAT expenses | ||||||||
| Accrued taxes | ||||||||
| Accrued litigation expense (b) | ||||||||
| Customer deposit | ||||||||
| Customer refund | ||||||||
| Other payables | ||||||||
| Other accrual (c) | ||||||||
| Total accrued liabilities and other payables | $ | $ | ||||||
| (b) | |
| (c) |
34
NOTE – 12 LEASES
We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of June 30, 2024 and December 31, 2023.
The Company used a weighted
average incremental borrowing rate of
During the three and six months ended June 30, 2024, no new lease arrangements was entered, and accounted as per ASC Topic 842.
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease expense (per ASC 842) | $ | $ | ||||||
| Short-term lease expense (other than ASC 842) | ||||||||
| Total lease expense | $ | $ | ||||||
As of June 30, 2024, right-of-use assets were
$
As of December
31, 2023, right-of-use assets were $
Components of Lease Expense
We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.
35
Future Contractual Lease Payments as of June 30, 2024
| Years ended June 30, | Operating lease amount | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Less: non-current portion | ( | ) | ||
| Present value of lease liabilities – current liability | $ | |||
NOTE – 13 LOAN
| June 30, 2024 | December 31, 2023 | |||||||
| Loan – A (i) | ||||||||
| $ | $ | |||||||
| i) |
NOTE – 14 SHAREHOLDERS’ DEFICIT
Authorized stock
The Company
is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is
The holders of the Company’s common stock are entitled to the following rights:
Voting Rights: Each share of the Company’s
common stock entitles its holder to
Dividend Right: Subject to limitations under Nevada law and preferences that may apply to any shares of preferred stock that the Company may decide to issue in the future, holders of the Company’s common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by the Board of the Company out of funds legally available therefor.
36
Liquidation Right: In the event of the liquidation, dissolution or winding up of our business, the holders of the Company’s common stock are entitled to share ratably in the assets available for distribution after the payment of all of the debts and other liabilities of the Company, subject to the prior rights of the holders of the Company’s preferred stock.
Other Matters: The holders of the Company’s common stock have no subscription, redemption or conversion privileges. The Company’s common stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company’s common stock are subject to the rights of the holders of shares of any series of preferred stock which the Company may issue in the future.
Common stock outstanding
As of June 30, 2024 and December 31, 2023, the
Company had a total of
On November 8, 2021, the Company entered into
an underwriting agreement with Maxim Group LLC, related to the offering of
Upon the closing of the IPO, all outstanding shares
of preferred stock series A, B, B-1, C and C-1 were automatically converted into
On May 1, 2024, the Company effected a 1-for-15
reverse stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares has changed
to
The forward stock split and reverse stock split described above had no effect on the stated value of the preferred stock, and the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance with the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged.
During the
six months ended June 30, 2024 and 2023, the Company issued
During the three months ended June 30, 2024 and 2023, the Company did not issue any shares of common stock to consultants in exchange for consulting services.
During the six
months ended June 30, 2024 and 2023, the Company issued
37
During the three and six
months ended June 30, 2024 and 2023, the Company issued
During the three and six
months ended June 30, 2024 and 2023, the Company issued
During the six
months ended June 30, 2024 and 2023, the Company issued
During the three months ended June 30, 2024 and 2023, the Company did not issue any shares of common stock for staff exercised options.
Warrants
In August 2019, the Company issued
In December 2020, the Company issued a certain
number of warrants pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant allows the holder to purchase one C-1 preferred
stock at a price of $
In December 2020, a total of
In December 2020, a total of
| Warrants | Weighted average exercise price | Weighted average remaining contractual life (in years) | ||||||||||
| Outstanding as of December 31, 2020 (a) | $ | |||||||||||
| Issued (b) | $ | |||||||||||
| Issued (a) | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Expired | ||||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||
| Issued (c) | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Expired | ( | ) | $ | |||||||||
| Outstanding as of December 31, 2022 | $ | |||||||||||
| Outstanding as of December 31, 2023 | $ | |||||||||||
| Outstanding as of June 30, 2024 | $ | |||||||||||
There is no intrinsic value for the warrants as of June 30, 2024 and December 31, 2023.
| (a) | Common stock will be issued upon exercise of the |
| (b) | Series C-1 Preferred Stock will be issued upon the exercise of the warrants. The Series C-1 Preferred Stock was automatically converted into |
| (c) | Common stock will be issued upon warrants exercise of the |
38
On April 19, 2021, the Company extended the expiry date of the Warrant issued to the Series C-1 Preferred Stockholder by six months from June 30, 2021 to December 31, 2021. Further, on November 16, 2021, the Company extended the expiry date of the Warrant issued to the Series C-1 Preferred Stockholder by six months from December 31, 2021 to June 30, 2022. The Company considered this warrant as permanent equity per ASC Topic 815-40-35-2, the warrants would not be marked to market at each financial reporting date. However, where there is a subsequent change in assumptions related warrants (in the instant case, an extension of the expiration date of the warrants), the difference between the amount originally recorded and the newly calculated amount, based upon the changed assumptions, is determined and the difference between the before and after valuation is recorded as an expense, with the corresponding credit to additional paid-in capital. No additional warrants modification expense were recorded as of June 30, 2024 and December 31, 2023, respectively.
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions.
| Before modification | After Modification | |||||||
| Dividend rate | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Weighted average expected life (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
The Company considered
Ex-director’s Stock option
On December 8, 2021, the Board of Directors approved
a grant to Dennis Nguyen of a 10-year stock option to purchase
| Share option | Weighted average exercise price | Weighted average remaining contractual life (in years) | ||||||||||
| Outstanding as of December 31, 2022 | ||||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Outstanding as of December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Outstanding as of June 30, 2024 | $ | |||||||||||
39
The total
fair value of options vested during the six months ended June 30, 2024 and 2023 was $
| December 8, 2021 | ||||
| Dividend rate | % | |||
| Risk-free rate | % | |||
| Weighted average expected life (years) | ||||
| Expected volatility | % | |||
| Share price | $ | |||
| Stock awards | Weighted average exercise price | Weighted average remaining contractual life | ||||||||||
| Unvested as of December 31, 2022 | $ | |||||||||||
| Issued | ||||||||||||
| Vested | ( | ) | ||||||||||
| Cancelled | ||||||||||||
| Unvested as of December 31, 2023 | $ | |||||||||||
| Issued | ||||||||||||
| Vested | ||||||||||||
| Cancelled | ||||||||||||
| Unvested as of June 30, 2024 | $ | |||||||||||
The Company
issued
Subscription receivable
The Company
has entered into a structured financing agreement (the “Agreement”), dated October 5, 2023, with Strattners FZCO (“Strattners”),
relating to shares of our common stock offered by the prospectus supplement and the accompanying prospectus. The Company may sell to shares
of common stock an aggregate offering price of up to $
As of June
30, 2024, the subscription receivable represents the unpaid capital contribution of $
NOTE – 15 PREFERRED STOCKS AND WARRANTS
| No. of shares | Stated Value | |||||||
| Series A Convertible Preferred Stock | $ | |||||||
| Series B Convertible Preferred Stock | $ | |||||||
| Series B-1 Convertible Preferred Stock | $ | |||||||
| Series C Convertible Preferred Stock | $ | |||||||
| Series C-1 Convertible Preferred Stock | $ | |||||||
| Series X Super Voting Preferred Stock | $ | |||||||
All of the Series A, B, B-1, C, and C-1 Preferred Shares were issued at a value of respective stated value per share. These all Series of Preferred Shares contain a conversion option, are convert into a fixed number of common shares or redeemable with the cash repayment at the liquidation, so as a result of this liquidation preference, under U.S GAAP, the Company has classified the all these Series of Preferred Shares within mezzanine equity in the consolidated balance sheet.
40
Series X Super Voting Preferred Stock was issued a par value per share. This Series of Preferred Shares does not contain a conversion option, so as a result of this liquidation preference, under U.S GAAP, the Company has classified the this Series of Preferred Shares within permanent equity in the consolidated balance sheet.
Voting Rights: (1) The affirmative vote of at least a majority of the holders of each series of preferred stock shall be necessary to:
| (a) | increase or decrease the par value of the shares of the Series A Preferred Stock, alter or change the powers, preferences or rights of the shares of Series A Preferred Stock or create, alter or change the powers, preferences or rights of any other capital stock of the Company if after such alteration or change such capital stock would be senior to or pari passu with Series A Preferred Stock; and |
| (a) | adversely affect the shares of Series A Preferred Stock, including in connection with a merger, recapitalization, reorganization or otherwise. |
| (2) | The affirmative vote of at least a majority of the holders of the shares of the Series A Preferred Stock shall be necessary to: |
| (a) | enter into a transaction or series of related transactions deemed to be a liquidation, dissolution or winding up of the Corporation, or voluntarily liquidate or dissolve; |
| (b) | authorize a merger, acquisition or sale of substantially all of the assets of the Company or any of its subsidiaries (other than a merger exclusively to effect a change of domicile of the Company to another state of the United States); |
| (c) | increase or decrease (other than decreases resulting from conversion of the Series A Preferred Stock) the authorized number of shares of the Company’s preferred stock or any series thereof, the number of shares of the Company’s common stock or any series thereof or the number of shares of any other class or series of capital stock of the Company; and |
| (d) | any repurchase or redemption of capital stock of the Company except any repurchase or redemption at cost upon the termination of services of a service provider to the Company or the exercise by the Company of contractual rights of first refusal as applied to such capital stock. |
Dividend Rights: The holders of the Company’s preferred stock are not entitled to any dividend rights.
Conversion Rights (Series A Preferred Stock):
Upon the consummation of this offering, the issued and outstanding shares of Series A Preferred Stock automatically convert into a number
of shares of the Company’s common stock equal to the quotient obtained by dividing (x) the aggregate Stated Value of the issued
and outstanding Series A Preferred Stock plus any other amounts due to the holders thereof divided by (y) the offering price of the Company’s
common stock. If 90 days after conversion, the closing market price of the Company’s common stock as quoted on Nasdaq (the “Market
Value”) has decreased below the initial public offering price, each holder of the Series A Preferred Stock shall be issued a warrant
to purchase a number of shares of the Company’s common stock equal to
Conversion Rights (Preferred Stock other
than Series A and Series X Super Voting Preferred Stock): Upon the consummation of this offering, each issued and outstanding share of
Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock will automatically convert
into
41
Liquidation Rights: In the event of any
liquidation, dissolution or winding up of the Company, either voluntary or involuntary (a “Liquidation Event”), the holders
of each series of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus
funds of the Company to the holders of the Company’s common stock by reason of their ownership thereof, an amount per share in cash
equal to the greater of (x) the aggregate Stated Value for all shares of such series of Preferred Stock then held by then or (y) the amount
payable per share of the Company’s common stock which such holder of preferred stock would have received if such holder had converted
to common stock immediately prior to the Liquidation Event all of such series of preferred stock then held by such holder (the “Series
Stock Liquidation Preference”). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the holders of the
preferred stock shall be insufficient to permit the payment to the holders of the preferred stock the full Series Stock Liquidation Preference
for all series, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among
the holders of the preferred stock in proportion to the aggregate Series Liquidation Preferences that would otherwise be payable to each
of the holders of preferred stock. Such payment shall constitute payment in full to the holders of the preferred stock upon the Liquidation
Event. After such payment shall have been made in full, or funds necessary for such payment shall have been set aside by the Company in
trust for the account of the holders of preferred stock, so as to be immediately available for such payment, such holders of preferred
stock shall be entitled to no further participation in the distribution of the assets of the Company. The sale of all or substantially
all of the assets of the Company, or merger, tender offer or other business combination to which the Company is a party in which the voting
stockholders of the Company prior to such transaction do not own a majority of the voting securities of the resulting entity or by which
any person or group acquires beneficial ownership of
Other Matters: The holders of the Company’s preferred stock have no subscription or redemption privileges and are not subject to redemption. The Company’s Series Preferred Stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s preferred stock are fully paid and non-assessable.
Series A Preferred Shares
No Series A Preferred Stocks were issued during the three and six months ended June 30, 2024 and 2023.
Upon the IPO Closing, all outstanding shares of
Series A Preferred Stocks were automatically converted into
As of June 30, 2024 and December 31, 2023, there were no shares of Series A Preferred Stocks issued and outstanding, respectively.
Series B Preferred Stocks
No Series B Preferred Stocks were issued during the three and six months ended June 30, 2024 and 2023.
Upon the IPO Closing, all outstanding shares of
Series B Preferred Stock were automatically converted into
As of June 30, 2024 and December 31, 2023, there were no shares of Series B Preferred Stocks issued and outstanding, respectively.
Series B-1 Preferred Shares
No Series B-1 Preferred Stocks issued during the three and six months ended June 30, 2024 and 2023.
Upon the IPO Closing, all outstanding shares of
Series B-1 Preferred Stocks were automatically converted into
As of June 30, 2024 and December 31, 2023, no shares of Series B-1 Preferred Stocks issued and outstanding, respectively.
42
Series C Preferred Shares
No Series C Preferred Stocks were issued during the three and six months ended June 30, 2024 and 2023.
Upon the IPO Closing, all outstanding shares of
Series C Preferred Stocks were automatically converted into
As of June 30, 2024 and December 31, 2023, there were no shares of Series C Preferred Stocks issued and outstanding, respectively.
Series C-1 Preferred Shares
No Series C-1 Preferred Stocks were issued during the three and six months ended June 30, 2024 and 2023.
The Company accounts for warrants issued in accordance with the guidance on “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” in Topic 480. These warrants did not meet the criteria to be classified as a liability award and therefore were treated as an equity award and classified the Series C-1 Preferred Stocks within mezzanine equity in the consolidated balance sheet.
Upon the IPO Closing, all outstanding shares of Series C-1 Preferred
Stocks were automatically converted into
As of June 30, 2024 and December 31, 2023, there were no shares of Series C-1 Preferred Stocks issued and outstanding, respectively.
Series X Super Voting Preferred Shares
No Series X Preferred Stocks were issued during the three and six months ended June 30, 2024 and 2023.
In August 2021, the Company created a new series
of preferred stock titled “Series X Super Voting Preferred Stock”, at par value, consisting of
As of June 30, 2024 and December 31, 2023, there
were
43
NOTE – 16 TREASURY STOCK
On January
25, 2023, the Board of Directors (“Board”) authorized a $
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Aggregate common stock repurchased | ||||||||
| Weighted average price paid per share | $ | $ | ||||||
| Total amount paid | $ | $ | ||||||
As of June
30, 2024 and December 31, 2023, we had up to $
NOTE – 17 INCOME TAXES
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | ||||||||
| Loss before income taxes | $ | $ | ||||||
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Current: | ||||||||
| - United States | $ | $ | ||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| - Philippine | ||||||||
| - Indonesia | ||||||||
| - Thailand | ||||||||
| - Malaysia | ||||||||
| Deferred: | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| - Philippine | ||||||||
| - Thailand | ||||||||
| - Malaysia | ||||||||
| Income tax expense | $ | $ | ||||||
44
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operating in various countries are subject to taxes in the jurisdictions in which they operate, as follows:
United States
The Company is registered in the Nevada and is subject to the tax laws of United States.
As of June 30, 2024, the operation in the United
States incurred $
Singapore
The Company’s subsidiary is registered in the Republic of Singapore and is subject to the tax laws of Singapore.
As of June 30, 2024, the operation in the Singapore
incurred $
Vietnam
The Company’s subsidiary operating in Vietnam
is subject to the Vietnam Income Tax at a standard income tax rate of
As of June
30, 2024, the operation in the Vietnam incurred $
India
The Company’s subsidiary operating in India
is subject to the India Income Tax at a standard income tax rate of
As of June 30, 2024, the operation in the India
incurred $
Indonesia
The Company’s subsidiary is registered in Indonesia and is subject to the tax laws of Indonesia.
As of June
30, 2024, the Company’s subsidiary operations in Indonesia incurred $
Philippines
The Company’s subsidiary is registered in the Philippines and is subject to the tax laws of the Philippines.
As of June
30, 2024, the Company’s subsidiary operations in Philippines incurred $
Thailand
The Company’s subsidiary is registered in Thailand and is subject to the tax laws of Thailand.
As of June
30, 2024, the Company’s subsidiary operations in Thailand incurred $
45
Malaysia
The Company’s subsidiary is registered in Malaysia and is subject to the tax laws of Malaysia.
As of June
30, 2024, the operation in the Malaysia incurred $
Deferred tax assets and liabilities are recognized for future tax consequences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the tax year in which the differences are expected to reverse. Significant deferred tax assets and liabilities of the Company as of June 30, 2024 and December 31, 2023 consist of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Software intangibles (U.S) | $ | $ | ||||||
| Deferred Stock Compensation (U.S.) | ||||||||
| Net operating loss carryforwards | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| - Philippines | ||||||||
| - Indonesia | ||||||||
| - Thailand | ||||||||
| - Malaysia | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
The Internal Revenue
Code includes a provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a
The Company is subject to taxation in the U.S. and various foreign jurisdictions. U.S. federal income tax returns for 2018 and after remaining open to examination. We and our subsidiaries are also subject to income tax in multiple foreign jurisdictions. Generally, foreign income tax returns after 2017 remain open to examination. No income tax returns are currently under examination. As of June 30, 2024 and December 31, 2023, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the three and six months ended June 30, 2024 and 2023, there were penalties or interest recorded in income tax expense.
NOTE – 17 PENSION COSTS
The Company
is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible full-times
employees in all countries operating in the Company. The Company is required to contribute a specified percentage of the participants’
relevant income based on their ages and wages level. During the six months ended June 30, 2024 and 2023, $
46
NOTE – 18 RELATED PARTY TRANSACTIONS
From time to time, a shareholder and director of the Company advanced funds to the Company for working capital purposes. Those advances are unsecured, non-interest bearing and due on demand.
The Company paid to the director and key management
personnel, the total salaries of $
The Company paid to the director and key management
personnel, the total salaries of $
The Company issued
The Company issued
The Company subsidiary
paid their one officer, total professional fee of $
The Company subsidiary
paid their one officer, total professional fee of $
The Company paid and
accrued to its shareholders, total professional fee of $
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated unaudited condensed financial statements, the Company has no other significant or material related party transactions during the periods presented.
NOTE – 19 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
| For the Three Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
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| For the Three Months Ended | ||||||||||||||||
| June 30, 2023 | June 30, 2023 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, 2023 | June 30, 2023 | |||||||||||||||
| Percentage of | Accounts | Percentage of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
(b) Major vendors
| For the Three Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage of Accounts | ||||||||||||||
| Vendor | Purchases | purchase | Payable | payable | ||||||||||||
| Vendor A | $ | % | $ | % | ||||||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage of Accounts | ||||||||||||||
| Vendor | Purchases | purchase | Payable | payable | ||||||||||||
| Vendor A | $ | % | $ | % | ||||||||||||
For the three and six months ended June 30, 2023, there is no vendor accounts for 10% or more of the Company’s cost of revenue as at period-end dates.
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors affecting the credit risk of specific customers, historical trends and other information.
(d) Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in VND, SGD, PHP, INR, IDR, MYR and THB and a significant portion of the assets and liabilities are denominated in VND, SGD, INR, IDR, MYR and THB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and VND, SGD, PHP, INR, IDR, MYR and THB. If VND, SGD, PHP, INR, IDR, MYR and THB depreciate against US$, the value of VND, SGD, PHP, INR IDR, MYR and THB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
48
(e) Economic and political risks
The Company’s operations are conducted in the Republic of Vietnam. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the Vietnam, and by the general state of the Vietnam economy.
The Company’s operations in the Vietnam and India are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in Vietnam and India, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
NOTE – 20 COMMITMENTS AND CONTINGENCIES
As of June 30, 2024, the Company had no material commitments or contingencies.
Litigation
The Company is currently litigating three cases pending in the Supreme Court for the State of New York, New York County.
Two cases are employment actions filed by former employees who seek compensation alleged to be due pursuant to agreements with the Company. Both of the employees are represented by the same counsel and filed their cases in the Supreme Court of the State of New York, County of New York, in December 2019.
In one of those actions,
brought by Rahul Narain, a former employee claims entitlement to compensation and a bonus totaling $
49
In the other employment
action, brought by Thomas O’Connor, a former employee, and CVO Advisors Pte. Ltd., involves claims of entitlement to salary payments
and expense reimbursement in the amount of $
The third case was brought by the Company against former employees Mr. Narain and Mr. O’Connor, in addition to two companies they started, operating under the name Growth Hero. The Company commenced this action on May 18, 2023. The Company alleges, inter alia, that Narain, O’Connor, and Growth Hero misappropriated the Company’s intellectual property and alleges other related torts pertaining to the business conducted by Growth Hero. The Company brought claims sounding in breach of contract, breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets, unfair competition, breach of fiduciary duties, violation of the Stored Communication Act, and for a permanent injunction. The Company seeks damages in an amount to be determined at trial. The Company has filed a motion to extend the time to service of process on Mr. O’Connor and the corporate entities and for leave to serve them via email, and has also initiated a Hague Convention application for international service upon them. The motion was granted to the extent that the Company’s time to serve Mr. O’Connor has been extended, without prejudice to renew. Rahul Narain has been served with process and has made a motion to dismiss the claims against him. The Company has submitted an opposition to this motion. The motion was granted due to the Court’s opinion that the claims set forth against Mr. Narain in this case were the same as the counterclaims asserted against Mr. Narain in his lawsuit against the Company. The Company filed a Notice of Appeal of that decision and is weighing whether to pursue that Appeal.
The Company disputes each claim in the above referenced matters and intends to defend the pending actions noted above. The ultimate outcome of any damages that may become payable if its defence is unsuccessful in whole or in part is not probable nor estimable at this time. While the Company feels confident in its defence of these pending matters, there can be no assurance that it will prevail and that any damages that may be awarded will not be material to the results of operations or financial condition of the Company.
The Company does not believe any of the foregoing actions will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
NOTE – 21 SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before unaudited condensed financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2024, up through August 19, 2024, the Company issued the unaudited condensed consolidated financial statements.
On July 12, 2024, Thoughtful Media Group Incorporated
issued an additional
On July 17, 2024, Thoughtful Media Group Incorporated entered into
securities purchase agreements for the private placement of $
50
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
BASIS OF PRESENTATION
The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”), including our unaudited condensed consolidated financial statements and the related notes and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 15, 2024, Quarterly Report on Form 10-Q for the three months ended March 31, 2024, as filed with the SEC on May 15, 2024, and other reports that we file with the SEC from time to time.
References in this Quarterly Report on Form 10-Q to “us”, “we”, “our” and similar terms refer to Society Pass Incorporated.
Overview
We are, through the acquisition and operation of e-commerce platforms and mobile applications through our direct and indirect wholly or majority-owned subsidiaries, building the next generation digital ecosystem and loyalty platform in Southeast Asia (“SEA”) primarily Singapore, Thailand, Indonesia, Vietnam and the Philippines.
The companies by the Company form the Society Pass Group (the “Group”). The Group currently markets to both consumers and merchants in SEA while maintaining an administrative headquarters in Singapore and a software development center in the Philippines. We continue to expand our e-commerce ecosystem throughout the rest of SEA by making selective acquisitions of leading e-commerce companies and applications with particular focuses on Vietnam, Thailand, Indonesia and the Philippines of SEA. Material acquisitions include:
| ● | In February 2021, we acquired an online lifestyle platform of Leflair branded assets (the “Leflair Assets”). | |
| ● | In February 2022, the Company completed the acquisition of 100% of the equity interest of New Retail Experience Incorporated and Dream Space Trading Company Limited through its subsidiary – Push Delivery Pte Limited, which two companies mainly provide an on-line grocery and food delivery platform in the Philippines and Vietnam respectively. | |
| ● | In May 2022, the Company completed another acquisition of 100% of the equity interests of Gorilla Networks Pte Ltd, Gorilla Mobile Pte Ltd, Gorilla Connects Pte Ltd and Gorilla Networks (VN) Co Ltd (collectively, “Gorilla Networks”), a food delivery service. | |
| ● | In July 2022, the Company and its wholly owned subsidiary Thoughtful Media Group Incorporated collectively acquired 100% of the equity interests of Thoughtful Media Group Incorporated and AdActive Media, Inc. (collectively “Thoughtful Media”), whose business provides services to advertisers that helps to make internet advertising more effective. | |
| ● | In July 2022, the Company acquired 100% of the equity interests of Mangan PH Food Delivery Service Corp. (“Mangan), a Philippines restaurant and grocery delivery business. | |
| ● | In August 2022, the Company and its 95%-owned subsidiary SOPA Technology, Pte, Ltd., collectively acquired 75% of the outstanding capital stock of Nusatrip International Pte Ltd. (“Nusatrip”) and also purchased all of the outstanding capital stock of PT Tunas Sukses Mandiri (“Tunas”), a company existing under the law of the Republic of Indonesia, and both engaged in online ticketing and reservation services. |
51
| ● | In April 2023, through our wholly owned subsidiary Thoughtful Media Group Inc and Adactive Media CA Inc acquired 100% of outstanding capital stock of PT Thoughtful Media Group Indonesia (Formerly known as PT Wahana Cerita Indonesia), an Indonesia-based company operating digital marketing and event organizing. |
| ● | In April 2023, through our 99% owned subsidiary Nusatrip International Pte. Ltd. acquired 100% of the outstanding capital stock of Mekong Leisure Travel Company Limited (changed business nature from Join Stock Company), a Vietnam-based travel agency. | |
| ● | In July 2023, through our 99% owned subsidiary Mekong Leisure Travel Company Limited acquired 100% of the outstanding capital stock of Vietnam International Travel and Service Joint Stock Company, a Vietnam-based travel agency. |
We operate certain verticals in SEA: loyalty, lifestyle, telecommunications, digital marketing, and travel as we try to create the next generation digital ecosystem and loyalty platform. We scaled back our operations in the food and beverage delivery market in 2024.
Loyalty
The Company spent over two years building a cutting edge, proprietary IT architecture to effectively scale and support our ecosystem’s companies, consumers and merchants. Using our loyalty platform, consumers may earn, and merchants may issue, Society Points. The Company will aggregate the data across various touch points and build a realistic view or consumer behavior and use this behavior to increase sales across our ecosystem by: cross-pollinating acquired companies with other existing verticals, customer re-targeting, offline and online behavior prediction and cross promotions and loyalty points. The Company ecosystem becomes a key enabler for our users by converting this aggregation of data into creation of loyalty for our ecosystem companies to generate revenue.
Lifestyle
The Company has an online lifestyle platform to enable the consumers to purchase high-end brands of all categories under its own brand name of “Leflair”. Under the deployment of the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The platform also allows consumers to order from hundreds of vendor choices with personalized promotions based on purchase history and location. The platform has also partnered up with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or collect at the Company’s logistics center.
Telecommunications
The Company also has online telecommunication reseller platform operating under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes Web3 technology to operate a MVNO for its users in Southeast Asia. With network coverage to over 160 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting. More importantly, Gorilla enables its customers to convert unused mobile data into digital assets or Gorilla GO Tokens through its innovative proprietary blockchain-based SwitchBack feature. Gorilla GO Tokens in turn can be redeemed for eVouchers, to offset future bills, or be redeemed for other value-added services. During the financial period ended March 31, 2024, local mobile data service was ceased operation due to business restructuring to refocus in overseas internet data.
Digital Marketing
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company’s e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG’s wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result, Thoughtful Media’s content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media’s data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views.
52
Travel
The Company purchased Nusatrip Group, a leading Jakarta-based Online Travel Agency (“OTA”) in Indonesia and across SEA. The Nusatrip acquisition extended SoPa’s business reach into SEA regional travel industry and marked the Company’s first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, Nusatrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, Nusatrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors. During the year, NusaTrip Group also acquired two Vietnam based companies having branding name of “VLeisure” and “VIT” selling air ticket, hotel reservation and providing hotel management software to local market.
Our loyalty-focused and data-driven e-commerce marketing platform interfaces connect consumers with merchants in the lifestyle sectors, assisting local brick-and-mortar businesses to access new customers and markets to thrive in an increasingly convenience-driven economy. Our Platform integrates with both global and country-specific search engines and applications and accepts international address and phone number data, providing a consumer experience that respects local languages, address formats and customs. Our Strategic Partners (as defined below) work with us to penetrate local markets, while our Platform allows effortless integration with existing technological applications and websites.
On June 30, 2023, NextGen Retail Inc., a Nevada corporation (the “Buyer”), a wholly-owned subsidiary of the Company, entered into a Securities Purchase Agreement with Story-I Ltd., an Australian corporation (“Story-I Australia”), Story-I Pte Ltd., a Singapore corporation (“Story-I Singapore”), a wholly-owned subsidiary of Story-I Australia, and Michael Chan, to purchase 95% of the outstanding shares (the “Majority Shares”) of PT Inetindo Infocom (the “Company”), an Indonesian company and retail reseller of Apple computers and other electronics in Indonesia. The consideration for the Majority Shares to be paid to Story-I Australia and Story-I Singapore by the Buyer is AUS$2,787,173, approximately US$ 1.85 million based on current exchange rates. The Company formally terminated the agreement on April 12, 2024.
Global Events
The Russian-Ukraine war, Iran-Pakistan tension and the supply chain disruption have not affected any specific segment of our business.
Software and Development
Our ability to compete depends in large part on our continuous commitment to research and development, our ability to rapidly introduce new features and functionality and our ability to improve proven applications for established markets in which we have competitive advantages. We intend to work closely with our customers to continuously enhance the performance, functionality, usability, reliability and flexibility of our applications.
Our software and development team is responsible for the design enhancements, development, testing and certification of the Application. In addition, we may, in the future, utilize third parties for our automated testing, managed upgrades, software development and other technology services.
Intellectual Property Portfolio
We strive to protect and enhance the proprietary technology and inventions that are commercially important to our business, including seeking, maintaining and defending patent rights. Our policy is to seek to protect our proprietary position through a combination of intellectual property rights, including trademarks, copyrights, trade secret laws and internal procedures. Our commercial success will depend in part on our ability to protect our intellectual property and proprietary technologies.
Corporate Information
Our principal executive offices are located at 701 S. Carson Street, Suite 200, Carson City, NV 89701.
Our corporate website address is www.thesocietypass.com. The website for our loyalty marketplace is www.sopa.asia. The information included on our websites are not part of this prospectus.
53
Financial Condition
Results of Operations
The following table sets forth certain operational data for the three months ended June 30, 2024 and 2023:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue, net | $ | 1,710,510 | $ | 2,187,232 | $ | 3,557,589 | $ | 4,229,812 | ||||||||
| Cost of revenue | (1,246,205 | ) | (1,610,073 | ) | (2,600,635 | ) | (2,966,416 | ) | ||||||||
| Gross income (loss) | 464,305 | 577,159 | 956,954 | 1,263,396 | ||||||||||||
| Less operating expenses: | ||||||||||||||||
| Sales and marketing expenses | (143,698 | ) | (98,714 | ) | (270,833 | ) | (229,378 | ) | ||||||||
| Software development costs | (13,833 | ) | (15,209 | ) | (27,337 | ) | (29,128 | ) | ||||||||
| General and administrative expenses | (2,461,968 | ) | (3,879,049 | ) | (5,707,639 | ) | (9,870,935 | ) | ||||||||
| Total operating expenses | (2,619,499 | ) | (3,992,972 | ) | (6,003,809 | ) | (10,129,441 | ) | ||||||||
| Loss from operations | (2,155,194 | ) | (3,415,813 | ) | (5,046,855 | ) | (8,866,045 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 1,043 | 59,208 | 6,129 | 99,194 | ||||||||||||
| Interest expense | (285 | ) | (300 | ) | (458 | ) | (652 | ) | ||||||||
| Loss on disposal of investment | 75 | — | — | — | ||||||||||||
| Loss on disposal of plant and equipment | 206 | — | 206 | — | ||||||||||||
| Gain on early lease termination | — | — | — | 1,064 | ||||||||||||
| JV income | — | 3,696 | — | 6,844 | ||||||||||||
| Waiver of loan payable | 43,410 | 15,200 | 43,410 | 15,200 | ||||||||||||
| Written-off of plant and equipment | 41 | (2,583 | ) | (8,420 | ) | (2,583 | ) | |||||||||
| Other income | 170,834 | 32,416 | 228,004 | 49,203 | ||||||||||||
| Total other income | 215,324 | 107,637 | 268,871 | 168,270 | ||||||||||||
| Loss before income taxes | (1,939,870 | ) | (3,308,176 | ) | (4,777,984 | ) | (8,697,775 | ) | ||||||||
| Income taxes | (3,884 | ) | (1,054 | ) | (4,994 | ) | (1,668 | ) | ||||||||
| NET LOSS | $ | (1,943,754 | ) | $ | (3,309,230 | ) | $ | (4,782,978 | ) | $ | (8,699,443 | ) | ||||
Revenue. We generated revenues of $1,710,510 and $2,187,232 during the three months ended June 30, 2024 and 2023, respectively. We generated revenues of $3,557,589 and $4,229,812 during the six months ended June 30, 2024 and 2023, respectively. The decrease in revenue for the three and six months periods was mainly due to the decrease in the sales from our travel vertical due to interruption of platform system upgrade with server reallocation and e-commerce online platform due to the pressure from higher competition.
For the three and six months ended June 30, 2024 and 2023, respectively, the customer who accounted for 10% or more of the Company’s revenues and its outstanding receivable balance at period-end dates, is presented as follows:
| For the Three Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | 963,208 | 56.31 | % | $ | 271,317 | 34.96 | % | ||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | 1,869,336 | 52.55 | % | $ | 271,317 | 34.96 | % | ||||||||
| For the Three Months Ended | ||||||||||||||||
| June 30, 2023 | June 30, 2023 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | 1,074,406 | 49.12 | % | $ | 352,072 | 28.30 | % | ||||||||
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| For the Six Months Ended | ||||||||||||||||
| June 30, 2023 | June 30, 2023 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Customer | Revenue | revenues | receivable | receivable | ||||||||||||
| Customer A | $ | 2,027,071 | 47.92 | % | $ | 352,072 | 28.30 | % | ||||||||
The customers are in United States.
Cost of Revenue. Cost of revenue was $1,246,205 and $1,610,073 for three months ended June 30, 2024, and 2023, respectively. During the period of six months ended June 30, 2024 and 2023, the incurred cost of revenue was $2,600,635 and $2,966,416, respectively. Our cost of revenue remained consistent due to offsetting of cost increased in line with revenue from digital marketing.
Major vendor
For the three and six months ended June 30, 2024, the vendor who accounts for 10% or more of the Company’s cost of revenue and its outstanding payable balance as at period-end date, is presented as follows:
| For the Three Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Vendor | Purchases | purchase | Payable | payable | ||||||||||||
| Vendor A | $ | 293,086 | 23.52 | % | $ | 108,733 | 6.13 | % | ||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| Percentage of | Accounts | Percentage
of Accounts | ||||||||||||||
| Vendor | Purchases | purchase | Payable | payable | ||||||||||||
| Vendor A | $ | 521,200 | 20.04 | % | $ | 108,733 | 6.13 | % | ||||||||
For the three and six months ended June 30, 2023, there is no vendor accounts for 10% or more of the Company’s cost of revenue as at period-end dates.
Gross Income We recorded a gross income of $464,305 and $577,159 for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, we recorded a gross income of $956,954 and $1,263,396, respectively. The gross income is due to increased gross income from revenue from digital marketing and online ticketing and reservation business. Gross income margin was 27% and of 26% for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, our gross income margin was 27% and 30% respectively. Drop in gross margin for the three and six months period ended June 30, 2024 was due to lower profit margin arising from digital marketing business.
Sales and Marketing Expenses (“S&M”). We incurred S&M expenses of $143,698 and $98,714 for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, we incurred S&M expenses of $270,833 and $229,378, respectively. The increase in S&M expense in 2024 was primarily attributable to the wider marketing strategy development.
Software Development Cost (“SDC”). We incurred SDC expenses of $13,833 and $15,209 for three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, we incurred SDC expenses of $27,337 and $29,128, respectively. The decrease in SDC in 2024 was primarily attributable to the minimum cost for maintaining our technology development team.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $2,461,968 and $3,879,049 for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, we incurred G&A expenses of $5,707,639 and $9,870,935, respectively. The G&A is primarily consisting of the professional costs associated with costs related to business development, the Company’s ongoing expenses for its listing on the Nasdaq Stock Exchange, staff cost and stock based compensation for services, and D&O insurance cost. The significant decrease is primarily due to effectiveness of cost control plan.
Income Tax Expense. Our income tax expense for the three months ended June 30,2024 and 2023 was $3,884 and $1,054, respectively, and for six months ended June 30, 2024 and 2023 was $4,994 and $1,668, respectively.
Net Loss. As a result of the items noted above, for the three months ended June 30, 2024, we incurred a net loss of $1,943,754 as compared to the same period ended June 30, 2023 of $3,309,230. During the six months ended June 30, 2023 the Company incurred a loss of $4,782,978, as compared to $8,699,443 for the same period ended June 30, 2023. The decrease in net loss was primarily attributable to the decrease in G&A expenses. The net loss for the six months ended June 30, 2024 includes non-cash items including non-cash stock-based compensation for services of $458,700 and depreciation and amortization of $327,411.
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Liquidity and Capital Resources
As of June 30, 2024, we had cash and cash equivalents and restricted cash of $833,937 and $53,900, respectively, accounts receivable of $776,181, deposits, prepayments and other receivables of $2,956,412, inventories of $293,333, contract assets of $530,433 and deferred tax assets of $140,636.
For the six months ended June 30, 2024, the Company’s stockholders’ equity was $2,114,953 which decreased as a result of an increase in accumulated deficit partially offset by additional paid-in-capital. For the six months ended June 30, 2024, the Company incurred net loss of $4,782,978 and net cash used in operating activities of $3,226,057. Net cash provided by financing activities was $325,619.
While the Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance it will be able to do so. The Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed in order to finance the Company’s business development activities, general and administrative expenses and growth strategy. We expect to continue to rely on cash generated through financing from public offerings or private offerings by our parent company or one or more of our subsidiaries, to finance our operations and future acquisitions. The Company believes that it has sufficient liquidity to continue its current business plans and operations for at least one year.
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (3,226,057 | ) | $ | (6,886,251 | ) | ||
| Net cash used in investing activities | — | (217,521 | ) | |||||
| Net cash provided by (used in) financing activities | 325,619 | (640,525 | ) | |||||
| Effect on exchange rate change | 64,293 | (338,974 | ) | |||||
| Net change in cash and cash equivalents | (2,836,145 | ) | (8,083,271 | ) | ||||
| Cash and cash equivalent and restricted cash at beginning of period | 3,723,982 | 19,003,336 | ||||||
| Cash and cash equivalent and restricted cash at end of period | $ | 887,837 | $ | 10,920,065 | ||||
Net Cash Used in Operating Activities.
For the six months ended June 30, 2024, net cash used in operating activities was $3,226,057, which consisted primarily of a net loss of $4,782,978, gain on disposal of plant and equipment of $206, waiver of loan payable of $43,410, deposits, prepayments and other receivables of $950,510, contract assets of $305,684, and operating lease liabilities of $247,009, partially offset by depreciation and amortization of $327,411, written-off of plant and equipment of $8,420, non-cash stock-based compensation for services of $458,700, stock issued for share buy-back of $487,240, deferred tax assets of $9,222, account receivables of $437,827, accounts payable of $238,874, accrued liabilities and other payables of $652,683, deferred revenue of $133,805, inventories of $98,696, advances to related parties of $3,363 and right of use assets of $245,696.
For the six months ended June 30, 2023, net cash used in operating activities was $6,886,251, which consisted primarily of a net loss of $8,699,443, gain from early lease termination of $1,064, waiver of loan payable of $15,200, deferred tax assets of $164,836, accounts receivable of $269,800, contract assets of $282,691, accrued liabilities and other payables of $2,047,472, operating lease liabilities of $286,297, partially offset by depreciation and amortization of $935,531, written-off of fixed assets of $2,583, non-cash stock-based compensation for services of $2,267,250, inventories of 110,573, deposits, prepayments and other receivables of $1,005,716, accounts payable of $425,124, advances to relayed parties of $57,070 and right of use assets of $279,986.
We expect to continue to rely on cash generated through financing from public offerings or private offerings of our or one or more of our subsidiaries’ securities, to finance our operations and future acquisitions.
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Net Cash Used In Investing Activities.
For the six months ended June 30, 2024, there was no cash movement.
For the six months ended June 30, 2023, there was a net cash outflow of $217,521, which consist of $244,454 used in purchase of plant and equipment and partially offset by $26,933 of cash generated from purchase of subsidiary and business acquisition.
Net Cash Provided by (Used in) Financing Activities.
For the six months ended June 30, 2024, net cash provided by financing activities was $325,619 from resale of share buy-back of $612,859, private funding of $200,000, partially offset by repurchase of common stock of $487,240.
For the six months ended June 30, 2023, net cash used in financing activities was $640,525 mainly for repurchase of common stock.
Critical Accounting Policies and Estimate
| ● | Basis of presentation |
The Company has prepared the accompanying unaudited condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ equity and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent quarter or for the full year ending December 31, 2024 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the 2023 audited financial statements and accompanying notes filed with the SEC.
| ● | Emerging Growth Company |
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
| ● | Use of estimates and assumptions |
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, the incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on amounts due to related parties, inventory valuation, revenue recognition, the allocation of purchase consideration in business combinations, and deferred tax assets and the related valuation allowance.
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| ● | Basis of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
| ● | Business combination |
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810, Consolidation (“ASC 810”). ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations. Under ASC 805, all business combinations are accounted for by applying the acquisition method. Accounting for the resulting goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company’s results of operations.
| ● | Noncontrolling interest |
The Company accounts for non-controlling interests in accordance with ASC Topic 810, which requires the Company to present non-controlling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to its non-controlling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
| ● | Segment reporting |
ASC Topic 280, Segment Reporting (“Topic 280”) establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. The Company currently operates in six reportable operating segments: (i) Online Grocery and Food and Groceries Deliveries, (ii) Digital marketing, (iii) Online ticketing and reservation, (iv) Telecommunications Reseller, (v) e-Commerce, (vi) Merchant Point of Sale (“merchant POS”).
| ● | Cash and cash equivalents |
Cash and cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of June 30, 2024 and December 31, 2023, the cash and cash equivalents excluded restricted cash amounted to $833,937 and $3,628,670, respectively.
The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250,000, so there were uninsured balance of $0 and $83,152 as of June 30, 2024 and December 31, 2023, respectively. In addition, the Company has uninsured bank deposits of $647,905 and $3,262,161 with a financial institution outside the U.S as of June 30, 2024 and December 31, 2023, respectively. All uninsured bank deposits are held at high quality credit institutions.
| ● | Restricted cash |
Restricted cash refers to cash that is held by the Company for specific reasons and is, therefore, not available for immediate ordinary business use. The restricted cash represented fixed deposit maintained in bank accounts that are pledged. As of June 30, 2024 and December 31, 2023, the restricted cash amounted to $53,900 and $95,312, respectively.
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| ● | Accounts receivable |
Accounts receivables are recorded at the amounts that are invoiced to customers, do not bear interest, and are due within contractual payment terms, generally 30 to 90-days from completion of service or the delivery of a product. Credit is extended based on an evaluation of a customer’s financial condition, the customer’s creditworthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Quarterly, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company records bad debt expense and records an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to pursue all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Currently, the Company does not have any off-balance-sheet credit exposure related to its customers, and as of both June 30, 2024 and December 31, 2023, there was no need for allowance for doubtful accounts.
| ● | Inventories |
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. No allowance for obsolete inventories was recorded by the Company during the three and six months ended June 30, 2024 and 2023. The inventories amounted to $293,333 and $431,483 at June 30, 2024 and December 31, 2023, respectively.
| ● | Plant and equipment |
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
Expected useful lives |
|||
| Computer equipment | 3 years | ||
| Office equipment | 5 years | ||
| Renovation | 5 years |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
| ● | Impairment of long-lived assets |
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the three and six months ended June 30, 2024 and 2023 presented.
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| ● | Revenue recognition |
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | Identify the contract with a customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to performance obligations in the contract; and | |
| ● | Recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities that correspond to our six business segments (business to consumer or “B2C”), grocery and food delivery (B2C), telecommunication reseller (B2C), online ticketing and reservations (B2C) and the services providing to merchants for their business growth (business to business or “B2B”), digital marketing (B2B) and online ticketing and reservations (B2B).
The Company’s performance obligations include providing connectivity between merchants and consumers, generally through an online ordering platform. The platform allows merchants to create an account, display a menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create an account and order from merchants on the consumer facing application. The platform allows a delivery company to accept an online delivery request and deliver or ship an order from a merchant to customer.
Lifestyle
The Company has developed an online lifestyle platform (the “Lifestyle Platform”) under its own brand name of “Leflair” to enable consumers to purchase high-end brands in many categories. Using the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company’s logistics center.
Grocery and Food Delivery
Other online platforms include online platforms in Vietnam, under the brand name of “Handycart”, and Philippines, under the brand names of “Pushkart” and “Mangan”, to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area. This business segment has been progressively ceasing yet the Company has maintained ongoing involvement in specific operational activities during the three and six months ended June 30, 2024.
Telecommunications
The Company operates a Singapore-based online telecommunication reseller platform under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting. More importantly, Gorilla enables its customers to convert unused mobile data into digital assets or Gorilla GO Tokens through its innovative proprietary blockchain-based SwitchBack feature. Gorilla GO Tokens in turn can be redeemed for eVouchers, to offset future bills, or be redeemed for other value-added services. Please visit https://gorilla.global/ for more information. During the three and six months ended June 30, 2024, the Company ceased its local mobile data service operation due to business restructuring to refocus on overseas internet data services.
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Digital Marketing
The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company’s e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG’s wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.
As a result, Thoughtful Media’s content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media’s data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views as at the reporting period.
Travel
The Company purchased the NusaTrip Group, a leading Jakarta-based Online Travel Agency (“OTA”) in Indonesia and across SEA. The NusaTrip acquisition extended the Company’s business reach into SEA regional travel industry and marked the Company’s first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, NusaTrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, NusaTrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors. During the year, NusaTrip Group also acquired two Vietnam based companies having branding name of “VLeisure” and “VIT” selling air ticket, hotel reservation and providing hotel management software to local market.
The Company’s e-Commerce business is primarily conducted using Leflair’s Lifestyle Platform, as follows:
| 1) | When a customer places an order on either the Leflair website or app, a sales orders report will be generated in the system. The Company will either fulfill this order from its inventory or purchase the item from the manufacturer or distributor. Once the Company has the item in its distribution center, it will contract with a logistics partner delivered to the end customer. The sale is recognized when the delivery is completed by the logistics partner to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to any product warranty. The Company is considered the principal in this e-commerce transaction and reports revenue on a gross basis as the Company establishes the price of the product, has responsibility for fulfillment of the order and retains the risk of collection. |
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $3,701 and $57,407 respectively, in the Lifestyle sector.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $24,429 and $280,924 respectively, in the Lifestyle sector.
The Company’s Merchant POS offers both software and hardware products and services to vendors, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to obtain access to the Merchant Marketing Program. | |
| 2) | The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month. | |
| 3) | The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants. |
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During the three months ended June 30, 2024 and 2023, the Company generated revenue of $0 and $1,692, respectively, from software fees.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $0 and $1,887 respectively, from software fees.
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC Topic 606 when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfilment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606 are present in the arrangement, revenue is recognized net of related direct costs since in these instances we act as an agent.
Software subscription fee — The Company’s performance obligation includes providing customer access to our software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and the customer is entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with automatic one-year renewal. The subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
The Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of 10% on the invoiced value of sales.
Grocery and food delivery consists of online grocery under brand name “Pushkart” and food delivery service under brand name “Handycart” as follows:
Customers place order for groceries and take-out food through our online platforms of “Pushkart”, “Mangan” and “Handcart” respectively. When the grocery or food merchant receives and order, our platform will assign a third-party delivery service to pick up and deliver the grocery and/or food order to the customer. Revenue is recognized when the grocery and/or food is delivered, at which time the customer pays for the grocery and /or food order with cash, at Net of merchant cost.
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $0 and $54,762, respectively, from this stream.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $0 and $88,847, respectively, from this stream.
As a telecommunication reseller we provide local mobile data and overseas internet data plans under the brand name of “Gorilla,” which is a group of company we acquired in May 2022. Our telecommunication revenues are recorded for ASC Topic 606 purposes as follows:
Local mobile plan - customers choose and subscribe to a monthly local mobile plan through our “Gorilla” online platform. The Company will proceed to register the sim card (effectively, the mobile telephone number activation card) and arrange delivery of that Sim card to the customer. Following Sim card activation, the system will capture the monthly data usage of each customer, calculated in accordance with the package data capacity and monthly subscription rate, which amounts are aggregated and recorded as revenue. Unused data will be converted to Rewards Points and carried forward to next month for potential subsequent data usage. As a result of the rewards points, the company also recognize revenue from Rewards Point redemption for subscription fees offset, voucher redemption, extra data purchases, that the customer chooses to use via our online platform.
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Overseas internet data plan – a customer will place order for their desired overseas internet data plan through either the “Gorilla” online platform or third-party partner platforms. Subscription revenue is recognized when the Sim card is delivered and activated.
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $177 and $6,369, respectively, from telecommunications.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $4,743 and $20,671, respectively, from telecommunications.
Digital marketing revenues are recognized when the Company has negotiated the terms of the transaction, which includes determining either the overall price, or price for each performance obligation in the form of a service or a product, the service or product has been delivered to the customer, no obligation is outstanding regarding that service or product, and the Company is reasonably assured that funds have been or will be collected from the customer.
A summary of each of the Company’s revenue streams under ASC 606 is as follows:
Marketing services from customers
Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.
The Company derives its revenue from the provision of digital marketing services to customers. The Company offers customers with a comprehensive suite of digital marketing services to enhance their social media presence and reach their target audiences, particularly Gen Z and Millennials, to achieve marketing goals. The customers can leverage the Company’s experience in building content and fanbases with creators, their creators’ creativity, engagement, and trust among creators’ loyal fanbases to increase their brand awareness and sell products. The Company offers customized digital marketing solution, including (i) advising on content strategy and budget and recommending specific creators; (ii) communicating with and managing selected creators; (iii) producing and engaging relevant content with creators to promote key messages for customers; (iv) uploading branded content on creators’ social media channels; (v) amplifying the reach of creators’ and customers’ content through precise media planning and buying via boosting marketing services on social media platforms, such as Google; and (vi) providing optimization services through data analysis and reporting.
The Company’s customers’ payment terms generally range from 30-60 days of fulfilling its performance obligations and recognizing revenue.
Campaign-based marketing services revenue is recognized as a distinct single performance obligation when the Company transfers services to customers, which occurs over time. The performance obligation may be a promise to place branded content on certain social media platforms and is satisfied upon delivery of such related services to customers. The duration of the service period is short, usually over 1-3 months. Such revenue is recognized at over time, for the amount the Company is entitled to receive, as and when the marketing services are provided and completed.
Marketing services from social media platforms (“platform revenue”)
The Company also derives its advertising revenue generated from its channel pages and posts on social media platforms, such as YouTube by monetizing its contents. The payments are usually received within 30 days upon completion of performance obligation for platform revenue services.
The Company recognizes revenue as performance obligations are satisfied as the creation of contents are published on the social media platforms, which occurs at a point in time. The advertisements are delivered primarily based on impressions of contents on social media platforms, hence the Company provided the advertising services by an on-going basis during the publication period and the outcome of the services can be received and consumed by the social media platform simultaneously.
The Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of 10% on the invoiced value of sales.
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During the three months ended June 30, 2024 and 2023, the Company generated revenue of $1,528,173 and $1,510,960, respectively, from this stream.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $3,080,593 and $2,794,734, respectively, from this stream.
Online ticketing and reservation provide information, prices, availability, booking services for domestic and international air ticket, hotels, car, train, and hotel technology as follows:
The Company’s revenues are substantially reported on a net basis as the travel supplier is primarily responsible for providing the underlying travel services and the Company does not control the service provided by the travel supplier to the traveler. Revenue from air ticketing services, air ticket commission, hotel reservation and ancillary services including insurance commissions and refund margin are substantially recognized at a point of time when the performance obligations that are satisfied. These revenues cover B2B and B2C sales channel segments.
The Company has a software subscription revenue generated from hotel in Vietnam, and online advertising revenue, reported in gross basis, providing a hotel booking management platform for hotel management purposes, and brand advertisement purpose. these revenues are recognized ratably over the time or upon relevant performance obligations being fulfilled.
Ticketing services
The Company receives spread margin from B2B and B2C customers and commissions from travel suppliers for ticketing reservations through the Company’s transaction and service platform under various services agreements. Spread margin and commissions from ticketing reservations rendered are recognized when tickets are issued as this is when the Company’s performance obligation is satisfied. The Company is not entitled to a spread margin and commission fee for the tickets canceled by the end users. Losses incurred from cancelations are immaterial due to a historical low cancelation rate and minimal administrative costs incurred in processing cancelations. The Company presents revenues from such transactions on a net basis in the statements of income as the Company, generally, does not control the service provided by the travel supplier to the traveler and does not assume inventory risk for canceled ticketing reservations. 100% of the Company’s ticketing services revenues were recognized on a net basis, as an agent, during the three and six months ended June 30, 2024 and 2023.
Hotel reservation services
The Company receives spread margin from B2B and B2C customers and commissions from travel suppliers for hotel room reservations through the Company’s transaction and service platform. Commissions from hotel reservation services rendered are recognized when the reservation becomes non-cancelable (when the cancelation period provided by the reservation expires) which is the point at which the Company has fulfilled its performance obligation (successfully booking a reservation, which includes certain post-booking services during the cancelation period). Contracts with certain travel suppliers contain incentive commissions typically subject to achieving specific performance targets. The incentive commissions are considered as variable consideration and are estimated and recognized to the extent that the Company is entitled to such incentive commissions. The Company generally receives incentive commissions from monthly arrangements with hotels based on the number of hotel room reservations where end users have completed their stay. The Company presents revenues from such transactions on a net basis in the statements of income and comprehensive income as the Company, generally, does not control the service provided by the travel supplier to the traveler and does not assume inventory risk for canceled hotel reservations.
Ancillary services
Ancillary revenues comprise primarily of the insurance commission and refund margin.
Insurance commission revenue received from B2B and B2C customers for selling of travel insurance through the Company’s transaction and service platform. Commission from travel insurance is recognized when the order is confirmed and paid which is the point at which the Company fulfilled its performance obligation. Refund margin revenue received from B2B and B2C customers for the spread arise from reservations cancellation fee between customers and travel suppliers. This is recognized upon the confirmation of refund amount by both customers and travel suppliers which is the point at which the Company fulfilled its performance obligation.
The Company presents revenues from ancillary service transactions on a net basis in the statements of income and comprehensive income as the Company, generally, does not control the service provided by the insurance supplier and travel supplier to the traveler.
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $177,033 and $556,042, respectively, from this stream.
During the six months ended June 30, 2023 and 2023, the Company generated revenue of $441,607 and $1,042,749, respectively, from this stream.
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Hotel technology platform software services
The Company receives subscription fee from travel suppliers for hotel room reservation and marketing system through the Company’s reservation and marketing platform.
Subscription fee from hotel technology platform software services rendered are recognized ratably over the fixed term of the agreement as services are provided throughout the contract period, where the performance obligations being fulfilled through the usage of our hotel technology platform software services.
The Company presents revenues from such transactions on a gross basis in the statements of income and comprehensive income as the Company, generally, control the service provided by the travel supplier to the traveler.
During the three months ended June 30, 2024 and 2023, the Company generated revenue of $1,426 and $1,142, respectively, from this stream.
During the six months ended June 30, 2024 and 2023, the Company generated revenue of $6,217 and $1,142, respectively, from this stream.
Principal vs Agent Considerations
In accordance with ASC Topic 606, Revenue Recognition: Principal Agent Considerations, the Company evaluates the terms in the agreements with its customers and vendors to determine whether or not the Company acts as the principal or as an agent in the arrangement with each party respectively. The determination of whether to record the revenue on a gross or net basis depends upon whether the Company has control over the goods prior to transferring it. This evaluation determined that the Company is not in control of establishing the transaction price, not managing all aspects of the terms, even though taking the risk of campaign results and default payment.
Contract assets
In accordance with ASC Topic 606, a contract asset arises when the Company transfers a good or performs a service in advance of receiving consideration from the customer as agreed upon. A contract asset becomes a receivable once the Company’s right to receive consideration becomes unconditional.
There were contract assets balance was $530,433 and $247,368 on June 30, 2024 and December 31, 2023, respectively.
Contract liabilities
In accordance with ASC Topic 606, a contract liability represents the Company’s obligation to transfer goods or services to a customer when the customer prepays for a good or service or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue. The Company’s contract liabilities balance was $1,283,821 and $1,265,753 on June 30, 2024 and December 31, 2023, respectively.
| ● | Software development costs |
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985, Software, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. These capitalized software costs are ratably amortized over the period of the software’s estimated useful life. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research and development expenditures arising from the development of the Company’s own software are charged to operations as incurred. For the six months ended June 30, 2024, and 2023, software development costs were $27,337 and $29,128, respectively. For the three months ended June 30, 2024 and 2023, the software development costs were $13,833 and $15,209, respectively. Based on the software development process, technological feasibility is established upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release have, to date, been immaterial and have been expensed as incurred.
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| ● | Cost of sales |
Cost of revenue under online ordering consist of the cost of merchandises ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of revenue related to software sales and licensing consist of the cost of software and payroll costs, which are directly attributable to the sales and licensing of software. Cost of revenue related to hardware sales consist of the cost of hardware and payroll costs, which are directly attributable to the sales of hardware.
Cost of revenue related to grocery and food delivery consist of the cost of the outsourced delivery and the outsource payment gateway, which are directly attributable to the sales of grocery and food delivery.
Cost of revenue related to our telecommunication data reseller segment consist of the cost of the primary telecommunication service, which are directly attributable to the sales of telecommunication data.
Cost of revenue under digital marketing consist of the cost of primary digital marketing service, which are directly attributable to the sales of digital marketing.
| ● | Shipping and handling costs |
No shipping and handling costs are associated with the distribution of the products to the customers since those costs are borne by the Company’s suppliers or distributors for our merchant POS business.
The shipping and handling costs for all segments other than our e-commerce segment are recorded net in sales. For shipping costs related to our e-commerce business, those shipping costs are recorded in cost of revenue.
| ● | Sales and marketing expenses |
Sales and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $270,833 and $229,378 for the six months ended June 30, 2024 and 2023, respectively. Advertising expense was $143,698 and $98,714 for the three months ended June 30, 2024 and 2023, respectively.
| ● | Product warranties |
The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company’s suppliers, the Company has concluded that no warranty liability is required as of June 30, 2024 and December 31, 2023. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal, although it looks at this issue every quarter to continue to support its assertion.
| ● | Income tax |
The Company adopted the ASC 740 Income Tax provisions, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC Topic 740, nor did it record any uncertain tax positions for the three and six months ended June 30, 2024 and 2023.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. On a quarterly basis, the Company reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances to reduce those amounts to the amounts management believes will be realized in future income tax returns.
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In addition to U.S. income taxes, the Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax, there may be transactions and calculations for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
| ● | Foreign currencies translation and transactions |
The reporting currency of the Company is the United States Dollar (“US$”) and the accompanying consolidated unaudited condensed financial statements have been expressed in US$s. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore, India and Philippines and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”), Indian Rupee (“INR”), Philippines Pesos (“PHP”), Malaysian Ringgit (“MYR), Thailand Baht (“THB”) and Indonesian Rupiah (“IDR”), respectively, which are the functional currencies in which the subsidiary’s operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$s, in accordance with ASC Topic 830, “Translation of Financial Statement” (“ASC 830”) using the applicable exchange rates on the balance sheet date. Shareholders’ equity is translated using historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed statements of changes in shareholder’s equity.
Schedule of Foreign currencies translation and transactions:
Translation of amounts from SGD into US$ has been made at the following exchange rates for the six months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end SGD$:US$ exchange rate | $ | 0.73742 | $ | 0.73826 | ||||
| Period average SGD$:US$ exchange rate | $ | 0.74236 | $ | 0.74826 |
Translation of amounts from VND into US$ has been made at the following exchange rates for six months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end VND$:US$ exchange rate | $ | 0.000039 | $ | 0.000042 | ||||
| Period average VND$:US$ exchange rate | $ | 0.000040 | $ | 0.000042 |
Translation of amounts from INR into US$ has been made at the following exchange rates for the six months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end INR$:US$ exchange rate | $ | 0.01199 | $ | 0.01219 | ||||
| Period average INR$:US$ exchange rate | $ | 0.01201 | $ | 0.01217 |
Translation of amounts from PHP into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end PHP:US$ exchange rate | $ | 0.01709 | $ | 0.01808 | ||||
| Period average PHP:US$ exchange rate | $ | 0.01757 | $ | 0.01810 |
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Translation of amounts from THB into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end THB:US$ exchange rate | $ | 0.02719 | $ | 0.02821 | ||||
| Period average THB:US$ exchange rate | $ | 0.02763 | $ | 0.02922 |
Translation of amounts from MYR into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end MYR:US$ exchange rate | $ | 0.21186 | $ | 0.21397 | ||||
| Period average MYR:US$ exchange rate | $ | 0.21147 | $ | 0.22439 |
Translation of amounts from IDR into US$ has been made at the following exchange rates for the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Period-end IDR:US$ exchange rate | $ | 0.000061 | $ | 0.000066 | ||||
| Period average IDR:US$ exchange rate | $ | 0.000063 | $ | 0.000066 |
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
| ● | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| ● | Earning per share |
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the years.
For the three and six months ended June 30, 2024 and 2023, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
Schedule of computation of diluted net loss per share:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (1,938,343 | ) | $ | (3,315,258 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 2,656,697 | 1,878,102 | ||||||
| Net loss per share – Basic and diluted | $ | (0.73 | ) | $ | (1.77 | ) | ||
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| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (4,778,268 | ) | $ | (8,610,185 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 2,498,998 | 1,842,013 | ||||||
| Net loss per share – Basic and diluted | $ | (1.91 | ) | $ | (4.67 | ) | ||
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:
Schedule of Common stock issued:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Options to purchase common stock (a) | 129,685 | 129,685 | ||||||
| Warrants granted to underwriter | 253,549 | 253,549 | ||||||
| Warrants granted with Series C-1 Convertible Preferred Stock | 71,200 | 71,200 | ||||||
| Total of common stock equivalents | 454,434 | 454,434 | ||||||
| (a) | The Board of Directors have approved a 10-year stock option at an exercise price of $97.35 per share that will be exercisable at any time. |
| ● | Leases |
The Company adopted Topic 842, Leases (“ASC 842”) to determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in plant and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
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When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
As of June 30, 2024 and December 31, 2023, the Company recorded the right of use asset of $972,603 and $1,407,956, respectively.
| ● | Retirement plan costs |
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
| ● | Share-based compensation |
The Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee and non-employee), at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option pricing model to estimate the fair value of employee stock options at the date of grant. As of June 30, 2024, those shares issued and stock options granted for service compensation, vest 180 days after the grant date, and therefore these amounts are thus recognized as expense during the three and six months ended June 30, 2024 and 2023. Stock-based compensation is recorded in general and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss, with corresponding credits to common stock and accumulated paid-in capital.
| ● | Warrants |
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its preferred and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option pricing model to estimate the grant date fair value of the warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital (the accounting treatment for common stock issuance costs). All other warrants are recorded at the grant date fair value as an expense over the requisite service period, or at the date of issuance if the warrants vest immediately, with corresponding credits to additional paid-in capital.
| ● | Related parties |
The Company follows ASC 850-10, Related Party Disclosures (“ASC 850”) for the identification of related parties and the disclosure of related party transactions.
Pursuant to ASC 850, the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under ASC 825, Financial Instruments, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
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The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required by ASC 850. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| ● | Commitments and contingencies |
The Company follows the ASC 450, Commitments, to account for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, which assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows if the current level of facts and circumstances changes in the future.
| ● | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties, operating lease liabilities and loan, approximate their fair values because of the short maturity of these instruments.
| ● | Recent Accounting Pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements (“ASU 2023-01”) that is intended to improve the guidance for applying Topic 842 to arrangements between entities under common control. This ASU requires all entities (that is, including public companies) to amortize leasehold improvements associated with common control leases over the useful life to the common control group. The standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the potential impact of ASU 2023-01 on its consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The disclosures requirements included in ASU 2023-07 are required for all public entities, including those with a single reportable segment. ASU 2023-07 is effective for annual periods beginning after December 15, 2024, on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the potential impact of ASU 2023-07 on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 720): Improvements to Income Tax Disclosures (“ASU 2023-09”), which prescribes standard categories for the components of the effective tax rate reconciliation and requires disclosure of additional information for reconciling items meeting certain quantitative thresholds, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the potential impact of the adoption of ASU 2023-09 on its consolidated financial statements.
All other recently issued, but not yet effective, 2024 Accounting Standards Updates are not expected to have an effect on the Company.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for “smaller reporting companies.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to be effective can only provide reasonable assurance that their objectives are achieved.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the period ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, from time to time, we have been and may be named as a defendant in various legal proceedings arising in connection with our business activities. We may also be involved, from time to time, in reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business (collectively, “regulatory matters”). We contest liability and/or the amount of damages as appropriate in each such pending matter. We do not anticipate that the ultimate liability, if any, arising out of any such pending matter will have a material effect on our financial condition, results of operations or cash flows.
Our material legal proceedings are described in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 20, “Commitments and Contingencies”.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in “Part I, Item 1A. Risk Factors” in the Company’s Form 10-K filed with the Securities and Exchange Commission on April 15, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Form 10-K. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits.
EXHIBIT INDEX
| Exhibit No. | Description | |
| 31.1** | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) | |
| 31.2** | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) | |
| 32.1++ | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith) | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| ** | Filed herewith |
| ++ | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOCIETY PASS INCORPORATED | |
| Date: August 19, 2024 | /s/ Raynauld Liang |
| Raynauld Liang | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: August 19, 2024 | /s/ Yee Siong Tan |
| Yee Siong Tan | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
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