Society Pass Incorporated 10-Q for FY2022 Q2
Society Pass Incorporated. (SOPAQ)
About this 10-Q
Society Pass Incorporated filed this 10-Q on August 17, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).
Headline figures
Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $499.06K
- up 6312.2% from $7783 a year earlier
- Net loss
- $7.59M
- compared with a net loss of $4.34M a year earlier
- Diluted EPS
- -$0.31
- compared with -$0.59 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 Co |
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 Act).
Yes
☐
As of August 17, 2022, there were shares of the registrant’s common stock, $0.0001 par value, outstanding
| 1 |
Table of Contents
| Page | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | 3 |
| Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 | 3 | |
| Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three And Six Months ended June 30, 2022 And 2021 | 4 | |
| Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months ended June 30, 2022 and 2021 | 5 | |
| Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2022 And 2021 | 6 | |
| Notes to Condensed Consolidated Financial Statements | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 59 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 79 |
| Item 4. | Controls and Procedures | 79 |
| PART II | OTHER INFORMATION | 80 |
| Item 1. | Legal Proceedings | 80 |
| Item 1A. | Risk Factors | 80 |
| Item 2. | Unregistered sales of Equity Securities and Use of Proceeds | 80 |
| Item 3. | Defaults Upon Senior Securities | 80 |
| Item 4. | Mining Safety Disclosure | 80 |
| Item 5. | Other Information | 80 |
| Item 6. | Exhibits | 81 |
| SIGNATURES | 82 | |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2022 AND DECEMBER 31, 2021
(Currency expressed in United States Dollars (“US$”))
| June 30, 2022 (Unaudited) | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Property, plant and equipment, net | ||||||||
| Right of use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payables | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued liabilities and other payables | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Due to first insurance funding | ||||||||
| Loan | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Convertible preferred shares; $ par value, shares authorized, and shares undesignated as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Series A shares: shares designated; and Series A shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Series B shares: shares designated; and Series B shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Series B-1 shares: shares designated; and Series B-1 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Series C shares: shares designated; and Series C shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively, net of issuance cost | ||||||||
| Series C-1 shares: shares designated; and Series C-1 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively, net of issuance cost | ||||||||
| EQUITY (DEFICIT) | ||||||||
| Series X Super Voting Preferred Stock, $par value, shares designated; shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Common shares; $ par value, shares authorized; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity attributable to Society Pass Incorporated | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | |||||||||||||
| Revenue, net | ||||||||||||||||
| Sales – online ordering | $ | $ | $ | $ | ||||||||||||
| Sales – data | ||||||||||||||||
| Software sales | ||||||||||||||||
| Hardware sales | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales: | ||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ||||||||||||
| Cost of data | ( | ) | — | ( | ) | — | ||||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Hardware sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Software development costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on settlement of litigation | ( | ) | ||||||||||||||
| Other income | ||||||||||||||||
| Total other expense | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ( | ) | ( | ) | ||||||||||||
| NET LOSS ATTRIBUTABLE TO SOCIETY PASS INCORPORATED | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation adjustment attributable to non-controlling interest | ||||||||||||||||
| Comprehensive loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to Society Pass Incorporated : | ||||||||||||||||
| – Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| – Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| – Basic | ||||||||||||||||
| – Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Three and Six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common stock | |||||||||||||||||||||||||||||||||||
| Number of share | Amount | Number of shares | Amount | Additional
paid-in capital | Accumulated other comprehensive (loss) income | Accumulated deficits | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | — | |||||||||||||||||||||||||||||||||||
| Sale of units in public offering (net of expense) | — | |||||||||||||||||||||||||||||||||||
| Shares issued to for business acquisition of New Retail | — | |||||||||||||||||||||||||||||||||||
| Share issued upon the exercise of warrant | — | |||||||||||||||||||||||||||||||||||
| Share issued for accrued services | — | |||||||||||||||||||||||||||||||||||
| Fair value of stock option granted for director’s bonus | — | — | ||||||||||||||||||||||||||||||||||
| Shares issued to acquire non-controlling interest | — | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Share issued upon the exercise of warrant | — | |||||||||||||||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | — | |||||||||||||||||||||||||||||||||||
| Shares issued for director’s remuneration | — | |||||||||||||||||||||||||||||||||||
| Shares issued to for the business acquisition of Gorilla Group | — | |||||||||||||||||||||||||||||||||||
| Fair value of stock option granted for director’s bonus | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued to acquire non-controlling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss for the period | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Three and Six months ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Common stock | ||||||||||||||||||||||||||||||||||||
| No. of shares | Amount | Additional paid-in capital | Accumulated other comprehensive (loss) income | Accumulated deficit | Total stockholders’ deficit | |||||||||||||||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Imputed interest | — | |||||||||||||||||||||||||||||||||||
| Net loss for the period | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Balance as of April 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Imputed interest | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Net loss for the period | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Impairment loss | ||||||||
| Imputed interest | ||||||||
| Financing charges – first insurance funding | ||||||||
| Loss on settlement of litigation | ||||||||
| Stock based compensation for services | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Deposits, prepayments and other receivables | ( | ) | ||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Accounts payables | ||||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Advances to related parties | ( | ) | ||||||
| Right of use assets | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of investment assets | ( | ) | ||||||
| Purchase of property, plant, and equipment | ( | ) | ||||||
| Purchase of subsidiary | ( | ) | ||||||
| Cash from purchase subsidiary | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from the issuance of preferred stock and exercise of warrants into preferred stock | ||||||||
| Proceeds from public offering, net of offering expenses | ||||||||
| Repayment of loan | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect on exchange rate change on cash and cash equivalents | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENT AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENT AT END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Common stock issued for accrued salaries | $ | $ | ||||||
| Shares issued to acquire subsidiary | $ | $ | ||||||
| Shares issued for accrued services | $ | $ | ||||||
| Impact of adoption of ASC Topic 842 - lease obligation and ROU asset | $ | $ | ||||||
| Purchase consideration accrued for asset purchase transactions | $ | $ | ||||||
| Preferred stock issued but amount collected subsequently | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
NOTE－1 DESCRIPTION OF BUSINESS AND ORGANIZATION
Society Pass Incorporated (the “Company”) is incorporated in State of Nevada on June 22, 2018 under the name of Food Society Inc. On October 3, 2018, the Company changed its company name to Society Pass Incorporated. The Company through its subsidiaries, mainly sells and distributes the hardware and software of Point of Sales (POS) application in Vietnam. The Company also has online lifestyle platform to enable the consumers to purchase high-end brands of all categories under its own brand name of “Leflair”. In February 2022, the Company completed the acquisition of 100% equity interest of New Retail Experience Incorporated and Dream Space Trading Company Limited through its subsidiary, mainly provide on-line Grocery and food delivery platform in Philippines and Vietnam respectively. In May 2022, the Company completed another acquisition of 100% equity interest of Gorilla Networks Pte Ltd, Gorilla Mobile Pte Ltd, Gorilla Connects Pte Ltd and Gorilla Networks (VN) Co Ltd.
On
February 10, 2021, the Company effected a
On
September 21, 2021, the Company effected a
An additional result of the stock split was that the stated value of preferred stock, the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance to the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged.
The
registration statement for the Company’s Initial Public Offering became effective on November 8, 2021. On November 8, 2021, the
Company entered into an underwriting agreement with Maxim Group LLC, related to the offering of shares of the Company’s
common stock (the “Firm Share”), at a public offering price of $ per share. Under the terms of the Underwriting Agreement,
the Company granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the
“Option Shares”) to cover over-allotments. The Company raised $ and $
On
February 8, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC
(the “Underwriter”), related to the offering of shares (the “Shares”) of the Company’s
common stock and warrants to purchase up to
| 7 |
Description of subsidiaries incorporated or acquired by the Company
Schedule of Description of subsidiaries
| Schedule of Description of subsidiaries | ||||||||||
| Name | Place and date of incorporation | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||||
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Paid up: VND 1,034,029,911 | % | |||||||||
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The Company and its subsidiaries are hereinafter referred to as (the “Company”).
NOTE－2 LIQUIDITY AND CAPITAL RESOURCES
As
of June 30, 2022, the Company had cash balances of $
The Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance. In parallel, 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.
| 8 |
COVID-19 (Delta and Omicron variants) and other Global Events
Due to the current or future resurgence of the pandemic (including the potential emergence of new and more transmissible variants, such as the Delta and Omicron variants), it has significantly impacted health and economic conditions throughout Vietnam, Indonesia, Philippines, Singapore and Southeast Asia. National, regional and local governments took a variety of actions to contain the spread of COVID-19, including office and store closures, quarantining suspected COVID-19 patients, and capacity limitations. These developments have significantly impacted the results of operations, financial condition and cash flows of the Company included in this reporting. The impact included the difficulties of working remotely from home including slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise have in an office environment and issues arising from mandatory state quarantines.
While it is not possible at this time to estimate with sufficient certainty the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have also had and may continue to have an adverse impact on global and domestic economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company has taken temporary precautionary measures intended to help minimize the risk of the virus to its employees, by following local safe management measures, which may negatively affect the Company’s business. These measures are continuing but lightened. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The Russian-Ukraine war 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 condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2022 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 financial statements should be read in conjunction with the 2021 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 condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, valuation of impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, inventory valuation, revenue recognition, business acquisition allocation of purchase consideration, and deferred tax valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
• Business Combination
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810-10-65, Consolidation. 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, including combinations among mutual entities and combinations by contract alone. Under ASC Topic 805, all business combinations are accounted for by applying the acquisition method. Accounting for 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 noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
• Segment Reporting
ASC Topic 280, “Segment Reporting” 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 two reportable operating segments: (i) e-commerce, (ii) Merchant POS, (iii) Online Grocery and Food and Groceries Deliveries and (iv) Telecommunications Reseller.
• Cash and cash equivalents
Cash and cash equivalents are
carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments
with an original maturity of three months or less as of the purchase date of such investments. As of June 30 2022 and December 31, 2021,
the cash and cash equivalents amounted to $
| 10 |
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 $
• Accounts receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30
to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer
credit-worthiness 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 collectibility. At the end of fiscal
year, 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 considers the allowance for doubtful accounts for any
estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not
being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal
resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted
and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.
As of June 30, 2022 and December 31, 2021, the allowance for doubtful accounts amounted to $-
• Inventories
Inventories
are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware
equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by customer demand. During the three and six months ended
June 30, 2022 and 2021, the Company recorded an allowance for obsolete inventories of $-
• Prepaid Expenses
Prepaid expenses represent future expenses paid in advance, until the associated benefits are realized, the future expense remains at current asset within the next twelve months and non-current asset after twelve months.. Since prepaid expenses are categorized as “current and non-current” assets, the benefits associated with the products or services paid for upfront are expected to be used for the next twelve months and thereafter. Once the benefits of the assets are gradually realized, the prepaid expense is reduced as the asset is expensed off on the statement of operations.
• Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Schedule of Expected useful life | ||
| 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 periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | identify the contract with a customer; |
| • | identify the performance obligations in the contract; |
| • | determine the transaction price; |
| • | allocate the transaction price to performance obligations in the contract; and |
| • | recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities (B2C), grocery and food delivery (B2C), telecommunication reseller (B2C) and the services providing to merchants for their business growth (B2B), which are operated under four business segments of e-Commerce (previously mentioned as Consumer Facing Business), grocery and food delivery, telecommunication reseller, and Merchant POS (previously mentioned as Merchant Facing Business).
The Company’s performance obligation includes providing the connectivity among merchants and consumers, generally through an online ordering platform. The platform allows merchants to create account, place menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create account and make orders from merchants on the consumer facing application. The platform allows delivering company to accept online delivery request and ship order from merchant to consumer.
The Company has 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, Tikinow, 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.
Other online platforms include brand name of “Handcart” and “Pushkart” to enable the consumers to purchase grocery and food from difference local grocery and food merchants and deliver to them in their area.
The Company also has online telecommunication reseller platform operate under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package.
e-Commerce mainly offers lifestyle platform under the brand name of “Leflair”, as follows:-
| 1) | Customer placed orders on the website / app, sales orders report will be generated in the system. The Company will inform its business partners proceed to packaging to the logistic partner warehouse and therefore, logistic partner delivered to the end customer. The sales is recognized when the delivery is completed by the shipper 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 no product warranty. The Company is considered as a principal in this e-commerce transaction and reported revenue in gross basis as the Company takes the responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. |
| 12 |
During
the six months ended June 30, 2022 and 2021, the Company has generated the revenue of $
During
the three months ended June 30, 2022 and 2021, the Company has generated the revenue of $
Merchant POS offers both software and hardware products and services, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to get on 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 six months ended June 30, 2022 and 2021, the Company has generated $
During
the three months ended June 30, 2022 and 2021, the Company has generated $
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 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606-10 are present in the arrangement, revenue is recognized net of related direct costs.
Software subscription fee — The Company’s performance obligation includes providing connectivity to 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 to be 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 the automatic renewal of another one year, and 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.
| 13 |
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 of grocery and food through online platform of “Pushkart” and “Handcart” respectively. Upon received order by the grocery and food merchant, the platform will assign third party delivery man to pick up and deliver the grocery and food to the customers. Revenue are thus recognized at the point of the grocery and food delivered and paid by the customer in cash.
During the six months ended June 30, 2022 and 2021,
the Company has generated $
During the three months ended
June 30, 2022 and 2021, the Company has generated $
Telecommunication reseller provides local mobile data plan and overseas internet data plan under brand name of “Gorilla” as follows:
Local mobile plan - customers subscribe their desired monthly local mobile plan through online platform of “Gorilla” after customer account registration completed. The Company will proceed to register the Sim card and arrange delivery to the customer. Upon the Sim card activation, the system will capture the data usage of each customers at the end of each month, prorated by the package data capacity and monthly subscription rate for revenue recognition. Unused data will be converted to Rewards Point and carry forward to next month for subsequent revenue recognition point. With this, the company also recognize revenue from Rewards Point redemption for subscription offset, voucher redemption, extra data purchase, at the point of transaction accepted through the customer account in the online platform.
Overseas internet data plan – customers place order of their desired overseas internet data plan through online platform of “Gorilla” or third party partner platforms. The revenue is recognize at the point of time when the Sim card delivered and activated.
During the six months ended June 30, 2022 and 2021,
the Company has generated $
During the three months ended
June 30, 2022 and 2021, the Company has generated $
Contract assets
In accordance with ASC Topic 606-10-45-3, contract asset is when the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.
There were no contract assets at June 30, 2022 and December 31, 2021.
Contract liabilities
In accordance with ASC Topic 606-10-45-2, a contract liability is Company’s obligation to transfer goods or services to a customer when the customer prepays consideration or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract
liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing
of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition
of revenue. The Company’s contract liability balance was $
• Software development costs
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. 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 in the development of its own software are charged to operations as incurred. 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 are immaterial. For the six months ended June 30, 2022 and 2021, the software development costs were $
| 14 |
• Cost of sales
Cost of sales under online ordering consist of the cost of merchandizes ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales under software sales consist of the cost of software and payroll, which are directly attributable to the sales of software.
Cost of sales under hardware sales consist of the cost of hardware and payroll, which are directly attributable to the sales of hardware.
Cost of sales under grocery and food delivery consist of the cost of outsource delivery and outsource payment gateway, which are directly attributable t the sales of grocery and food delivery.
Cost of sales under telecommunication data reseller consist of the cost of primary telecommunication service, which are directly attributable to the sales of telecommunication data.
• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers which are borne by the Company’s suppliers or distributors for merchant POS business.
Except for e-Commerce business, the shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales.
• Sales and marketing
Sales
and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel,
and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense
was $
• Product warranties
The Company’s provision for estimated future warranty costs is based upon 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, 2022 and December 31, 2021. 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.
• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
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 are many transactions and calculations undertaken during the ordinary course of business 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.
| 15 |
• Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the six months ended June 30 2022 and 2021.
• Foreign currencies translation and transactions
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. 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”) and Philippines Pesos (“PHP”), respectively, which are the functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Shareholders’ equity is translated using the historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the statements of changes in shareholder’s equity.
Translation of amounts from SGD into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
Schedule of Foreign currencies translation and transactions
| Schedule of Foreign currencies translation and transactions | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end SGD:US$ exchange rate | $ | $ | ||||||
| Period average SGD:US$ exchange rate | $ | $ | ||||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| 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, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| 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 six months ended June 30, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end PHP:US$ exchange rate | $ | $ | N/A | |||||
| Period average PHP:US$ exchange rate | $ | $ | N/A | |||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
| 16 |
• 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 condensed consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the periods.
For the three and six months ended June 30, 2022 and 2021, 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
| Schedule of computation of diluted net loss per share | ||||||||
| Three months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding – Basic and diluted | ||||||||
| Net loss per share – Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding – Basic and diluted | ||||||||
| Net loss per share – Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| 17 |
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
| Schedule of Common stock issued | ||||||||
| Six months ended June 30, | Six months ended June 30, | |||||||
| 2022 | 2021 | |||||||
| Series A Convertible Preferred Stock (a) | ||||||||
| Series B Convertible Preferred Stock | ||||||||
| Series B-1 Convertible Preferred Stock | ||||||||
| Series C Convertible Preferred Stock | ||||||||
| Series C-1 Convertible Preferred Stock | ||||||||
| Options to purchase common stock (b) | ||||||||
| Warrants granted to underwriter | ||||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (c) | ||||||||
| Total of common stock equivalents | ||||||||
| (a) |
| (b) |
| (c) |
• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determines 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 condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the condensed 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.
| 18 |
As
of June 30, 2022 and December 31, 2021, 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
Pursuant to ASU 2018-07, 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 or non-employee), are measured 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 model to estimate the fair value of employee stock options at the date of grant. As of June 30, 2022, those shares issued and stock options granted for service compensations were vested 180 days later based on share issuance date, and therefore these amounts are thus recognized as expense during the six months ended June 30, 2022 and 2021, the stock-based compensations are recorded in the General and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss.”
• Common stock awards
The Company grants common stock awards to employees and non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided is recorded in the general and administrative expenses and charged to the same account as if such settlements had been made in cash. The fair value of the Common Stock Awards to the Company’s director was estimated using a Black-Scholes Option Pricing Model.
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its Preferred stock 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 model to estimate the fair value of compensation 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 of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period, or at the date of issuance, if there is not a service period.
• Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 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 the Fair Value Option Subsection of section 825–10–15, 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.
| 19 |
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 in those statements. 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 450-20, Commitments to report accounting 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, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted 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 at this time 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.
• 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. |
| 20 |
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, 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. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
| 21 |
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements, but does not believe that it will have a material affect on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements, but does not believe that it will have a material affect on its consolidated financial statements..
In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact and timing of adoption of this guidance, however, it appears that more revenue will be recorded under this new requirement than was previously allowed.
No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our condensed consolidated Financial Statements.
NOTE－4 REVENUE
Revenue consisted of the following deliverables:
| Schedule of Revenue | ||||||||
| Six Months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – data | ||||||||
| Software subscription sales | ||||||||
| Hardware sales | ||||||||
| $ | $ | |||||||
| Three Months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Sales – online ordering | $ | $ | ||||||
| Sales – data | ||||||||
| Software subscription sales | ||||||||
| Hardware sales | ||||||||
| $ | $ | |||||||
| 22 |
Contract liabilities recognized was related to software sales only and the following is reconciliation for the periods presented:
Schedule of Contract liabilities
| Schedule of Contract liabilities | ||||||||
| Six Months ended June 30, 2022 | Year ended December 31, 2021 | |||||||
| 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 four reportable business segments:
| (i) | e-Commerce operates an online lifestyle platform under the brand name of “Leflair” covering a diversity of services and products, such as Fashion & Accessories, Beauty & Personal Care, and Home & Lifestyle, and managed by SOPA Technology Company Ltd, and |
| (ii) | Merchant POS operates the sale of hardware and software, managed by Hottab group and SOPA entities except SOPA Technology Company Ltd, and |
| (iii) | Online grocery and food deliveries operates an online food delivery under brand name of “Handycart” and online grocery delivery under “Pushkart”, managed by Dream Space Trading Co Ltd and New Retail Experience Incorporated respectively, and |
| (iv) | Telecommunication reseller operates the sales of local mobile plan and global internet plan, managed by Gorilla Group. |
The Company’s Chief Finance Officer (CFO) evaluates operating segments using the following table presents revenues and gross profits by reportable segment and asset except liability information.
| 23 |
Schedule of Segment Reporting
| Schedule of Segment Reporting | ||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Revenue from external customers: | ||||||||||||||||||||
| Sales – online ordering | $ | $ | $ | $ | $ | |||||||||||||||
| Sales – online platform | ||||||||||||||||||||
| Sales – data | ||||||||||||||||||||
| Software sales | ||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Hardware sales | ( | ) | ( | ) | ||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Other income | ||||||||||||||||||||
| Total other income | ||||||||||||||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| 24 |
| Six Months Ended June 30, 2021 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Revenue from external customers: | ||||||||||||||||||||
| Sales – online ordering | $ | $ | $ | $ | $ | |||||||||||||||
| Sales – online platform | ||||||||||||||||||||
| Sales – data | ||||||||||||||||||||
| Software sales | ||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||
| Cost of online ordering | ||||||||||||||||||||
| Cost of online platform | ||||||||||||||||||||
| Cost of data | ||||||||||||||||||||
| Software sales | ( | ) | ( | ) | ||||||||||||||||
| Hardware sales | ( | ) | ( | ) | ||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ||||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||||||||||
| Depreciation | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Loss on settlement of litigation | ( | ) | ( | ) | ||||||||||||||||
| Other income | ||||||||||||||||||||
| Total other income | ( | ) | ( | ) | ||||||||||||||||
| Loss before income taxes | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
| 25 |
| Three Months Ended June 30, 2022 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Revenue from external customers: | ||||||||||||||||||||
| Sales – online ordering | $ | $ | $ | $ | $ | |||||||||||||||
| Sales – online platform | ( | ) | ||||||||||||||||||
| Sales – data | ||||||||||||||||||||
| Software sales | ||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||
| Cost of online ordering | ( | ) | ( | ) | ||||||||||||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||||||||||
| Cost of data | ( | ) | ( | ) | ||||||||||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Hardware sales | ( | ) | ( | ) | ||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||
| Impairment loss | ||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Other income | ||||||||||||||||||||
| Total other income | ||||||||||||||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| 26 |
| Three Months Ended June 30, 2021 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Revenue from external customers: | ||||||||||||||||||||
| Sales – online ordering | $ | $ | $ | $ | $ | |||||||||||||||
| Sales – online platform | ||||||||||||||||||||
| Sales – data | ||||||||||||||||||||
| Software sales | ||||||||||||||||||||
| Hardware sales | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||
| Cost of online ordering | ||||||||||||||||||||
| Cost of online platform | ||||||||||||||||||||
| Cost of data | ||||||||||||||||||||
| Software sales | ( | ) | ( | ) | ||||||||||||||||
| Hardware sales | ( | ) | ( | ) | ||||||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ||||||||||||||||
| Gross income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||||||||||||||
| Software development costs | ( | ) | ( | ) | ||||||||||||||||
| Impairment loss | ||||||||||||||||||||
| Depreciation | ( | ) | ( | ) | ||||||||||||||||
| Amortization | ( | ) | ( | ) | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ||||||||||||||||
| — | — | |||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||
| Other income | ||||||||||||||||||||
| Total other income | ( | ) | ( | ) | ||||||||||||||||
| Loss before income taxes | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
| 27 |
| June 30, 2022 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Intangible assets, net | $ | $ | $ | $ | $ | |||||||||||||||
| Identifiable assets | $ | $ | $ | $ | $ | |||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Intangible assets, net | $ | $ | $ | $ | $ | |||||||||||||||
| Identifiable assets | $ | $ | $ | $ | $ | |||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Capital Expenditure: | ||||||||||||||||||||
| Purchase of property, plant, and equipment | $ | $ | $ | $ | $ | |||||||||||||||
| Total capital expenditure | $ | $ | $ | $ | $ | |||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||
| Online Grocery and Food Deliveries | Telecommunication Reseller | e-Commerce | Merchant POS | Total | ||||||||||||||||
| Capital Expenditure: | ||||||||||||||||||||
| Purchase of property, plant, and equipment | $ | $ | $ | $ | $ | |||||||||||||||
| Total capital expenditure | $ | $ | $ | $ | $ | |||||||||||||||
The below sales are based on the countries in which the customer is located. Summarized financial information concerning our geographic segments is shown in the following tables:
Schedule of geographic revenue segments
| Schedule of geographic segments | |||||||||
| Six Months Ended June 30, | |||||||||
| 2022 | 2021 | ||||||||
| Indonesia | $ | $ | |||||||
| Vietnam | |||||||||
| Singapore | |||||||||
| Philippines | |||||||||
| $ | $ | ||||||||
| Three Months Ended June 30, | |||||||||
| 2022 | 2021 | ||||||||
| Indonesia | $ | $ | |||||||
| Vietnam | |||||||||
| Singapore | |||||||||
| Philippines | |||||||||
| $ | $ | ||||||||
| 28 |
NOTE－6 BUSINESS COMBINATION
On
February 14, 2022 and February 25, 2022, the Company completed the acquisition of
(c) Acquisition of New Retail:
The total consideration of
the acquisition is
| Schedule of Acquisition of assets and liability | ||||
| Purchase price consisted of the following: | ||||
| Fair value of stock at closing | $ | |||
| Cash paid | ||||
| Less cash received | ( | ) | ||
| Purchase price | $ | |||
The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.
The Company expects to retain
the services of an independent valuation firm to determine the fair value of these identifiable intangible assets. Once determined, the
Company will reallocate the purchase price of the acquisition based on the results of the independent evaluation if they are materially
different from the allocations as recorded on February 14, 2022. The preliminary estimated fair value of assets acquired, and liabilities
assumed in were as follows: The purchase price allocation resulted in $
| Schedule of Acquisition of assets and liability | ||||
| Acquired assets: | ||||
| Trade receivables | $ | |||
| Other receivables | ||||
| Property and equipment | ||||
| Total acquired assets | ||||
| Less: Assumed liabilities | ||||
| Trade payables | ||||
| Accrued liabilities and other payable | ||||
| Total Assumed liabilities | ||||
| Fair value of net assets assumed | ||||
| Goodwill recorded | ||||
| Cash consideration allocated | $ | |||
Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
The goodwill is not expected to be deductible for tax purposes. The Company recognized a goodwill impairment of $528,583 during the six months ended June 30, 2022, because there were continuous operating losses and negative cash flows incurred subsequent to the acquisition date. Under ASC 350-20-50, the Company recognized the goodwill impairment loss by comparing the actual operating results of New Retail to the profit forecast which indicated that the goodwill was impaired. Goodwill impairments may not be subsequently reversed.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.
| 29 |
The following unaudited pro forma information presents the combined results of operations as if the acquisitions had been completed on January 1, 2022 and 2021.
| Schedule of net loss per share | ||||||||
| Six months ended June 30, 2022 | Six months ended June 30, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | $ | ( | ) | $ | ( | ) | ||
(ii) Acquisition of Dream Space:
The
total acquisition consideration of the acquisition is cash consideration of VND , (approximately US$
| Schedule of Acquisition of assets and liability | ||||
| Purchase price consisted of the following: | ||||
| Cash paid | $ | |||
| Less cash received | ||||
| Purchase price | $ | |||
The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.
The purchase price allocation resulted in $-0- of goodwill, as below:
| Schedule of Acquisition of assets and liability | ||||
| Acquired assets: | ||||
| Trade receivables | $ | |||
| Other receivables | ||||
| Cash | ||||
| Property and equipment | ||||
| Total acquired assets | ||||
| Less: Assumed liabilities | ||||
| Trade payables | ||||
| Accrued liabilities and other payable | ||||
| Total Assumed liabilities | ||||
| Fair value of net liabilities assumed | ( | ) | ||
| Exchange difference | ||||
| Goodwill recorded | ||||
| Cash consideration allocated | $ | |||
Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, among other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
| 30 |
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. No additional assets or liabilities were recognized during the measurement period, or the changes to the amounts of assets or liabilities previously recognized.
The following unaudited pro forma information presents the combined results of operations as if the acquisitions had been completed on January 1, 2022 and 2021.
| Schedule of net loss per share | ||||||||
| Six months ended June 30, 2022 | Six months ended June 30, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | $ | ( | ) | $ | ( | ) | ||
(iii) Acquisition of Gorilla:
On May 31, 2022, the Company
(“Buyer”) entered into Stock Purchase Agreement with Gorilla Networks Pte Ltd. (“Gorilla”) for the acquisition
of 100%
of the equity interests in Gorilla for an aggregate purchase price equal to (i) the number of the Buyer’s shares
of restricted common stock equal to the quotient of $150,000 divided by the closing price of the Buyer’s common stock on the Nasdaq
Capital Market on the day immediately before the Closing Date (“Closing Price”) issued on the Closing Date (“First
Tranche”) and (ii) the number of the Buyer’s shares of restricted common stock equal to the quotient of $1,000,000 (less
the amount of the First Tranche and the amount of the Assumed Liabilities) divided by the Closing Price issued on the six month anniversary
of the Closing Date (“Second Tranche”). The approximately $($1,000,000 less assumed liabilities of $
| Schedule of Acquisition of assets and liability | ||||
| Purchase price consisted of the following: | ||||
| Fair value of stock at closing | $ | |||
| Less: cash received | ( | ) | ||
| Purchase price | $ | |||
The Company accounts for business combinations using the acquisition method and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, the presentation of the assets acquired, historical financial statements under Rule 3-05 and related pro forma information under Article 8 of Regulation S-X, respectively, are not required to be presented.
The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.
| 31 |
The Company expects to retain the services of an independent valuation firm to determine the fair value of these identifiable intangible assets. Once determined, the Company will reallocate the purchase price of the acquisition based on the results of the independent evaluation if they are materially different from the allocations as recorded on May 31, 2022. The preliminary estimated fair value of assets acquired, and liabilities assumed in were as follows: The purchase price allocation resulted in $-0- of goodwill, as below:
| Schedule of Acquisition of assets and liability | ||||
| Acquired assets: | ||||
| Inventories | $ | |||
| Trade receivables | ||||
| Other receivables | ||||
| Property and equipment | ||||
| Intangible assets (Apps development cost) | ||||
| Total acquired assets | ||||
| Less: Assumed liabilities | — | |||
| Trade payables | ||||
| Accrued liabilities and other payable | ||||
| Amount due to related parties | ||||
| Amount due to shareholder | ||||
| Total acquired Liabilities | ||||
| Fair value of net assets assumed | ||||
| Goodwill recorded | ||||
| Net consideration allocated, net | $ | |||
Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.
The following unaudited pro forma information presents the combined results of operations as if the acquisitions had been completed on January 1, 2022 and 2021.
| Schedule of net loss per share | ||||||||
| Six months ended June 30, 2022 | Six months ended June 30, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | $ | ( | ) | $ | ( | ) | ||
| 32 |
NOTE－7 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES
| Schedule of prepayments and other receivables | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Deposits | $ | $ | ||||||
| Prepayments (a) | ||||||||
| Prepayments for consultancy fee (b) | ||||||||
| Prepayments for first insurance funding (c) | ||||||||
| Value added tax | ||||||||
| Other receivables | ||||||||
| Advance to related party | ||||||||
| Total | $ | $ | ||||||
| Less: non-current portion | ||||||||
| Prepayments for consultancy fee | ( | ) | ||||||
| Current portion | $ | $ | ||||||
| (a) |
| (b) |
| (c) |
NOTE－8 INVENTORIES
| Schedule of inventories | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Finished goods | $ | $ | ||||||
| Less | ||||||||
| Reserve for excess and obsolete inventory | ||||||||
| Total Inventories | $ | $ | ||||||
All finished goods inventories
were related to e-commerce business and was held by the third party logistic. The cost of sales totaled $
| 33 |
NOTE－9 INTANGIBLE ASSETS
As of June 30, 2022 and December 31, 2021, intangible assets consisted of the following:
| Schedule of intangible assets | ||||||||||
| Useful life | June 30, 2022 | December 31, 2021 | ||||||||
| At cost: | (Unaudited) | |||||||||
| Software platform | $ | $ | ||||||||
| Apps development | ||||||||||
| Other intangible assets | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
On November 1 2018, the Company entered software development agreement with CVO Advisors Pte Ltd (CVO) 2018 to design and build App and Web-based platform for the total consideration of $8,000,000. CVO who is a third party vendor in the business of designing, developing, operating computer software applications including mobile and web application for social media, big data, point of sales, loyalty rewards, food delivery and technology platforms in Asia. The CVO developer performed and accepted technical work, of software development phase, which was materially completed by December 23, 2018. The Company obtained a third party license (Wallet Factory International Ltd) for their technology build up by CVO.
The delivered platform was further developed by the Company’s in-house technology team (based in Noida that Sopa is currently using for the loyalty platform. The platform can be downloaded from Apple store or Googleplay store (i.e. SoPaApp) and the Company’s web version is on www.sopa.asia. The platform was completed developed on September 30, 2020 and has estimated life of 2.5 years. The platform started to be amortized from October 1, 2020.
Further,
the Company entered subscription agreement with CVO to issued shares of preferred stocks for the software development, equal to
the aggregate of $8,000,000 or at the stated value of $
Pursuant
to the subscription agreement entered with CVO, the Company issued shares of Series A convertible preferred stock for the purchase
of software development at the stated value of $
Also, owner of CVO entered into call option agreement with the CEO of the Company to sale all the shares of CVO for the sum of $10 per share, as of date, these options were exercised by the CEO of the Company, but the equity holders of CVO Advisors Pte. Ltd. have not honored the exercise of the call. The parties are currently in litigation (refer Note 19). As a result of this option exercise, there were no accounting effect on the Company’s financial statement during the period ended June 30, 2022.
Amortization of intangible assets attributable to future periods is as follows:
| Schedule of Amortization of intangible assets | |||||
| Six months ended June 30, 2022: | Amount | ||||
| 2022 (remaining period) | $ | ||||
| 2023 | |||||
| Total | $ | ||||
Amortization
of intangible assets was $
Amortization
of intangible assets was $
Apps development costs for
the development stage of mobile apps development with blockchain feature used by the subsidiaries under Telecommunications Reseller segment
business amounted to $
| 34 |
NOTE－10 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| Schedule of Property plant and equipment | ||||||||
| June 30, 2021 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| At cost: | ||||||||
| Computer | $ | $ | ||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Renovation | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: exchange difference | ( | ) | ||||||
| $ | $ | |||||||
Depreciation
expense for the six months ended June 30, 2022 and 2021 was $
Depreciation
expense for the three months ended June 30, 2022 and 2021 was $
NOTE—11 ASSET PURCHASE AGREEMENT
On February 16, 2021, the Company
entered into an agreement to acquire assets of Goodventures SEA Limited (“Goodventure”). The acquired assets consisted of
intellectual property for it lifestyle e-commerce retail business. As consideration for entering into the Asset Purchase Agreement, the
Company agreed to pay Goodventure a total of $
| Schedule of Asset acquisition | ||||
| Acquired assets: | ||||
| Intellectual property | $ | |||
| Less: Assumed liabilities | ||||
| Accrued liabilities and other payable | ||||
| Fair value of net assets acquired | ||||
| Impairment loss recorded | ( | ) | ||
| Net asset value | $ | |||
The
Company has paid $
The
Company paid the purchase price of $200,000 during the year ended December 31, 2021. The purchase price of $200,000 shall be allocated
amongst the intangible assets acquired, further, these intangible have a short term life as well as the quantum of the value, the company
decided to expense it and accounted $
The shares issued as part of this transaction do not give the holders the right to influence or control SoPa Pte Ltd. The holders do not have any special voting rights or the right to appoint any board members.
| 35 |
SOPA
Technology Pte Ltd is a private company that was incorporated under the laws of Singapore on June 6, 2019. SOPA Technology Pte Ltd manages
Society Pass Incorporated’s operating activities in SEA countries and South Asia. As a pass-through holding company, the value
of the
The following table summarizes the changes in non-controlling interest from December 31, 2021 to June 30, 2022:
Schedule of non-controlling interest
| Schedule of non-controlling interest | ||||
| Balance, December 31, 2021 | % | |||
| Transfer (to) from the non-controlling interest as a result of Leflair Purchase Agreement | % | |||
| Parent Co. acquired/exchanged the non controlling interest holding with their shares | % | |||
| Balance, June 30, 2022 | % |
A reconciliation of the non-controlling loss attributable to the Company:
Schedule of reconciliation non-controlling loss attributable to the company
| Schedule of reconciliation non-controlling loss attributable to the company | ||||
| Non Controlling Interest, December 31, 2021 | $ | ( | ) | |
| Acquisition cost | ||||
| Net loss attributable to non-controlling interest | ( | ) | ||
| Foreign currency translation adjustment | ||||
| Non Controlling Interest, June 30, 2022 | $ | ( | ) |
Net loss attributable to non-controlling interest for the six months ended June 30, 2022:
Schedule of Net loss attributable to non-controlling interest
| Schedule of Net loss attributable to non-controlling interest | ||||
| Net loss generated by SOPA Technology Pte Ltd for the six months ended June 30, 2022 | $ | ( | ) | |
| Non controlling interest percentage | % | |||
| Net loss attributable to non-controlling interest | $ | ( | ) | |
| Foreign currency translation adjustment | ||||
| Non Controlling Interest | $ | ( | ) |
For
the six months ended June 30, 2022,
| 36 |
NOTE－12 AMOUNTS DUE TO RELATED PARTIES
Amounts due to related parties consisted of the following:
| Schedule of Amount due to related parties | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Amounts due to related parties (a) | $ | $ | ||||||
| Amount due to a director (b) | ||||||||
| $ | $ | |||||||
| (a) |
| (b) |
NOTE－13 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
| Schedule of Accounts payable | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables- Related Party (a) | ||||||||
| Accrued liabilities and other payables (b) | ||||||||
| Other Accounts payable | ||||||||
| Total Accounts payable | $ | $ | ||||||
Accounts payable includes significant third parties balance of $
| (a) | The
amount represented due to one related parties in respect to unpaid salaries amounted to $ |
|
| The amount represented due to one related parties
in respect to unpaid salaries amounted to $ |
| 37 |
| (b) |
| Schedule of Accrued liabilities | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Accrued payroll | $ | $ | ||||||
| Accrued VAT expenses | ||||||||
| Accrued taxes | ||||||||
| Other accrual (d) | ||||||||
| Other payables (c) | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
| (c) |
| (d) |
NOTE－14 LEASES
We adopted ASU No. 2016-02, Leases, on January 1, 2019, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of June 30, 2022 and December 31, 2021.
The
Company adopts a
| 38 |
During
the six months ended June 30, 2022, the Company enter into new lease arrangements, and accounted as per ASC Topic 842, the ROU asset
and lease obligation of $
The Company excluded short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense, as follows:
| Schedule of Lease expenses | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Operating lease expense (per ASC 842) | $ | $ | ||||||
| Short-term lease expense (other than ASC 842) | ||||||||
| Total lease expense | $ | $ | ||||||
As of June 30, 2022, right-of-use assets were $
As
of December 31, 2021, right-of-use assets were $
Components of Lease Expense
We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.
Future Contractual Lease Payments as of June 30, 2022
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next three years ending June 30:
| Schedule of Future Contractual Lease Payments | |||||
| Years ended June 30, | Operating lease amount | ||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Total | |||||
| Less: interest | ( | ) | |||
Present value of lease liabilities | $ | ||||
| Less: non-current portion | |||||
| Present value of lease liabilities – current liability | $ | ||||
NOTE－15 DUE TO FIRST INSURANCE FUNDING
On
October 7, 2021, the Company purchased the Directors and Officers (D&O) insurance at a premium fee of $
| 39 |
For
the three months ended June 30, 2022 and 2021, the Company recognized the amortization of interest expense of $
During
the six months ended June 30, 2022 the Company has repaid the installments for $
During
the year ended December 31, 2021 the Company has repaid the installments for $
Future contractual amortization of debt as of June 30, 2022
The below table summarizes our (i) minimum payments in the next twelve months, (ii) implied interest, and (iii) present value of future payments in the next twelve months:
Schedule of Future contractual amortization of debt
| Schedule of Future contractual amortization of debt | ||||
| Year ending June 30, | Future payment | |||
| 2023 | $ | |||
| Less: imputed interest | ( | ) | ||
| Present value of first insurance funding – current liability | $ | |||
NOTE－16 LOAN
| Schedule of loan | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Loan – A (i) | $ | $ | ||||||
| Loan – B (ii) | ||||||||
| Loan – C (iii) | ||||||||
| $ | $ | |||||||
| i) |
| ii) |
| iii) |
| 40 |
NOTE－17 SHAREHOLDERS’ DEFICIT
Authorized stock
The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 100,000,000 shares of capital stock, consisting of shares of common stock, $ par value per share, and shares of preferred stock, $ par value per share.
The holders of the Company’s common stock are entitled to the following rights:
Voting Rights: Each share of the Company’s common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of the Company’s common stock are not entitled to cumulative voting rights with respect to the election of directors.
Dividend Right:. Subject to limitations under Nevada law and preferences that may apply to any shares of preferred stock that the Company may decide to issue in the future, holders of the Company’s common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by the Board of the Company out of funds legally available therefor.
Liquidation Right:. In the event of the liquidation, dissolution or winding up of our business, the holders of the Company’s common stock are entitled to share ratably in the assets available for distribution after the payment of all of the debts and other liabilities of the Company, subject to the prior rights of the holders of the Company’s preferred stock.
Other Matters: The holders of the Company’s common stock have no subscription, redemption or conversion privileges. The Company’s common stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company’s common stock are subject to the rights of the holders of shares of any series of preferred stock which the Company may issue in the future.
Common stock outstanding
As of June 30, 2022 and December 31, 2021, the Company had a total of and shares of its common stock issued and outstanding, respectively.
On February 10, 2021, the Company effected a 750 for 1 stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in this financial statements and footnotes have been retroactively adjusted for the periods presented, unless otherwise indicated, to give effect to the forward stock split.
On
September 21, 2021, the Company effected a
An additional result of the stock split was that the stated value of preferred stock, the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance to the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged as a result of the stock split and reverse stock split described above.
On November 8, 2021, the Company entered into an underwriting agreement with Maxim Group LLC, related to the offering of shares of the Company’s common stock (the “Firm Share”), at a public offering price of $ per share. Under the terms of the Underwriting Agreement, the Company has granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the “Option Shares”) to cover over-allotments. The Company’s common stock was listed on the Nasdaq Capital Market on November 9, 2021 and began trading on such date. The closings (the IPO Closing.) of the offering and sale of the Firm Shares and the sale of 236,111 Option Shares occurred on November 12, 2021. Aggregate gross proceeds from the closings related to the Firm Shares and the Option Shares was $ and $, respectively. The IPO related expenses in these transactions amounted to $2,677,846.
| 41 |
Upon
During the six months ended June 30, 2022 and 2021, the Company issued and shares of its common stock for share exchange with the subsidiary’s 0.08% non-controlling interest and valued it at par as there was no change in the control over the subsidiary.
On February 8, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (the “Underwriter”), related to the offering of 3,484,845 shares including over-allotment (the “Shares”) of the Company’s common stock,. Each Share is being sold together with one Warrant to purchase one Share at a combined offering price of $3.30.
During six months ended June 30, 2022, the Company issued shares of our common stock to consultants in exchange for consulting services value of $.
During three months ended June 30, 2022, the Company issued shares of our common stock to consultants in exchange for consulting services value of $.
During
the six months ended June 30, 2022, the Company issued of our share of common stock to six of our employees as compensation
value of $
During
the three months ended June 30, 2022, the Company issued of our share of common stock to six of our employees as compensation
value of $
During
three and six months ended June 30, 2022, the Company issued
During February 2022, the Company issued shares of its common stock for share exchange with the subsidiary’s 100% non-controlling interest at $3.53, total amounting to $800,000 and valued it at par as there was no change in the control over the subsidiary.
During May 2022, the Company
issued partial first tranche shares
of its common stock for share exchange with the subsidiary’s 100% controlling interest at $
Warrants
In
August 2019, the
| 42 |
In
December 2020, the Company issued certain numbers of warrants pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant
is entitled the holder to purchase one C-1 preferred share at a price of $ per share. The warrants shall be exercisable on or before
December 31, 2020 and June 30, 2021. During the six months ended June 30, 2021, the Company issued
In December 2020, a total of 838 warrants are exercised in exchanged to 838 Series C-1 preferred shares. (refer note 13 for details).
Below is a summary of the Company’s issued and outstanding warrants as of June 30, 2022 and December 31, 2021:
| Schedule of warrants issued and outstanding | ||||||||||||
| 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 June 30, 2022 | $ | |||||||||||
There is no intrinsic value for warrants as of June 30, 2021 and December 31, 2020.
| (a) |
| (b) |
| (c) |
On
April 19, 2021, the Company extended the expiry date of the Warrant issued to Preferred Series C-1 holder 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 Preferred Series
C-1 holder 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 changes
in assumptions related warrants (in the instant case, an extension of the expiration date of the warrants), the difference between the
amount originally recorded and the newly calculated amount, based upon the changed assumptions, is determined and the difference between
the before and after valuation is recorded as an expense, with the corresponding credit to additional paid-in capital. The Company recorded
additional warrants modification expense of $
| 43 |
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions
Schedule of Stock options assumptions
| Schedule of Stock option assumptions | ||||||||
| Before modification | After Modification | |||||||
| Dividend rate | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Weighted average expected life (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
(a) The Company considered 25% volatility as from inception through the date of the Company common stocks.
Director’s Stock option
On December 8, 2021, the Board of Directors approved a grant to Dennis Nguyen of a 10-year options to purchase 1,945,270 shares options at an exercise price of $6.49 per share that will be exercisable at any time.
Schedule of Stock Option
| Schedule of Director’s stock awards | |||||||||||||
| Share option | Weighted average exercise price | Weighted average remaining contractual life (in years) | |||||||||||
| Outstanding as of December 31, 2020 | — | ||||||||||||
| Granted | |||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of December 31, 2021 | $ | ||||||||||||
| Granted | — | ||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of June 30, 2022 | $ | ||||||||||||
The total fair value of options vested during the six months ended June 30, 2022 and year ended December 31, 2021 was $-- and $ respectively.
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions for the six months ended June 30, 2022 and years ended December 31, 2021
| Schedule of Stock option assumptions | ||||
| December 31, 2021 | ||||
| Dividend rate | % | |||
| Risk-free rate | % | |||
| Weighted average expected life (years) | ||||
| Expected volatility | % | |||
| Share price | $ | |||
| 44 |
Director’s stock awards
| Schedule of Director’s stock awards | |||||||||||||
| Share option | Weighted average exercise price | Weighted average remaining contractual life (in years) | |||||||||||
| Unvested as of December 31, 2020 | — | ||||||||||||
| Issued | years | ||||||||||||
| Vested | ( | ) | — | ||||||||||
| Cancelled | — | ||||||||||||
| Unvested as of December 31, 2021 | $ | years | |||||||||||
| Issued | — | ||||||||||||
| Vested | ( | ) | — | ||||||||||
| Cancelled | — | — | |||||||||||
| Unvested as of June 30, 2022 | $ | years | |||||||||||
| Shares Unvested at period-end | 488,970 | $ | 7.65 |
Below is the unvested shares vesting schedule at future years
| Schedule of Future years | |||||
| Year ended December 31 2022 | |||||
| Year ended December 31 2023 | |||||
| Total |
The
Company issued 814,950 shares of its common stock on September 1, 2021 (“start date”) of which 651,960 shares shall be subject
to vesting. The vesting shares shall be vested in accordance with the following vesting schedule: 162,990 vesting shares will vest every
six-months for a two-year period from the start date, with the first vesting date being March 1, 2022. For the six months ended June
30, 2022 and 2021, the Company recognized the amortization of stock compensation expense of $
NOTE－18 PREFERRED STOCKS AND WARRANTS
As of June 30, 2022 and December 31, 2021, the Company’s preferred stocks have been designated as follow:
| Schedule of Preferred stocks | ||||||||
| 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 condensed consolidated balance sheet.
Series X Super Voting Preferred Stock was issued at a par value. 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.
| 45 |
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 |
| (b) | 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 an initial public offering, the issued and outstanding shares of Series A Preferred Stock automatically convert into a number of shares of the Company’s common stock equal to the quotient obtained by dividing (x) the aggregate Stated Value of the issued and outstanding Series A Preferred Stock plus any other amounts due to the holders thereof divided by (y) the offering price of the Company’s common stock. If 90 days after conversion, the closing market price of the Company’s common stock as quoted on Nasdaq (the “Market Value”) has decreased below the initial public offering price, each holder of the Series A Preferred Stock shall be issued a warrant to purchase a number of shares of the Company’s common stock equal to 40% of the quotient of the (a) aggregate Stated Value held by such holder before conversion at the initial public offering price and the Market Value of the shares of common stock that were issuable upon conversion divided by (b) the Market Value. The warrants shall have a term of five years and shall be exercisable at the Market Value.
Conversion Rights (Preferred Stock other than Series A Preferred Stock): Upon the consummation of an initial public offering, each issued and outstanding share of Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock will automatically convert into 750 shares of the Company’s common stock.
Liquidation Rights: In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (a "Liquidation Event"), the holders of each series of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Company’s common stock by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the aggregate Stated Value for all shares of such series of Preferred Stock then held by then or (y) the amount payable per share of the Company’s common stock which such holder of preferred stock would have received if such holder had converted to common stock immediately prior to the Liquidation Event all of such series of preferred stock then held by such holder (the "Series Stock Liquidation Preference"). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the holders of the preferred stock shall be insufficient to permit the payment to the holders of the preferred stock the full Series Stock Liquidation Preference for all series, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the preferred stock in proportion to the aggregate Series Liquidation Preferences that would otherwise be payable to each of the holders of preferred stock. Such payment shall constitute payment in full to the holders of the preferred stock upon the Liquidation Event. After such payment shall have been made in full, or funds necessary for such payment shall have been set aside by the Company in trust for the account of the holders of preferred stock, so as to be immediately available for such payment, such holders of preferred stock shall be entitled to no further participation in the distribution of the assets of the Company. The sale of all or substantially all of the assets of the Company, or merger, tender offer or other business combination to which the Company is a party in which the voting stockholders of the Company prior to such transaction do not own a majority of the voting securities of the resulting entity or by which any person or group acquires beneficial ownership of 50% or more of the voting securities of the Company or resulting entity shall be deemed to be a Liquidation Event.
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Other Matters: The holders of the Company’s preferred stock have no subscription or redemption privileges and are not subject to redemption. The Company’s Series Preferred Stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s preferred stock are fully paid and non-assessable.
Series A Preferred Shares
There was Series A Preferred Shares issued during the three and six months ended June 30, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series A Preferred Shares were automatically converted into shares of the Company’s
common stock in the value of $
As of June 30, 2022 and December 31, 2021, there were and shares of Series A Preferred Shares issued and outstanding, respectively.
Series B Preferred Shares
There was Series B Preferred Shares issued during the three and six months ended June 30, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series B Preferred Stock were automatically converted into shares of the Company’s
common stock at a value of $
As of June 30, 2022 and December 31, 2021, there were and shares of Series B Preferred Shares issued and outstanding, respectively.
Series B-1 Preferred Shares
There was no Series B-1 Preferred Shares issued during the three and six months ended June 30, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series B-1 Preferred Shares were automatically converted into shares of the Company’s
common stock at a value of $
As of June 30, 2022 and December 31, 2021, there were and shares of Series B-1 Preferred Shares issued and outstanding, respectively.
Series C Preferred Shares
| 47 |
There was Series C Preferred Shares issued during the three and six months ended June 30, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series C Preferred Shares were automatically converted into shares of the Company’s
common stock at a value of $
As of June 30, 2022 and December 31, 2021, there were and shares of Series C Preferred Shares issued and outstanding, respectively.
Series C-1 Preferred Shares
The Company accounts for warrants issued in accordance with the guidance on “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” in Topic 480. These warrants did not meet the criteria to be classified as a liability award and therefore were treated as an equity award and classified the Series C-1 Preferred Shares within mezzanine equity in the condensed consolidated balance sheet.
Upon
the IPO Closings, all outstanding shares of Series C-1 Preferred Shares were automatically converted into shares of the Company’s
common stock in a value of $
As of June 30, 2022 and December 31, 2021, there were and shares of Series C-1 Preferred Shares issued and outstanding, respectively.
Series X Super Voting Preferred Shares
In August 2021, the Company created a new series of preferred stock to be titled “Series X Super Voting Preferred Stock”, at $0.0001 par value, consisting of 3,500 authorized shares and to provide to such preferred stock certain rights and privileges including but not limited to the right to 10,000 votes per share (post reverse split: 4,000 votes per share) to vote on all matters that may come before the stockholders of the Corporation, voting together with the common stock as a single class on all matters to be voted or consented upon by the stockholders but is not entitled to any dividends, liquidation preference or conversion or redemption rights, so accordingly it is accounted as an equity classification.
As of June 30, 2022 and December 31, 2021, there were and shares of Series X Super Voting Preferred Shares issued and outstanding, respectively.
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NOTE－19 INCOME TAXES
For the six months ended June 30, 2022 and 2021, the local (“Nevada”) and foreign components of loss before income taxes were comprised of the following:
| Schedule of provision for income taxes | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | $ | ||||||
| - Foreign | ( | ) | ||||||
| Loss before income taxes | $ | $ | ( | ) | ||||
The provision for income taxes consisted of the following:
| Schedule of provision for income taxes | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Current: | ||||||||
| - United States | $ | $ | ||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - Philippines | ||||||||
| - India | ||||||||
| Deferred: | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - Philippines | ||||||||
| - India | ||||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: Singapore and Vietnam that are subject to taxes in the jurisdictions in which they operate, as follows:
United States
The Company is registered in the Nevada and is subject to the tax laws of United States. A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows:
| Schedule of Effective Income Tax Rate Reconciliation | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of allowance | ||||||||
| Income tax expense | $ | $ | ||||||
As of June 30, 2022, 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.
| Schedule of Effective Income Tax Rate Reconciliation | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of allowance | ||||||||
| Income tax expense | $ | $ | ||||||
As of June 30, 2022, the operations
in Singapore incurred $
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Vietnam
The
Company’s subsidiary operating in Vietnam is subject to the Vietnam Income Tax at a standard income tax rate of
| Schedule of Effective Income Tax Rate Reconciliation | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of allowance | ||||||||
| Income tax expense | $ | $ | ||||||
As
of June 30, 2022, 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
| Schedule of Effective Income Tax Rate Reconciliation | Six months ended June 30, | |||||||
| 2022 | 2021 | |||||||
| Profit before income taxes | $ | $ | ||||||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ||||||||
| Tax effect of allowance | ( | ) | ( | ) | ||||
| Income tax expense | $ | $ | ||||||
As
of June 30, 2022, the operation in the India incurred $
Philippines
The Company’s subsidiary operating in Philippines is subject to the Philippines Income Tax at a standard income tax rate of 25% during its tax year. The reconciliation of income tax rate to the effective income tax rate for the six months ended June 30, 2022 and 2021 is as follows:
| Schedule of Effective Income Tax Rate Reconciliation | ||||||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ||||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ||||||||
| Tax effect of allowance | ( | ) | ||||||
| Income tax expense | $ | $ | ||||||
As of June 30, 2022, the operation
in the Philippines 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, 2022 and December 31, 2021 consist of the following:
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Schedule of Deferred Tax Assets and Liabilities
| Schedule of Deferred Tax Assets and Liabilities | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Deferred tax assets: | ||||||||
| Software intangibles (U.S) | $ | $ | ||||||
| Deferred Stock Compensation (U.S.) | ||||||||
| Net operating loss carryforwards | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| - Philippines | ||||||||
| 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 remain 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, 2022 and 2021, the Company does
NOTE－20 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 in which the Company operates. 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, 2022 and 2021, $
NOTE－21 RELATED PARTY TRANSACTIONS
From time to time, the shareholder and director of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.
The
Company paid and accrued to the directors, the total salaries of $
The
Company paid and accrued to the directors, the total salaries of $
The
company subsidiaries paid their one officer, total professional fee of $
The
company subsidiaries paid their one officers, total professional fee of $
The
Company paid and accrued to its shareholders, total professional fee of $
The
Company paid and accrued to its shareholders, total professional fee of $
The Company issued 370,000 shares
to related parties for total professional fee of $
The Company issued 316,092 shares
to related parties for total salaries of $
On May 20, 2022, the Company’s has internal restructuring of SOPA Technology Company Limited portion, who was previously under 100% holding of SOPA Technology Pte. Ltd., effectively 95% under Society Pass Incorporated, now 100% holding of Leflair Incorporated, effectively 100% under Society Pass Incorporated.
Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
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NOTE－22 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the six months ended June 30, 2022 and 2021, the customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at period-end dates, are presented as follows:
| Schedule of concentrations of risk | ||||||||||||
| Six months ended June 30, 2022 | June 30, 2022 | |||||||||||
| Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Customer B | $ | % | $ | ( | ) | |||||||
| Three months ended June 30, 2022 | June 30, 2022 | |||||||||||
| Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | % | $ | — | ||||||||
| Customer B | $ | % | — | |||||||||
| Six months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Three months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
The customers are located in Vietnam except one located in Indonesia.
(b) Major vendors
For the three and six months ended June 30, 2022 and 2021, the vendors who accounts for 10% or more of the Company’s hardware purchases and software cost and its outstanding payable balances as at period-end dates, are presented as follows:
| Three and Six months ended June 30, 2022 | June 30, 2022 | ||||||||||
| Vendors | Purchases | Percentage of purchases | Accounts payable | ||||||||
| Vendor A | $ | % | $ | ||||||||
| Six months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Vendors | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| Three months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Vendors | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
All vendors are located in Vietnam.
| 52 |
(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$, to date the majority of the revenues and costs are denominated in VND, SGD, PHP and INR and a significant portion of the assets and liabilities are denominated in VND, SGD and INR. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and VND, SGD, PHP and INR. If VND, SGD, PHP and INR depreciates against US$, the value of VND, SGD, PHP and INR revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
(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－23 COMMITMENTS AND CONTINGENCIES
As of June 30, 2022, the Company has no material commitments or contingencies .
Right issues under Series C-1 preferred stock
The Company has issued warrant pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant entitles the holder to purchase two (2) common shares at a price of per share. The warrants shall be exercisable on or before December 31, 2020 and June 30, 2021, respectively. On April 19, 2021, the Company extended the termination date of the Warrant issued to the Preferred Series C-1 holder by six months from the expiration date of June 30, 2021 to December 31, 2021. On November 16, 2021, the Company has further extended the termination date until June 30, 2022. The Company considers this warrant as permanent equity per ASC Topic 815-40-35-2, since the warrants would not be marked to market at each financial reporting date. However, where there is a subsequent change in assumptions related to 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 accumulated paid-in capital.
| 53 |
Financing arrangement (due to a shareholder)
In February 2018, the Company entered into MOU with Connect Investment Pte Ltd (Enter Asia) for capital alliance for approximately 27% of shareholdings in the Company. Further, in August 2018, the said MOU was modified and shareholding was revised from 27% to 10% in the Company. However, subsequently in October 2020, it was agreed between both the parties to cease the said MOU with the understanding that there is no current and future obligation with either of them i.e., neither Enter Asia to make investment in the Company nor the Company to issue shares to Enter Asia. Further, the Enter Asia is going to get the shares of the Hottab Holdings Ltd (HHL) for the amount so far invested in the Company and therefore the amount due to Enter Asia is reclassified into the amount due to shareholder “Hottab Holdings Ltd”.
SOSV
In January 2019, the HPL entered
into stock purchase agreement and accelerator contract for equity (ACE) with SOSV IV LLC (SOSV) whereby the HPL will issue shares representing
5% of their capital stock for the amounts of $
Service contracts
The Company carries various service contracts on its vendors for repairs, maintenance and inspections. All contracts are short term and can be cancelled.
Material contracts
On May 28, 2021, the Company entered into a business cooperation agreement with Paytech Company Limited (Strategic Partners) to provide payment integration and loyalty services to the platform that allows merchants to process transactions with consumers. As of date, this program have not started and are expected to commence later in 2022 or in 202.
On August 15, 2021, the Company entered into a business cooperation agreement with Rainbow Loyalty Company Limited (Strategic Partners) to provide loyalty services for merchants on the platform. As of June 30, 2022, this program has not started and is expected to commence in the latter part of 2022 or early 2023.
On May 26, 2021, the company entered into a business cooperation agreement with TikiNow Smart Logistic Limited Company to provide warehouse service, packing service, delivery service and payment collection of online orders that paid by cash (COD). This agreement has been implemented since effective on October 1, 2021.
On May 15, 2021, the company entered into a business cooperation agreement with AsiaPay Company Limited (Partner) to provide payment gateway service for customers who make payment by credit cards on the platform. This agreement has been implemented effective September 7th, 2021.
| 54 |
On December 6, 2021, the Company entered into two consulting agreements with China-America Culture Media Inc. and New Continental Technology Inc., acting as Consultant to assist the Company in completing certain Business Opportunities with potential partners until February 28, 2023. The consideration of the service are $3,250,000 and $3,190,000.
Executive service agreements
On
April 1, 2017 the Company entered into an at-will employment agreement with Dennis Nguyen, its Chairman and Chief Executive Officer.
The Employment Agreement provides for a monthly salary of $
On
September 1, 2021 the Company entered into a 5-year employment agreement with Raynauld Liang, its Chief Financial Officer and Singapore
Country General Manager. The employment agreement provides Mr. Liang with compensation of (i) an annual base salary of $
On November 16, 2021, the Board of Directors awarded Dennis Nguyen a 10-year option to purchase shares of the Company’s common stock at an exercise price of $ as the settlement for accrued and unpaid bonuses.
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. The Company is not aware of any such legal proceedings that will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
The litigation docket of Carmel, Milazzo & Feil LLP (the Company’s outside counsel) discloses the following actual, pending or threatened litigation for the Company:
Rahul Narain v. Society Pass, Inc.
| 55 |
Supreme Court of the State of New York, County of New York, Index 656956/2019
Thomas O’Connor & CVO Advisors Pte. Ltd. v. Society Pass, Inc.
Supreme Court of the State of New York, County of New York, Index 656938/2019
Dennis Nguyen v. Thomas O’Connor
Supreme Court of the State of New York, County of New York, Index 651015/2020
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, a
In
the other employment action, another
The third case also involves one of those former employees; therein, a Company affiliate filed suit in February 2020 seeking enforcement, by way of specific performance, of an agreement which entitles the affiliate to purchase all of the 99 percent of the shares of the plaintiff-entity which alleges entitlement to $8 million in shares of the Company’s Series A Preferred Stock in one of the employment actions described above. The former employee has responded to the Company’s complaint in this action with a motion to dismiss, which was later withdrawn by same, and then by way of an answer without counterclaims. The judge assigned to this action has announced his retirement at the end of the calendar year; it is unclear to whom the case will be assigned in the future.
The Company was in an AAA arbitration defending allegations of breach of an agreement. The Demand for Arbitration therein, dated August 25, 2020, asserts that the Petitioner, an LLC, had an agreement with the Company and its CEO granting the Petitioner the right to require the Company to redeem certain common stock in the Company for a cash payment.
The
Demand alleges that the Petitioner submitted a Redemption Notice, as required under the alleged agreement, obligating the Company to
redeem the shares. The Demand alleges that the failure of the Company to redeem the shares and pay Petitioner further obligates the Company
to provide additional common stock to the Petitioner.
| 56 |
The Company has submitted
a total and general denial of the allegations of the Demand. The matter has been assigned to an arbitrator and a Preliminary Hearing
and Scheduling Order was issued in or around November 9, 2020. Dispositive motions were due at the end of January 2021 but otherwise
this matter was in the discovery phase with any Final Hearing before the arbitrator tentatively scheduled for mid-September 2021. On
May 21, 2021, the Company agreed to settle the matter for the sum of $
SOSV IV LLV v. Society Pass Inc., et al.
United States District Court for New Jersey, Index No. 21-cv-12386
On or about March 5, 2021, SOSV IV LLC (“SOSV”) sent a demand letter to the Company in regard to its investment in Hottab Pte. Ltd. (“Hottab”). Thereafter, SOSV filed suit in the District Court for New Jersey on June 10, 2021.
In
this lawsuit, SOSV alleges that it entered into an investment arrangement with Hottab in which SOSV was to receive five percent (5%)
of the common stock of Hottab and entered into an Accelerator Contract for Equity (the “ACE”) pursuant to which it alleges
to have invested a sum of $
SOSV further alleges that subsequent to a term sheet between the Company and Hottab being executed, the Company entered into an agreement to purchase one hundred percent (100%) of the issued and outstanding shares of Hottab from Hottab Holdings Limited (“Hottab Holdings”). As SOSV does not have any interest in Hottab Holdings, it alleges it did not receive any consideration as allegedly provided under the ACE.
Upon
these allegations, SOSV asserts causes of action sounding in fraudulent misrepresentation/concealment, breach of contract, breach of
the covenant of good faith and fair dealing, quantum meruit and/or unjust enrichment, promissory estoppel, oppression of minority shareholder,
and breach of fiduciary duties. SOSV seeks damages in the amount of $
Initially, SOSV filed suit in the District Court for New Jersey on June 10, 2021. SOSV voluntarily dismissed its New Jersey lawsuit and on October 29, 2021, re-filed the action in the Southern District of New York. The Southern District of New York lawsuit was also voluntarily dismissed by SOSV. SOSV has recently re-filed the suit in the Supreme Court of the State of New York, County of New York. The most recently filed complaint contains largely similar allegations and asserts causes of action sounding in fraudulent misrepresentation/concealment, intentional interference with contract, breach of the implied covenant of good faith and fair dealing, quantum meruit/unjust enrichment, oppression of minority shareholder, breach of fiduciary duty, and recission (or in the alternative declaration of ownership interest). The most recently filed complaint demands $336,000 and damages equal to the value of SOSV’s alleged ownership interest in Hottab, or alternatively an Order compelling the issuance of shares in SoPa in an amount equal to Plaintiff’s ownership interest in Hottab at the time of the Agreement of Purchase and Sale. SOSV also seeks disgorgement, though this does not include any pertinent dollar figure.
The
Company denies the accusations of SOSV and intends to vigorously defend this matter. As the lawsuit is still in the pleadings stage,
we are unable to prognosticate a likelihood of success. The Company reserved a provision for $
As
of June 30, 2022, the Company had a total of $
As of June 30 2022, the Company expects no possible loss from these legal proceedings and no provision is accrued accordingly.
| 57 |
NOTE－24 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 financial statements are issued, the Company has evaluated all events or transactions that occurred after June 30, 2022, up through August 17, 2022 the Company issued the unaudited condensed consolidated financial statements.
On
July 7, 2022, the Company, through its wholly-owned subsidiary, Thoughtful Media Group Incorporated, a Nevada corporation (the “Buyer"),
acquired from AdActive Media Group, Inc., a Delaware corporation (the “Seller”), (i) all of the outstanding capital stock
of AdActive Media CA, Inc., a California corporation (the “CA Sub”), and (ii) 99.75% of all of the outstanding capital
stock of Thoughtful Thailand Limited, a Thailand corporation. The
consideration paid to the Seller by the Company and the Buyer, included in a Stock Purchase Agreement, among the Company, Buyer and Seller
(the “Stock Purchase Agreement”), was shares of the Company’s common stock. The
Company also issued the Seller a warrant, expiring on
On July 1, 2022, the Company
through the subsidiary “Leflair Incorporated” issued a warrant to purchase
On July 20, 2022, the
Company, through its wholly-owned subsidiary, New Retail Experience Incoroproated, a Philippines corporation (“ the Buyer”)
acquired Mangan PH Food Delivery Services Corp., a corporation registered in Philippines at a consideration price of US$
| 58 |
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, 2021, as filed with the SEC on March 30, 2022, Quarterly Report on Form 10-Q for the three months ended March 31, 2022, as filed with the SEC on May 17, 2022, 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 acquire and operate e-commerce platforms and mobile applications through our direct and indirect wholly or majority-owned subsidiaries, including but not limited to Society Technology LLC, SOPA Technology Pte Ltd, SOPA Cognitive Analytics Pte Ltd, SOPA Technology Co Ltd, HOTTAB Pte Ltd and HOTTAB Vietnam Co Ltd. Along with HOTTAB Asset Vietnam Co Ltd (currently wholly-owned by one employee of HOTTAB Vietnam Co Ltd and contractually operated by HOTTAB Vietnam Co Ltd), Leflair Incorporated, Push Delivery Pte Ltd, New Retail Experience Incorporated (“NREI”), and Dream Space Co., Ltd (“Dream Space”), Gorilla Networks Pte Ltd (“Gorilla Net”), Gorilla Mobile Pte Ltd (“Gorilla Mob”). These fourteen companies form the Society Pass Group (the “Group”). The Group currently markets to both consumers and merchants in Vietnam, Philippines and Singapore while maintaining an administrative headquarters in Singapore and a software development center, which was located in India but is transitioning to a location in SEA. In February 2021, we acquired an online lifestyle platform of Leflair branded assets (the “Leflair Assets”). We acquired NREI and Dream Space in February 2022 and have integrated the Leflair Assets, NREI and Dream Space into the Society Pass corporate structure and ecosystem. Society Pass Incorporate acquired Gorilla Net and Gorilla Mob in May 2022 under Society Pass Incorporated. 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 the VIP countries (Vietnam, Indonesia and Philippines) of SEA.
Our business currently comprises of the following five verticals: lifestyle, grocery and food delivery, merchant software, telecommunication reseller, and loyalty. Lifestyle includes Leflair App and Leflair.com website; Grocery and food delivery (“F&B”) includes Pushkart App, Pushkart.ph website, Handycart App, and Handycart.vn website. The merchant software segment includes #HOTTAB Biz App, #HOTTAB POS App and Hottab.net website. Telecommunication reseller business includes Gorilla App and Gorilla.com website. The loyalty vertical includes Society Pass App and SoPa.asia website. In addition, in the third quarter we acquired companies in the travel and digital media verticals. These current four and prospective e-commerce interfaces are collectively referred to in this Quarterly Report as the “Platform”.
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Our loyalty-focused and data-driven e-commerce marketing platform interfaces connect consumers with merchants in the F&B and lifestyle sectors, assisting local brick-and-mortar businesses to access new customers and markets to thrive in an increasingly convenience-driven economy. Our Platform 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.
Leflair.com website and Leflair App are marketed in Vietnam. Pushkart.ph website and Pushkart App are marketed in Philippines. Handycart.vn website and Handycart App are marketed in Vietnam. Gorilla App and Gorilla.com website are marketed in Singapore.
Branded as “#HOTTAB”, our merchant software business helps merchants increase revenues and streamline costs with an online and multilingual store front, fully integrated POS software solution, joint marketing program, payment infrastructure, loyalty administration, customer profile analytics, and SME financing packages. Through #HOTTAB Biz App, #HOTTAB POS and Hottab.net merchant administration website interfaces, #HOTTAB functions both online and offline and facilitates transactions, orders, voucher redemption, and rewards. Merchants only need a smart device in order to quickly access our #HOTTAB product ecosystem. In addition, our Customer Care department provides attentive after-sales service.
The Hottab.net admin website and #HOTTAB Biz App, #HOTTAB POS APP are marketed in both Vietnam and Indonesia.
SoPa.asia website and Society Pass App are marketed in Vietnam.
As of August 17, 2022 we have onboarded over 1.6 million registered consumers and over 5,500 registered merchants on our Platform.
Impact of the COVID-19 Pandemic and other Global Events
The current outbreak of COVID-19 has globally resulted in loss of life, business shutdowns, restrictions on travel, and widespread cancellation of social gatherings. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including:
| • | new information which may emerge concerning the severity of the disease in Vietnam and SEA; |
| • | the duration and spread of the outbreak; |
| • | the severity of travel restrictions imposed by geographic areas in which we operate, mandatory or voluntary business closures; |
| • | regulatory actions taken in response to the pandemic, which may impact merchant operations, consumer and merchant pricing, and our product offerings; |
| • | other business disruptions that affect our workforce; |
| • | the impact on capital and financial markets; and |
| • | action taken throughout the world, including in markets in which we operate, to contain the COVID-19 outbreak or treat its impact. |
In addition, the current outbreak of COVID-19 has resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health threats could do so in the future. Such events have impacted, and could in the future impact, demand for merchants and consumer purchase patterns, which in turn, could adversely affect our revenue and results of operations.
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Since the onset of the COVID-19 pandemic in March and April 2020, all our POS merchant clients are affected by COVID-19 measures for F&B to temporary stop restaurant dine ins.
| • | Some of our restaurant clients ceased operations permanently and many were closed since June 2020 without any notice of reopening their business to date. |
| • | Our largest POS client, a hotel chain for which we provide POS services to their F&B business in their hotels, ceased operations in two out of nine hotels since April 2020. |
| • | The Company faces challenges to onboard new clients but at the same time losing many existing ones. |
With the ongoing pandemic, Company faces challenges in our operation as follows;
| • | Disruption of operation in Vietnam, Philippines, India, Singapore and US where staffs have to work from home. |
| • | The coordination of rebooting of company’s recent asset acquisition of NREI and Dream Space, which are the F&B Delivery platforms in operate in Philippines and Vietnam respectively. |
| • | Application of licenses are delayed as government agencies take longer time to review and process time. |
| • | HR process to hire personnel are generally slow due to people not willing to leave their current job, company have to spend more time and resource |
The spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences and further actions may be taken as required or recommended by government authorities or as we determine are in the best interests of our employees, customers, and other business partners. We are monitoring the global outbreak of the pandemic, in SEA, especially Vietnam and are taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and the governmental and community reactions thereto. See “Risk Factors--Our business may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.
The Russian-Ukraine war and the supply chain disruption have not affected any specific segment of our business.
Financial Condition
Results of Operations
The following table sets forth certain operational data for the three and six months ended June 30, 2022 and 2021:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue,net | $ | 499,062 | $ | 7,783 | $ | 944,152 | $ | 17,289 | ||||||||
| Cost of revenue | (499,200 | ) | (86,562 | ) | (959,083 | ) | (104,857 | ) | ||||||||
| Gross loss | (138 | ) | (78,779 | ) | (14,931 | ) | (87,568 | ) | ||||||||
| Less operating expenses: | ||||||||||||||||
| Sales and marketing expenses | (253,290 | ) | (41,284 | ) | (449,392 | ) | (42,184 | ) | ||||||||
| Software development costs | (17,320 | ) | (36,828 | ) | (36,868 | ) | (66,989 | ) | ||||||||
| Impairment loss | — | — | (528,583 | ) | (200,000 | ) | ||||||||||
| General and administrative expenses | (7,345,364 | ) | (4,167,802 | ) | (13,186,062 | ) | (6,121,899 | ) | ||||||||
| Total operating expenses | (7,615,974 | ) | (4,245,914 | ) | (14,200,905 | ) | (6,431,072 | ) | ||||||||
| Loss from operations | (7,616,112 | ) | (4,324,693 | ) | (14,215,836 | ) | (6,518,640 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 6,027 | 10 | 6,072 | 16 | ||||||||||||
| Interest expense | (384 | ) | (12,157 | ) | (4,429 | ) | (24,214 | ) | ||||||||
| Loss on settlement of litigation | — | — | — | (550,000 | ) | |||||||||||
| Other income | 24,672 | 992 | 38,293 | 1,747 | ||||||||||||
| Total other expense | 30,315 | (11,155 | ) | 39,936 | (572,451 | ) | ||||||||||
| Loss before income taxes | (7,585,797 | ) | (4,335,848 | ) | (14,175,900 | ) | (7,091,091 | ) | ||||||||
| Income taxes | (797 | ) | (6,903 | ) | (2,099 | ) | (8,640 | ) | ||||||||
| NET LOSS | $ | (7,586,594 | ) | $ | (4,342,751 | ) | $ | (14,177,999 | ) | $ | (7,099,731 | ) | ||||
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Revenue. We generated revenues of $499,062 and $7,783 during the three months ended June 30, 2022 and 2021 respectively. During the six month ended June 30, 2022 and 2021 we generated revenue of $944,152 and $17,289 respectively. The significant increase in revenue for three months and six month periods was mainly due to increase in the sales from our online platforms and newly acquired subsidiaries.
During the six months ended June 30, 2022 and 2021, the following customer exceeded 10% of the Company’s revenues:
| Six months ended June 30, 2022 | June 30, 2022 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | 783,141 | 82.94 | % | $ | 34,062 | ||||||
| Customer B | $ | 109,567 | 11.60 | % | $ | (11,818 | ) | |||||
| Six months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Customer | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | 14,797 | 85.59 | % | $ | — | ||||||
For the three months ended June 30, 2022 and 2021, the customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at year-end dates, are presented as follows:
| Three months ended June 30, 2022 | ||||||||
| Customer | Revenues | Percentage of revenues | ||||||
| Customer A | $ | 392,739 | 78.70 | % | ||||
| Customer B | $ | 73,876 | 14.80 | % | ||||
| Three months ended June 30, 2021 | ||||||||
| Customer | Revenues | Percentage of revenues | ||||||
| Customer A | $ | 7,009 | 88.11 | % | ||||
Customer is located in Vietnam.
Cost of Revenue. Cost of revenue was $499,200 and $86,562 during three months ended June 30, 2022, and 2021 respectively. During the period of six months ended June 30, 2022 and 2021, we incurred cost of revenue was $959,083 and $104,857 respectively. Cost of revenue increased primarily as a result of the increased sales and the cost of logistic.
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Major vendors
For the six months ended June 30, 2022 and 2021, only one vendor accounted for 10% or more of the Company’s hardware purchases and software costs:
| Six months ended June 30, 2022 | June 30, 2022 | |||||||||||
| Vendors | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | — | — | $ | — | |||||||
| Six months ended June 30, 2021 | June 30, 2021 | |||||||||||
| Vendors | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | 12,436 | 11.86 | % | $ | — | ||||||
For the three months ended June 30, 2022 and 2021, the vendors who accounts for 10% or more of the Company’s hardware purchases and software cost its outstanding payable balances as at year-end dates, are presented as follows:
| Three months ended June 30, 2022 | ||||||||
| Vendors | Purchases | Percentage of purchases | ||||||
| Vendor A | $ | — | — | |||||
| Three months ended June 30, 2021 | ||||||||
Vendors |
Purchases | Percentage
of purchases | ||||||
| Vendor A | $ | 12,436 | 14.37 | % | ||||
Our one major vendor is located in Vietnam.
Gross Loss. We recorded a gross loss of $138 and $78,779 for three months ended June 30, 2022 and 2021 respectively. During the six months ended June 30, 2022 and 2021, we recorded a gross loss of $14,931 and $87,568 respectively. The decrease in gross loss is due to increased revenue from e-commerce and our newly acquired telecommunication reseller business.
Sales and Marketing Expenses (“S&M”). We incurred S&M expenses of $253,290 and $41,284 for the three months ended June 30, 2022 and 2021 respectively. During the six months ended June 30, 2022 and 2021, we have incurred S&M expenses of $449,392 and $42,184 respectively. The increase in S&M expense in 2022 is primarily attributable to the increased in sales activity and the related promotion expenses related needed for new merchants joining our e-commerce platform. Further, there was an increase in marketing cost in 2022 to attract the attention of customers to our e-commerce platform.
Software Development Cost (“SDC”). We incurred SDC expenses of $17,320 and $36,828 for three months ended June 30, 2022 and 2021 respectively. During the six months ended June 30, 2022 and 2021, we incurred SDC expenses of $36,868 and $66,989 respectively. The decrease in SDC in 2022 is primarily attributable to the restructuring of our technology development team.
Impairment Charge (“IC”). We incurred impairment charges of $528,583 and $200,000 for the six months ended June 30, 2022, and 2021, respectively. No impairment charge was incurred for the three months ended June 30, 2022 and 2021. The increase is primarily attributable to the impairment of goodwill related to the acquisition of the NREI ecommerce asset in the first quarter of 2022 which was expensed in the same period due to the short life term of the asset and the quantum of consideration.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $7,345,364 and $4,167,802 for the three months ended June 30, 2022 and 2021 respectively. During the six months ended June 30, 2022 and 2021, we incurred G&A expenses of $13,186,062 and $6,121,899 respectively. The increase in G&A is primarily attributable to the increased professional costs associated with cost related to business acquisition and the Company’s filing for listing on the Nasdaq Stock Exchange and stock based compensation for services.
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Loss on settlement of litigation. On May 21, 2021, the Company agreed to settle a litigation matter for $550,000 in cash. The settlement was paid in two tranches, with both tranches paid in the second quarter of 2021. In connection with the settlement, the Company recognized litigation settlement expense in the amount of $550,000 in the period ended June 30, 2021. There was no such expenses incurred in the comparative period ended June 30, 2022.
Income Tax Expense. Our income tax expenses for the three months ended June 30,2022 and 2021 was $797 and $6,903 and for six months ended June 30, 2022 and 2021 was $2,099 and $8,640, respectively.
Net Loss. As a result of the items noted above, for the three months ended June 30, 2022, we incurred a net loss of $7,586,594 as compare to the same period ended June 30,2021 of $4,342,751. During the six months ended June 30, 2022 the Group incurred a loss of $14,177,999, as compared to $7,099,731 for the same period ended June 30, 2021. The increase in net loss in both periods is primarily attributable to increased general and administrative expenses.
Liquidity and Capital Resources
As of June 30, 2022, we had cash and cash equivalents of $28,012,846, accounts receivable of $51,891, deposits, prepayments and other receivables of $4,549,753 and inventories of $336,476.
As of December 31, 2021, we had cash and cash equivalents of $23,264,777, accounts receivable of $52,588, deposits, prepayments and other receivables of $6,094,254 and inventories of $221,068.
For the six months ended June 30, 2022, the Company’s stockholders’ equity was $34,587,713 which increased as a result of additional paid-in-capital partially offset by an increase in accumulated deficit. For the six months ended June 30, 2022, the Company incurred net loss of $14,177,999 and net cash used by operating activities of $5,448,474. Net cash used by investing activities was $227,873. Net cash provided by financing activities was $10,351,413, resulting principally from the $10,402,891 net proceeds from a public offering and $412,890 of net proceeds from the C1 warrants exercised during the period ended June 30, 2022, partially offset by repayment of the First Insurance Funding loan in the amount of $464,368 during 2022.
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 of our or one or more of our subsidiaries’ securities, to finance our operations and future acquisitions. The Company believes that it has sufficient liquidity to continue its current business plans and operations.
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash (used in) operating activities | $ | (5,448,474 | ) | $ | (1,513,720 | ) | ||
| Net cash (used in) investing activities | (227,873 | ) | (200,000 | ) | ||||
| Net cash provided by financing activities | 10,351,413 | 1,322,505 | ||||||
| Effect on exchange rate change | 73,003 | 27,182 | ||||||
| Net change in cash and cash equivalents | 4,748,069 | (364,033 | ) | |||||
| Cash and cash equivalent at beginning of period | 23,264,777 | 506,666 | ||||||
| Cash and cash equivalent at end of period | 28,012,846 | 142,633 | ||||||
Net Cash Used In Operating Activities.
For the six months ended June 30, 2022, net cash used in operating activities was $5,448,474, which consisted primarily of a net loss of $14,177,999, partially offset by non-cash stock based compensation for services of $4,208,568, a decrease in deposits, prepayments and other receivables of $2,470,800, depreciation and amortization of $1,614,617, and a non-cash impairment loss of $528,583.
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For the six months ended June 30, 2021, net cash used in operating activities was $1,513,720, which consisted primarily of net loss of $7,099,731, partially offset by non-cash stock based compensation for services of $3,507,275, a loss on settlement of litigation of $550,000, depreciation and amortization of $1,604,451 and a non-cash impairment loss of $200,000.
We expect to continue to rely on cash generated through financing from public offerings or private offerings of our or one or more of our subsidiaries’ securities, to finance our operations and future acquisitions.
Net Cash (Used In) Investing Activities.
For the six months ended June 30, 2022, there was a net cash outflow of $227,873 primarily as a result of the purchase of property, plant, and equipment.
For the six months ended June 30, 2021, there was a net cash outflow of $200,000 for a deposit paid related to the Leflair asset acquisition.
Net Cash Provided By Financing Activities.
For the six months ended June 30, 2022, net cash provided by financing activities was $10,351,413, consisting primarily of funds raised from a public offering and Series C-1 warrants exercised partially offset by repayment of the First Insurance Funding Loan.
For the six months ended June 30, 2021, net cash provided by financing activities was $1,322,505, consisting primarily of funds raised from shareholders for Series C Preferred Stock and warrants exercised.
Critical Accounting Policies and Estimate
• Basis of presentation
The Company has prepared the accompanying condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2022 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 financial statements should be read in conjunction with the 2021 audited financial statements and accompanying notes filed with the SEC.
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• 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”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
• Use of estimates and assumptions
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, valuation of impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, inventory valuation, revenue recognition, business acquisition allocation of purchase consideration, and deferred tax valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
• Business combinations
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810-10-65, Consolidation. 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, including combinations among mutual entities and combinations by contract alone. Under ASC Topic 805, all business combinations are accounted for by applying the acquisition method. Accounting for 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 noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
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• Segment Reporting
ASC Topic 280, “Segment Reporting” 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 four reportable operating segments: (i) e-commerce, (ii) Merchant POS, (iii) Online Grocery and Food Groceries Deliveries and (iv) Telecommunications Reseller.
• Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of June 30 2022 and December 31, 2021, the cash and cash equivalent was amounted to $28,012,846 and $23,264,777, 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 $10,780,926 and $13,699,082 in parent entity as of June 30, 2022 and December 31, 2021, respectively. In addition, the Company has uninsured bank deposits of $16,966,211 and $9,315,695 with a financial institution outside the U.S as of June 30, 2022 and December 2021, respectively. All uninsured bank deposits are held at high quality credit institutions.
• Accounts receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness 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 collectibility. At the end of fiscal year, 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 considers the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of June 30, 2022 and December 31, 2021, the allowance for doubtful accounts amounted to $-0- and $0, respectively.
• Inventories
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the three and six months ended June 30, 2022 and 2021, the Company recorded an allowance for obsolete inventories of $-0- and $0, respectively. The inventories was amounted to $336,476 and $221,068 at June 30, 2022 and December 31, 2021, respectively.
• Prepaid Expenses
Prepaid expenses represent future expenses paid in advance, until the associated benefits are realized, the future expense remains at current asset within the next twelve months and non-current asset after twelve months.. Since prepaid expenses are categorized as “current and non-current” assets, the benefits associated with the products or services paid for upfront are expected to be used for the next twelve months and thereafter. Once the benefits of the assets are gradually realized, the prepaid expense is reduced as the asset is expensed off on the statement of operations.
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• Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | ||
| Computer equipment | 3 years | |
| Office equipment | 5 years | |
| Renovation | 5 years |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
• Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | identify the contract with a customer; |
| • | identify the performance obligations in the contract; |
| • | determine the transaction price; |
| • | allocate the transaction price to performance obligations in the contract; and |
| • | recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities (B2C), grocery and food delivery (B2C), telecommunication reseller (B2C) and the services providing to merchants for their business growth (B2B), which are operated under four business segments of e-Commerce (previously mentioned as Consumer Facing Business), grocery and food delivery, telecommunication reseller, and Merchant POS (previously mentioned as Merchant Facing Business).
The Company’s performance obligation includes providing the connectivity among merchants and consumers, generally through an online ordering platform. The platform allows merchants to create account, place menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create account and make orders from merchants on the consumer facing application. The platform allows delivering company to accept online delivery request and ship order from merchant to consumer.
The Company has 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, Tikinow, 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.
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Other online platforms include brand name of “Handcart” and “Pushkart” to enable the consumers to purchase grocery and food from difference local grocery and food merchants and deliver to them in their area.
The Company also has online telecommunication reseller platform operate under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package.
e-Commerce mainly offers lifestyle platform under the brand name of “Leflair”, as follows:-
| 1) | Customer placed orders on the website / app, sales orders report will be generated in the system. The Company will inform its business partners proceed to packaging to the logistic partner warehouse and therefore, logistic partner delivered to the end customer. The sales is recognized when the delivery is completed by the shipper 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 no product warranty. The Company is considered as a principal in this e-commerce transaction and reported revenue in gross basis as the Company takes the responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. |
During the six months ended June 30, 2022 and 2021, the Company has generated the revenue of $892,715 and $-0- respectively, in the Lifestyle sector.
During the three months ended June 30, 2022 and 2021, the Company has generated the revenue of $482,410 and $-0- respectively, in the Lifestyle sector.
Merchant POS offers both software and hardware products and services, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to get on 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 six months ended June 30, 2022 and 2021, the Company has generated $21,890 and $16,954, respectively revenue from software fees.
During the three months ended June 30, 2022 and 2021, the Company has generated $10,941 and $7,714, respectively revenue 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 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606-10 are present in the arrangement, revenue is recognized net of related direct costs.
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Software subscription fee — The Company’s performance obligation includes providing connectivity to 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 to be 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 the automatic renewal of another one year, and 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 of grocery and food through online platform of “Pushkart” and “Handcart” respectively. Upon received order by the grocery and food merchant, the platform will assign third party delivery man to pick up and deliver the grocery and food to the customers. Revenue are thus recognized at the point of the grocery and food delivered and paid by the customer in cash.
During the six months ended June 30, 2022 and 2021, the Company has generated $23,836 and $-0-, respectively revenue from this stream.
During the three months ended June 30, 2022 and 2021, the Company has generated $8,042 and $-0-, respectively revenue from this stream.
Telecommunication reseller provides local mobile data plan and overseas internet data plan under brand name of “Gorilla” as follows:
Local mobile plan - customers subscribe their desired monthly local mobile plan through online platform of “Gorilla” after customer account registration completed. The Company will proceed to register the Sim card and arrange delivery to the customer. Upon the Sim card activation, the system will capture the data usage of each customers at the end of each month, prorated by the package data capacity and monthly subscription rate for revenue recognition. Unused data will be converted to Rewards Point and carry forward to next month for subsequent revenue recognition point. With this, the company also recognize revenue from Rewards Point redemption for subscription offset, voucher redemption, extra data purchase, at the point of transaction accepted through the customer account in the online platform.
Overseas internet data plan – customers place order of their desired overseas internet data plan through online platform of “Gorilla” or third party partner platforms. The revenue is recognize at the point of time when the Sim card delivered and activated.
During the six months ended June 30, 2022 and 2021, the Company has generated $5,642 and $-0-, respectively revenue from this stream.
During the three months ended June 30, 2022 and 2021, the Company has generated $5,642 and $-0-, respectively revenue from this stream.
Contract assets
In accordance with ASC 606-10-45-3, contract asset is when the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.
There were no contract assets at June 30, 2022 and December 31, 2021.
Contract liabilities
In accordance with ASC Topic 606-10-45-2, a contract liability is Company’s obligation to transfer goods or services to a customer when the customer prepays consideration or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue. The Company’s contract liability balance was $4,618 and $25,229 at June 30, 2022 and December 31, 2021, respectively.
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• 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 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. 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 in the development of its own software are charged to operations as incurred. 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 are immaterial. For the six months ended June 30, 2022 and 2021, the software development costs were $36,868 and $66,989, respectively. For the three months ended June 30, 2022 and 2021, the software development costs were $17,320 and $36,828, respectively.
• Cost of sales
Cost of sales under online ordering consist of the cost of merchandizes ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales under software sales consist of the cost of software and payroll, which are directly attributable to the sales of software.
Cost of sales under hardware sales consist of the cost of hardware and payroll, which are directly attributable to the sales of hardware.
Cost of sales under grocery and food delivery consist of the cost of outsource delivery and outsource payment gateway, which are directly attributable t the sales of grocery and food delivery.
Cost of sales under telecommunication data reseller consist of the cost of primary telecommunication service, which are directly attributable to the sales of telecommunication data.
• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers which are borne by the Company’s suppliers or distributors for merchant POS business.
Except for e-Commerce business, the shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales.
• Sales and marketing
Sales and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $253,290 and $449,392 for the three and six months ended June 30, 2022, respectively. Advertising expense was $41,284 and $42,184 for the three and six months ended June 30 2021, respectively.
• Product warranties
The Company’s provision for estimated future warranty costs is based upon 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, 2022 and December 31, 2021. 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.
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• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
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 are many transactions and calculations undertaken during the ordinary course of business 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.
• Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the six months ended June 30 2022 and 2021.
• Foreign currencies translation and transactions
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore India and Philippines and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”), Indian Rupee (“INR”) and Philippines Pesos (“PHP”), respectively, which are the functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Shareholders’ equity is translated using the historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive loss within the statements of changes in shareholder’s equity.
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Translation of amounts from SGD into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
Schedule of Foreign currencies translation and transactions
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end SGD:US$ exchange rate | $ | 0.71874 | $ | 0.74356 | ||||
| Period average SGD:US$ exchange rate | $ | 0.73258 | $ | 0.75028 | ||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end VND:US$ exchange rate | $ | 0.000043 | $ | 0.000043 | ||||
| Period average VND:US$ exchange rate | $ | 0.000044 | $ | 0.000043 | ||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end INR:US$ exchange rate | $ | 0.012675 | $ | 0.013450 | ||||
| Period average INR:US$ exchange rate | $ | 0.013126 | $ | 0.013617 | ||||
Translation of amounts from PHP into US$ has been made at the following exchange rates for the six months ended June 30, 2022 and 2021:
| June 30, 2022 | June 30, 2021 | |||||||
| Period-end PHP:US$ exchange rate | $ | 0.018176 | $ | N/A | ||||
| Period average PHP:US$ exchange rate | $ | 0.019173 | $ | N/A | ||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
• Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
• Earnings per share
Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the periods.
For the three and six months ended June 30, 2022 and 2021, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.
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Schedule of computation of diluted net loss per share:
| Three Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (7,504,324 | ) | $ | (4,342,751 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 24,347,607 | 7,413,600 | ||||||
| Net loss per share – Basic and diluted | $ | (0.31 | ) | $ | (0.59 | ) | ||
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (14,052,702 | ) | $ | (7,099,731 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 23,126,643 | 7,413,600 | ||||||
| Net loss per share – Basic and diluted | $ | (0.61 | ) | $ | (0.96 | ) | ||
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
| Six months ended June 30, | Six months ended June 30, | |||||||
| 2022 | 2021 | |||||||
| Series A Convertible Preferred Stock (a) | — | 8,000 | ||||||
| Series B Convertible Preferred Stock | — | 764,400 | ||||||
| Series B-1 Convertible Preferred Stock | — | 48,000 | ||||||
| Series C Convertible Preferred Stock | — | 113,100 | ||||||
| Series C-1 Convertible Preferred Stock | — | 2,186,400 | ||||||
| Options to purchase common stock (b) | 1,945,270 | — | ||||||
| Warrants granted to underwriter | 3,793,929 | — | ||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (c) | — | 1,178,700 | ||||||
| Total: | 5,739,199 | 4,298,600 | ||||||
| (a) | The Series A the conversion formula is aggregate Stated Value divided by IPO price (State Value for each Series A preferred shares is $1,000). These are 8,000 shares of Series A Preferred Stock issued and outstanding (10,000 shares are designated Series A). The conversion formula would be $8 million (the aggregate stated value) divided by IPO price. |
| (b) | The Board of Directors have approved a 10-years option at an exercise price of $6.49 per share that will be exercisable at any time. |
| (c) | The expiry date of warrants granted with Series C-1 was expired on June 30, 2022. |
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• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determines 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 condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the condensed consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
As of June 30, 2022 and December 31, 2021, the Company recorded the right of use asset of $710,586 and $627,968 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
Pursuant to ASU 2018-07, 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 or non-employee), are measured 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 model to estimate the fair value of employee stock options at the date of grant. As of June 30, 2022, those shares issued and stock options granted for service compensations were vested 180 days later based on share issuance date, and therefore these amounts are thus recognized as expense during the six months ended June 30, 2022 and 2021, the stock-based compensations are recorded in the General and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss.”
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• Common stock awards
The Company grants common stock awards to employees and non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided is recorded in the general and administrative expenses and charged to the same account as if such settlements had been made in cash. The fair value of the Common Stock Awards to the Company’s director was estimated using a Black-Scholes Option Pricing Model.
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its Preferred stock 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 model to estimate the fair value of compensation 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 of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period, or at the date of issuance, if there is not a service period.
• Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 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 the Fair Value Option Subsection of section 825–10–15, 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 in those statements. 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 450-20, Commitments to report accounting 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, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
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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 at this time 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.
• 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.
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, approximate their fair values because of the short maturity of these instruments.
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Critical Accounting Policies and Estimate
• 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. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements, but does not believe that it will have a material affect on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements, but does not believe that it will have a material affect on its consolidated financial statements.
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In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact and timing of adoption of this guidance, however, it appears that more revenue will be recorded under this new requirement than was previously allowed.
No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our condensed consolidated Financial Statements.
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.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. This lack of segregation of duties leads management to conclude that the Company’s disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over our Exchange Act reporting disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended June 30, 2022 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 23, "Commitments and Contingencies".
As of June 30, 2022, the Company had a total of $240,981 outstanding in legal fees to its attorneys related to these matters.
Item 1A. Risk Factors.
Not required under Regulation S-K for “smaller reporting companies.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
All unregistered sales of equity during the period covered by this report were included in a Current Report on Form 8-K and are therefore not required to be furnished hereunder.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits.
EXHIBIT INDEX
*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
** Filed herewith
++ Furnished herewith
In accordance with SEC Release 33-8238, Exhibit 32.1 is furnished and not filed.
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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 17, 2022 | /s/ Dennis Nguyen | |
| Dennis Nguyen | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 17, 2022 | /s/ Raynauld Liang | |
| Raynauld Liang | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
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Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934
I, Dennis Nguyen certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2022 of Society Pass Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) [Intentionally omitted];
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 17, 2022 | By: | /s/ Dennis Nguyen |
| Dennis Nguyen | ||
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934
I, Raynauld Liang, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2022 of Society Pass Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) [Intentionally omitted];
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 17, 2022 | By: | /s/ Raynauld Liang |
| Raynauld Liang | ||
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Society Pass Incorporated (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: August 17, 2022 | By: | /s/ Dennis Nguyen |
| Dennis Nguyen | ||
| Chief Executive Officer | ||
| By: | /s/ Raynauld Liang | |
| Chief Financial Officer | ||