Starbox Group Holdings Ltd 6-K, filed Jun 27, 2024
Starbox Group Holdings Ltd. (STBXF)
About this 6-K
Starbox Group Holdings Ltd filed this 6-K on June 27, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of June 2024
Commission
File Number:
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Explanatory Note
Starbox Group Holdings Ltd., a Cayman Islands company (the “Company”), is furnishing its unaudited financial statements and notes for the six months ended March 31, 2024 and incorporating such financial statements into the Company’s registration statements referenced below. The financial statements and notes are attached as Exhibit 99.1 to this report. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended March 31, 2024 is attached as Exhibit 99.2 to this report.
This Form 6-K is hereby incorporated by reference into the registration statements on Form F-3 of the Company (File Number 333-274484 and File No. 333-278571), as amended, and into the base prospectus and the prospectus supplement outstanding under the foregoing registration statements, to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Unaudited Consolidated Financial Statements and Notes of Starbox Group Holdings Ltd. for the Six Months Ended March 31, 2024 and 2023 | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| 101. INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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.
| Starbox Group Holdings Ltd. | ||
| Date: June 27, 2024 | By: | /s/ Lee Choon Wooi |
| Name: | Lee Choon Wooi | |
| Title: | Chief Executive Officer | |
Exhibit 99.1
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2024 (Unaudited) | As of September 30, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepayments and other current assets | ||||||||
| Short-term deposits | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets, net | ||||||||
| Long-term deposits | ||||||||
| Goodwill | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Taxes payable | ||||||||
| Deferred revenue | ||||||||
| Accrued liabilities and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Loans payable | ||||||||
| Due to related parties | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Deferred tax liabilities, net | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Loans payable | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENT AND CONTINGENCY | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred shares, par value $, shares authorized, shares issued and outstanding | ||||||||
| Ordinary shares, par value $, shares authorized, shares and shares issued and outstanding as of March 31, 2024 and September 30, 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Retained earnings (accumulated deficit) | ( | ) | ||||||
| Total company shareholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| 2024 | 2023 | |||||||
| SIX MONTHS ENDED MARCH 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating revenue | ||||||||
| Advertising services | $ | $ | ||||||
| Cash rebate and payment solution services and media booking | ||||||||
| Software licensing | ||||||||
| Production service | ||||||||
| Marketing and promotional campaign services | ||||||||
| Total operating revenue | ||||||||
| Cost of revenue | ||||||||
| Gross Profit | ||||||||
| Operating expenses | ||||||||
| Selling expenses | ||||||||
| R&D expenses | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| (Loss) income from operations | ( | ) | ||||||
| Other income, net | ||||||||
| Interest income (expense), net | ( | ) | ||||||
| Other income | ||||||||
| Total other income, net | ||||||||
| (Loss) income before income tax | ( | ) | ||||||
| Income tax expense | ||||||||
| (Loss) income before noncontrolling interest | ( | ) | ||||||
| Less: loss attributable to noncontrolling interest | ( | ) | ||||||
| Net (loss) income to the Company | $ | ( | ) | $ | ||||
| Other Comprehensive income | ||||||||
| Foreign currency translation (loss) gain attributable to the Company | ( | ) | ||||||
| Foreign currency translation gain attributable to noncontrolling interest | ||||||||
| Comprehensive (loss) income attributable to the Company | $ | ( | ) | $ | ||||
| Comprehensive loss attributable to noncontrolling interest | $ | ( | ) | $ | ||||
| Net (loss) income per share - basic and diluted | $ | ) | $ | |||||
| Weighted average number of ordinary shares outstanding - basic and diluted | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED MARCH 31 2024 AND 2023
(UNAUDITED)
| Shares | Amount |
capital |
(accumulated deficit) |
comprehensive loss |
Shareholder’s equity |
interests | Total equity | |||||||||||||||||||||||||
| Ordinary Shares | Additional paid-in | Retained earnings | Accumulated other | Total Starbox’s | Non-controlling | |||||||||||||||||||||||||||
| Shares | Amount |
capital |
(accumulated deficit) |
comprehensive loss |
Shareholders’ |
interests | Total equity | |||||||||||||||||||||||||
| Balance at October 1, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| - | - | |||||||||||||||||||||||||||||||
| Shares issued for equity financing, net of expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Shares issued for R&D expense | ||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||
| Foreign currency translation (loss) income | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||
| Balance at October 1, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||||||
| Net income (loss) | - | |||||||||||||||||||||||||||||||
| Shares issued for equity financing | ||||||||||||||||||||||||||||||||
| Shares issued for equity financing, net of expenses | ||||||||||||||||||||||||||||||||
| Foreign currency translation income | - | |||||||||||||||||||||||||||||||
| Foreign currency translation income (loss) | - | |||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
The accompany notes are an integral part of these consolidated financial statements.
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| 2024 | 2023 | |||||||
| SIX MONTHS ENDED MARCH 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| R&D expense | ||||||||
| Operating lease expenses | ||||||||
| Disposal of fixed assets | ||||||||
| Changes in deferred tax | ||||||||
| Changes in operating assets / liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid income tax | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Deferred revenue | ||||||||
| Taxes payable | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Long term deposit | ( | ) | ||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from equity financing | ( | ) | ||||||
| Changes in due from related parties | ( | ) | ||||||
| Proceeds from loans | ||||||||
| Repayment to related parties | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | ||||||||
| NET DECREASE IN CASH & EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH & EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH & EQUIVALENTS, END OF PERIOD | ||||||||
| Supplemental Cash Flow Data: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024 (UNAUDITED) AND SEPTEMBER 30, 2023
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Business
Starbox Group Holdings Ltd., through its subsidiaries (“Starbox Group” or the “Company”), is engaged in connecting retail merchants with individual online and offline shoppers (“retail shoppers”) to facilitate transactions through cash rebates offered by retail merchants, providing digital advertising services to retail merchants, and providing payment solution services to merchants. The Company has also expanded its business to marketing and software development sectors, as well as online and offline advertisement services to business clients. The Company’s current principal operations and geographic markets are substantially located in Malaysia.
Organization
Starbox Group was incorporated as an exempted company limited by shares under the laws of the Cayman Islands on September 13, 2021.
Prior
to the reorganization on May 23, 2023 described below, Starbox Group owned
Starbox Group and Starbox Berhad are currently not engaged in any active business operations and are merely acting as holding companies.
Starbox
Berhad owns
Reorganization
A
reorganization of the Company’s legal structure was completed on November 17, 2021. The reorganization involved the incorporation
of Starbox Group, and the transfer of
The reorganization on November 17, 2021 has been accounted for as a recapitalization among entities under common control since the same controlling shareholders controlled all these entities before and after the Reorganization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
On May 23, 2023, Starbox Group completed a further reorganization. The reorganization consisted of (i) the acquisitions of Starbox International Ltd., a British Virgin Islands company (“Starbox International”), and Starbox Global Ltd., a British Virgin Islands company (“Starbox Global”), both of which became wholly owned by the Company (the acquisitions of Starbox International and Starbox Global, collectively, the “Starbox Acquisitions”), and (ii) share transfer transactions between the Company and Starbox International, in which the Company transferred all of the issued share capital in Starbox Berhad to Starbox International in exchange for RM. On April 19, 2023, in connection with the Starbox Acquisitions, the Company entered into two share transfer agreements with Choo Keam Hui, whereby Choo Keam Hui transferred shares of US$ par value each in the capital of Starbox International to the Company, and Choo Keam Hui transferred shares of US$ par value each in the capital of Starbox Global to the Company.
The reorganization on May 23, 2023 has been accounted for as a recapitalization among entities under common control since the same controlling shareholders controlled all these entities before and after the reorganization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
On June 26, 2023, the Company, as the issuer, and its wholly owned subsidiary, Starbox Global, as the buyer, entered into a share purchase agreement (the “One Eighty Share Purchase Agreement”), with the then shareholders of One Eighty Holdings Ltd (the “One Eighty Shareholders”), as the sellers, with respect to One Eighty Holdings Ltd (“One Eighty Ltd”), as the target company.
Pursuant
to the One Eighty Share Purchase Agreement, Starbox Global agreed to acquire ordinary shares, par value US$ per share,
of One Eighty Ltd (the “One Eighty Sale Shares”), representing
On September 7, 2023, One Eighty Ltd incorporated Benefit Pointer Limited (“Benefit Pointer”) in the British Virgin Islands. Benefit Pointer does not have any operations as of the date of this report.
On September 7, 2023, Starbox International incorporated Irace Technology Limited (“Irace Technology”) in the British Virgin Islands. Irace Technology is engaged in software development, marketing, and licensing.
On
October 26, 2023, the Company, as the issuer, and Starbox International, as the purchaser, entered into a share sale agreement (the “ProSeeds
Share Sale Agreement”), with the three then shareholders of ProSeeds Limited (collectively, the “ProSeeds Shareholders”),
as the sellers, with respect to ProSeeds Limited, a company incorporated in Seychelles (“ProSeeds”). Pursuant to the ProSeeds
Share Sale Agreement, Starbox International agreed to acquire shares of ProSeeds (the “ProSeeds Sale
Shares”), representing
On
January 26, 2024, the Company, as the issuer, and Starbox International, as the purchaser, entered into a share sale agreement (the “Trade
Router Share Sale Agreement”) with the four then shareholders of Trade Router Ltd. (collectively, the “Trade Router Shareholders”),
as the sellers, with respect to Trade Router Ltd., a company incorporated in Seychelles (“Trade Router”). Pursuant to the
Trade Router Share Sale Agreement, Starbox International agreed to acquire shares of Trade Router (the “Trade Router
Sale Shares”), representing
On
March 7, 2024, the Company, as the issuer, and Irace Technology, as the purchaser, entered into a share sale agreement (the “Carnegie
Hill Share Sale Agreement”) with the four then shareholders of Carnegie Hill Limited (collectively, the “Carnegie Hill Shareholders”),
as the sellers, with respect to Carnegie Hill Limited, a company incorporated in Seychelles (“Carnegie Hill”). Pursuant to
the Carnegie Hill Share Sale Agreement, Irace Technology agreed to acquire shares of Carnegie Hill, representing
ProSeeds, Trade Router, and Carnegie Hill have no operations but own a series of advanced multi-level marketing software, an Artificial Intelligent Generated Content (“AIGC”) system, and an Advanced Intelligent system. ProSeeds, Trade Router, and Carnegie Hill are not considered a business under ASC 805-10, because they do not have any process or system to create the output from the software system any of them owns. Since the assets acquired are not deemed to be a business, the Company accounts for the transactions as asset acquisitions in accordance with ASC 805-50. The assets acquired were measured based on their cost to the acquiring entities, which included consideration the acquiring entities transfer to the seller and direct transaction costs.
The consolidated financial statements of the Company as of March 31, 2024 include the following entities:
SCHEDULE OF CONSOLIDATED FINANCIAL STATEMENTS OF ENTITIES
| Entity | Date
of Formation | Place
of Incorporation | %
of Ownership | Major business activities | ||||
| Starbox Group | ||||||||
| Starbox International | ||||||||
| Starbox Global | ||||||||
| Starbox Berhad | ||||||||
| StarboxGB | ||||||||
| StarboxSB | ||||||||
| StarboxPB | ||||||||
| Irace Technology | ||||||||
| One Eighty Ltd | ||||||||
| One Eighty Holdings Sdn Bhd | ||||||||
| Benefit Pointer | ||||||||
| 180 Degrees Brandcom Sdn Bhd (“180 Degrees”) | ||||||||
| Media Elements Sdn Bhd (“Media Elements”) | ||||||||
| Trade Router | ||||||||
| ProSeeds | ||||||||
| Carnegie Hill |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the financial statements of the Company and its subsidiaries. All inter-company balances and transactions are eliminated upon consolidation. The results of subsidiaries acquired or disposed of are recorded in the consolidated income statements from the effective date of acquisition or up to the effective date of disposal, as appropriate.
A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the meetings of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders.
Uses of estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include the valuation of accounts receivable, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, the discount rate used to calculate lease liabilities, the amount of worldwide tax provision, realization of deferred tax assets, provision necessary for contingent liabilities, and revenue recognition. Actual results could differ from those estimates.
Risks and uncertainties
The main operations of the Company are located in Malaysia. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in political, economic, social, regulatory, and legal environments in Malaysia, as well as by the general state of the economy in Malaysia. Although the Company has not experienced losses from these situations and believes that it complies with existing laws and regulations, including its organization and structure disclosed in Note 1, this may not be indicative of future results.
The Company’s business, financial condition, and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics, and other catastrophic incidents, which could significantly disrupt the Company’s operations.
Noncontrolling interests
The Company follows FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leaves control intact to be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance.
The net income attributed to NCI were separately designated in the accompanying statements of operations. Losses attributable to an NCI in a subsidiary may exceed such NCI’s interest in the subsidiary’s equity. The excess attributable to an NCI is attributed to those interests. NCI shall continue to be attributed their share of losses, even if that attribution results in a deficit NCI balance.
As
of March 31, 2024 and September 30, 2023, the Company had NCIs of $
Cash and cash equivalents
Cash
and cash equivalents include currency on hand and deposits held by banks that can be added or withdrawn without limitation. The
Company maintains all of its bank accounts in Malaysia. Cash deposits with financial institutions in Malaysia are subject
to certain protection under the requirement of the deposit insurance system. The maximum insurance coverage limit is MYR
Accounts receivable, net
Accounts receivable primarily include service fees generated from providing online and offline advertising services, branding services and payment solution services to retail merchant customers (see Note 3).
Accounts
receivable are presented net of allowance for doubtful accounts. The Company determines the adequacy of allowance for doubtful accounts
based on individual account analysis, historical collection trend, and the best estimate of specific losses on individual exposures.
The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect
amounts due. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent
account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable. As of March 31, 2024 and September 30, 2023, the bad debt allowance was $
Short-term/long-term deposits
All
deposits owned by the Company are fixed deposits held in its banks. Deposits with original maturities of
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment are provided using the straight-line method over their expected useful lives, as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIVES
| Useful life | ||
| Office equipment and furniture | ||
| Motor vehicles | ||
| Property - office building and office suite |
Expenditures for maintenance and repair, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive income (loss) in other income (expenses).
Intangible assets
The Company’s intangible assets primarily consist of purchased and customized computer software and applications used in conducting the Company’s cash rebate, digital advertising, and software licensing business. Intangible assets also include content assets, which are licensed movies and television series acquired from third-party content providers in order to offer members unlimited viewing of such content to drive traffic on the Company’s SEEBATS website and mobile app. Intangible assets are carried at cost less accumulated amortization and any recorded impairment (see Note 6).
Intangible assets are amortized using the straight-line method with the following estimated useful lives:
SCHEDULE OF INTANGIBLE ASSETS
| Useful life | ||
| Computer software and applications | ||
| Computer system - AI calculation engine | ||
| Trademark | ||
| Technology | ||
| Customer relationship | ||
| Content assets-licensed movies and television series |
Goodwill
Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level.
Generally, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If factors indicate that this is the case, the Company then estimates the fair value of the related reporting unit determined using discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.
If
the fair value is less than the carrying value, the goodwill of the reporting unit is determined to be impaired and the Company will
record an impairment equal to the excess of the carrying value over its fair value. The Company did
Impairment of long-lived assets
Long-lived
assets with finite lives, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the estimated future undiscounted cash flows from the use of the asset
and its eventual disposition are below the asset’s carrying value, the asset is deemed to be impaired and written down to its fair
value. There were
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. | |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other current assets, deferred revenue, taxes payable, due to a related party, and accrued expenses and other current liabilities approximate the fair value of the respective assets and liabilities as of March 31, 2024 and September 30, 2023, based upon the short-term nature of the assets and liabilities.
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of March 31, 2024 by level within the fair value hierarchy:
SCHEDULE OF FAIR VALUE ON A RECURRING BASIS
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Short-term/long-term deposits | $ | $ | $ | $ | ||||||||||||
The Company measures certain non-financial assets on a non-recurring basis:
SCHEDULE OF FAIR VALUE ON NON-FINANCIAL ASSETS ON NON-RECURRING BASIS
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Intangible assets acquired from the acquisition of One Eighty Ltd | $ | $ | $ | $ | ||||||||||||
| Goodwill arising from the acquisition of One Eighty Ltd | $ | $ | $ | $ | ||||||||||||
The fair value of the intangible assets and goodwill from the business combination (see Note 16) were determined based on the discounted cash flow method, which is an income approach, and required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that would be used by a market participant, projections of revenue and cash flows.
Foreign currency translation
The functional currency for Starbox Group, Starbox International, Starbox Global, Irace Technology, ProSeeds, Trade Route, Carnegie Hill, One Eighty Ltd, and Benefit Pointer are the U.S Dollar (“US$”). Starbox Berhad, StarboxGB, StarboxSB, StarboxPB, One Eighty Holdings Sdn Bhd, 180 Degrees, and Media Elements use Malaysian Ringgit (“MYR”) as their functional currency. The Company’s consolidated financial statements have been translated into and reported in US$. Assets and liabilities accounts are translated using the exchange rate at each reporting period end date. Equity accounts are translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
SCHEDULE OF CURRENCY EXCHANGE RATE
| March 31, 2024 | March 31, 2023 | September 30, 2023 | ||||
| Period-end spot rate | US$ | US$ | US$ | |||
| Average rate | US$ | US$ | US$ |
Comprehensive income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The foreign currency translation gain or loss resulting from the translation of the financial statements expressed in MYR to US$ is reported in other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss).
Revenue recognition
To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company currently generates its revenue from the following main sources:
Revenue from advertising services
a) Digital advertising services
The Company’s advertising service revenue is derived principally from advertising contracts with retail merchant customers (the “advertisers”), which allow advertisers to place advertisements on the Company’s websites and mobile apps and third-party social media channels over a particular period of time. The advertising contracts specify the related fees and payment terms and provide evidence of the arrangements. The Company’s digital advertising services are to (i) provide advertisement design and consultation services to help advertisers precisely shape their digital advertising strategies and optimize the design, content, and layout of their advertisements and (ii) the displaying of advertisers’ advertisements of products and services on the Company’s websites and mobile apps and third-party social media channels over a particular period of time and in a variety of forms, such as logos, banners, push notification, and posts by accounts of influencers and bloggers, to help promote advertisers’ products and services and enhance their brand awareness. Advertisers may elect to engage with the Company for only advertisement display services or both advertisement design and consultation services and advertisement display services.
In
connection with these digital advertising services, the Company charges retail merchant customers nonrefundable digital advertising service
fees. For advertisement design and consultation services, the Company’s stand-alone selling price ranges from approximately $
The Company identifies advertisement design and consultation services and advertisement display services as two separate performance obligations, as each is a service that is capable of being distinct and distinct in the context of advertising contracts. Each of the service commitments in advertisement design and consultation services, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the advertisements, are not distinct in the context of advertising contracts, because they are inputs to deliver the combined output of advertisements to be displayed as specified by the customer. Therefore, advertisement design and consultation services are identified as a single performance obligation. The Company allocates revenue to each performance obligation based on its stand-alone selling price, which is specified in the contracts.
The Company’s advertisement design and consultation services are normally rendered within a short period of time, ranging from a few days to a month. As all the benefits enjoyed by the customers can be substantially realized at the time when the design and consultation services are completed, the Company recognizes revenue at the point when designated services are rendered and accepted by the customers. The Company does not provide rights of return, credits or discounts, price protection, or other similar privileges to customers for such services and accordingly no variable consideration included in such services.
The majority of the Company’s advertising contracts are for the provision of advertisement display on the Company’s websites and mobile apps and social media channels for a fixed period of time (ranging from a few weeks to a few months) without a guaranteed minimum impression level. In instances where certain discounts are provided to customers for advertisement displays, such discounts are reported as deduction of revenue. Revenue from advertisement services is recognized over the period the advertisement is displayed. Advances from customers are deferred first and then recognized as revenue upon the completion of the contract. There are no future obligations after the completion of the contract and no rights of refund related to the impression levels.
b) Brand-building-related consulting services
The Company’s advertising service revenue is derived principally from its advertising and brand-building-related consulting service agreements with customers, pursuant to which the Company provides creative ideas, strategies, proposals, and solutions to customers for advertising and brand positioning, helping them create appropriate advertising languages or images, identifying appropriate communication media channels, incorporating advertising and brand promotion strategies into their marketing plans, and recommending and coordinating the customers with relevant media channels for advertisement display or broadcasting. The Company’s advertising and brand-building-related consulting service agreements with customers are fixed-price agreements, and the service fees depend on the job scope and complexity of each project. It normally takes a few months to one year to complete a project, including market research, advertisement idea conceptualization, brand positioning proposals, and final delivery of customer-accepted proposals and solutions.
Each of the service promises in an advertising and brand-building-related consulting service agreement is not distinct in the context because they are the inputs to deliver the combined output. Therefore, these performance obligations are identified as a combined single performance obligation. Once a customer accepts the final deliverables, which marks the completion of an agreement, there are no future obligations and no rights of refund. The Company allocates contract price to such single performance obligation over the service period. Revenue from such services is recognized over the period. Advances or deposits from customers are deferred first and then recognized as revenue until the completion of the service.
The Company is acting as a principal in these transactions and records revenue earned and costs incurred related to these transactions on a gross basis, because the Company has discretion in establishing prices, and is responsible for fulfilling the promises and transferring services to the customer and assumes fulfilment risk.
Revenue from cash rebate, payment solution services, and media booking
a) Cash rebate services
The
Company also utilizes its websites and mobile apps to connect retail merchants and retail shoppers and facilitate retail shoppers to
purchase consumer products or services from retail merchants online or offline under the cash rebate programs offered by retail merchants.
The cash rebate offered by retail merchants range from
The Company merely acts as an agent in this type of transactions. The Company does not have control of the goods or services under the sales transactions between the retail merchants and retail shoppers, has no discretion in establishing prices, and does not have the ability to direct the use of the goods or services to obtain substantially all the benefits. The Company recognizes cash rebate revenue at the point when retail merchants and retail shoppers are connected and the sales transactions are facilitated and completed. Revenue is reported net of service taxes.
b) Payment solution services
In
May 2021, the Company started to provide payment solution services to retail merchant customers by referring them to VE Services Sdn
Bhd (“VE Services”), a Malaysian Internet payment gateway company and a related-party entity controlled by one of the shareholders
of the Company. The Company entered into an appointment letter with VE Services and started to refer retail merchant customers to VE
Services to process payments through multiple payment methods, such as FPX, Alipay, Maybank QR Pay, Boost, Touch ‘n Go, and GrabPay.
VE Services first charges retail merchants a service fee ranging from
c) Media booking
The Company also sells media companies’ advertising spaces to merchant customers on behalf of media companies. Media channel booking includes press media booking, TV commercial airtime booking, broadcasting or radio media booking, billboard media booking, and digital media booking. The Company signs agency agreements with media companies to sell their advertising spaces to merchant customers who have advertising needs. The Company’s performance obligations include referring merchant customers to media companies and getting paid by media companies referral fees or commissions at pre-determined rates negotiated with the media companies, which are rates based on advertising amounts purchased or spent by merchant customers. Revenue is recognized at the point when merchant customers have posted their advertisements on the media channels. The Company is acting as an agent in these transactions, as it does not have discretion in establishing prices, and is not responsible for fulfilling the promise and providing customers the specified services and deliverables.
Revenue from software licensing
In 2023, the Company started its software licensing business, in which the Company develops software, such as the data management system, licenses the use right of the software to customers for certain periods of time for licensing income, and provides related technology support and system maintenance services on a monthly basis. A software licensing contract with a customer includes promises to transfer software products and provide technical support and system maintenance services, which are generally capable of being distinct performance obligations. Software licensing is considered a distinct performance obligation and is accounted for separately from the technical support and system maintenance services. Revenue from distinct software licensing is recognized at the point in time when the software is delivered to the customers. Revenue from technical support, system maintenance, and upgrades is recognized over the period in which the service is provided. The stand-alone sales prices (“SSPs”) for distinct performance obligations are based on directly observable pricing. In instances where the SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.
Revenue from photograph, commercial video and audio recording, and production services (“production services”)
The Company signs fixed-price agreements with customers who already have their own concept or ideas for the commercial photo, video, and audio, but need professionals and talents to help turn their unique vision, voice, and expression into displayable and captivating advertisements in photograph, video, or audio format. The Company’s performance obligations include identifying, organizing, and coordinating with professional teams (including qualified photographers, videographers, film directors, actors or models, commercial voiceover talents, stylists, makeup artists, editors, video and audio engineers, and music mixing engineers) to perform such services, shooting location rental, equipment and transportation vehicle rental, developing the script for the dialog for photographing and video and audio recording, post production editing, and the delivery of final quality products to customers to satisfy their advertising needs. As a result of these combined performance obligations, the Company delivers the final photograph, video, or audio recording outputs to customers when the related services are rendered. These services are not distinct in the context of the service agreements because they are the inputs to deliver the combined output to the customers. The agreement with customers for such photograph, commercial video and audio recording, and production services specifies the service fees, payment terms, work scope, and arrangements. Once customers accept the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. The Company allocates a contract price to such single performance obligations at the point when the services are rendered and the photograph, video, or audio recording products are delivered to customers. Revenue is recognized at the point when the final products are delivered to customers and are accepted by them.
The Company is acting as a principal and records revenue earned and costs incurred related to these transactions on a gross basis, because the Company has the discretion in establishing prices, is responsible for fulfilling the promises and delivering the final products to the customer, assumes fulfilment risk having latitude in selecting third-party professional teams to complete the advertising production job, and bears the risk for services that are not fully paid for by customers.
Revenue from marketing and promotional campaign services and others
The Company assists merchants in planning, arranging, and executing seasonal on-the-ground sales and promotional campaigns, normally in shopping malls. The Company’s services include providing sales campaign proposals, coordinating with shopping mall owners for location rental, assisting merchant clients with equipment rental, advising the clients on site layout arrangements and decorations, and providing product display strategies. The Company considers these a single performance obligation. It usually takes a few days to a few weeks from the preparation of the marketing and sales campaign event to the execution. The service agreement with a merchant client is a fixed-price agreement, and the Company is entitled to receive the payment when the related services are rendered. Contract price is allocated to one single performance obligation upon rendering the services. Revenue is recognized at the point when the marketing and promotion event is organized and related services are performed.
The Company is acting as a principal for such service and records revenue earned and costs incurred related to these services on a gross basis, because the Company has latitude in establishing prices, and is responsible for fulfilling the promise and providing customers with the specified services.
Disaggregation of revenue
The Company disaggregates its revenue from contracts by service types, as the Company believes it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The summary of the Company’s disaggregation of revenue by service types for the six months ended March 31, 2024 and 2023 is as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2024 | 2023 | |||||||
| For the six months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue from advertising services | $ | $ | ||||||
| Revenue from cash rebate, payment solution services, and media booking | ||||||||
| Revenue from software licensing | ||||||||
| Revenue from production services | ||||||||
| Revenue from marketing and promotional campaign service | ||||||||
| Total operating revenue | $ | $ | ||||||
Cost of revenue
Cost of revenue mainly consisted of labor costs and production costs for advertisement consultation, design, and production services of One Eight Ltd.
Deferred revenue (contract liabilities)
In
accordance with ASC 606, the Company recognizes revenue when a customer obtains control or satisfaction of the related performance obligation.
Amounts in deferred revenue at period-end reflect orders for which cash payments are received or due prior to the transfer of control
or satisfaction of the related performance obligation. Contract liabilities within the Company’s consolidated balance sheets
as of March 31, 2024 and September 30, 2023 primarily consisted of deferred revenue. The Company’s performance obligations
are generally satisfied within 12 months of the initial contract date. As of March 31, 2024 and September 30, 2023, deferred revenue
amounted to $
Operating leases
On May 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842). The adoption of ASC Topic 842 resulted in the presentation of operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheet.
The Company determines if an arrangement contains a lease at the inception of a contract under ASC Topic 842. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, ROU assets and liabilities are recognized at the commencement date based on the present value of any remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU assets include adjustments for accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option. Hence, the Company does not recognize any operating lease ROU assets and operating lease liabilities for short-term leases.
The Company evaluates the carrying value of ROU assets if there are indicators of impairment and reviews the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations. There was no impairment for right-of-use lease assets as of March 31, 2024 and September 30, 2023.
Operating expenses
The Company’s operating costs primarily consist of (i) marketing and promotional expenses to develop members, merchants, and advertisers, (ii) website and facility maintenance expenses to upgrade, optimize, and maintain its websites and mobile apps, (iii) employee salary and benefit expenses, (iv) professional and business consulting expenses, and (v) other general office expenses for administrating the Company’s business. Operating costs are expensed as incurred. Judgment is required to determine whether to separately present cost of revenue, selling expenses, and general and administrative expenses. The Company considers materiality, the manner that operating costs can be separately identified, and what is most useful to financial statement users, and elects to present all costs and operating expenses as a single line item “cost, selling, general, and administrative expenses” as reflected in the consolidated statements of operations. Management believes that such presentation is meaningful when considering the nature of the Company’s operations and the manner in which the Company manages its business.
Software development costs (research and development expenses)
The Company expenses software development costs as research and development (“R&D”) expenses for software that it intends to sell or lease (external-use), under ASC 985-20, as such expenses are incurred until technological feasibility is established, at which time such expenses are capitalized until the product is available for general release to customers. The Company capitalizes the software that is for internal use under ASC 350-40.
Research
and development expenses included in operating costs amounted to $
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An
uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax
examination.
The Company’s operating subsidiaries in Malaysia are subject to the income tax laws of Malaysia. No significant income was generated outside Malaysia for the six months ended March 31, 2024 and 2023. As of March 31, 2024, all of the Company’s tax returns of its Malaysian subsidiaries remain open for statutory examination by relevant tax authorities for seven years from the date the corporate income tax return was filed.
Service taxes
Service
tax is a consumption tax levied by Malaysian tax authorities and is charged on any taxable service income (including digital services)
provided in Malaysia by a registered company in carrying on their business. The rate of service tax is
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months ended March 31, 2024 and 2023, there were dilutive shares due to the feature of anti-dilutive.
Statement of cash flows
In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon the local currencies using the average exchange rate in the period. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Related parties and transactions
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure.
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
In November 2023,the FASB issued ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The update will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within segment profit and loss. Require that an entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less significant expenses disclosed and each reported measure of segment profit or loss. The amendments are effective for the Company as of the beginning of 2024 fiscal year, and interim periods beginning 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented. The Company is currently evaluating the impact of the adoption of this standard to determine its impact on its disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of operations and comprehensive income, and statements of cash flows.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
| March 31, 2024 | September 30, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful account | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
Approximately
SCHEDULE OF ACCOUNTS RECEIVABLE AND SUBSEQUENT COLLECTION
| Accounts receivable by aging bucket | Balance as of March 31, 2024 | Subsequent collection | % of subsequent collection | |||||||||
| Less than 6 months | $ | $ | % | |||||||||
| From 7 to 9 months | % | |||||||||||
| From 10 to 12 months | % | |||||||||||
| Over 1 year | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for doubtful accounts | ( | ) | - | |||||||||
| Accounts receivable, net | $ | $ | % | |||||||||
NOTE 4—PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| March 31, 2024 | September 30, 2023 | |||||||
| Prepaid expenses and other current assets: | ||||||||
| Speedprop Global Sdn. Bhd. (1) | $ | $ | ||||||
| ARX Media Sdn. Bhd. (2) | ||||||||
| Boring Lark Sdn Bhd. (3) | ||||||||
| Teclutions Sdn. Bhd. (4) | ||||||||
| Sky Top Asis Pacific Limited (5) | ||||||||
| Prime King Investment Limited (6) | ||||||||
| Others (7) | ||||||||
| Total prepaid expenses and other current assets | $ | 25,571,859 | $ | 16,067,467 | ||||
The Company currently operates its business through its GETBATS, SEEBATS, and PAYBATS websites and mobile applications, 180 Degrees, and Media Elements. The satisfactory performance, reliability, and availability of the Company’s information technology systems are critical to its ability to drive more internet traffic to its advertising websites and mobile apps and provide effective digital advertising services for brands and retailers, especially when the Company starts to expand its business from Malaysia to neighboring countries such as Indonesia, Philippine, and Thailand.
| (1) |
| (2) |
In
October 2022, the Company signed a new contract with ARX, to conduct a software application design and development project.
Total contract price amounted to MYR |
| On
June 12, 2023, the Company entered into a new project agreement with ARX, for ARX to provide software support services for a term
of 12 months, and to develop a full set of AI advertisement engine and analytical system. The total contract price amounted
to MYR | |
| (3) |
| (4) |
On
March 15, 2023, the Company entered into another agreement with Teclutions to design and develop a Conversational AI Chatbot Integration
VR headgear platform. A total contract price of $
On
July 10, 2023, the Company entered into another agreement with Teclutions to develop a GETBATS descriptive analysis system. A total
contract price of $
In
addition, on July 15, 2023, the Company entered into another agreement with Teclutions to develop a promotion and advertisement system
aimed at attracting online customers to physical stores through augmented reality technology. A total contract price of $
|
| (5) |
|
| (6) |
|
| (7) |
As of March 31, 2024 and September 30, 2023, there was no allowance for doubtful accounts recorded as the Company considers all of the prepayments fully realizable.
NOTE 5 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
| March 31, 2024 | September 30, 2023 | |||||||
| Office equipment and furniture | $ | $ | ||||||
| Motor vehicles | ||||||||
| Property - office building and office suite | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expenses were $
NOTE 6 — INTANGIBLE ASSETS, NET
Intangible assets, net, consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS NET
| March 31, 2024 | September 30, 2023 | |||||||
| Computer software and applications (1) | $ | $ | ||||||
| Computer system – AI calculation engine (2) | ||||||||
| Content assets – licensed movies and television series (3) | ||||||||
| Trademark (4) | ||||||||
| Technology (4) | ||||||||
| Customer relationships (4) | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible asset, net | $ | $ | ||||||
| (1) |
| (2) |
| (3) | |
| Based on factors, including historical and estimated viewing patterns, the Company amortizes the content assets in “operating costs-license costs” on a straight-line basis over its license period or estimated period of use, beginning with the month of first availability. | |
On
November 1, 2021, the Company entered into a Service and Licensing Agreement with a third-party content provider, Shenzhen Yunshidian
Information Technology Ltd. (“Shenzhen Yunshidian”), to license movies and television series in various genres, such as action,
comedy, fantasy, historical, and romance. The agreement has a term from November 1, 2021 to October 31, 2023 and may be terminated by
either party in the event of a material breach by the other party of the agreement. The Company agreed to pay a content and service fee
of $ |
| (4) |
Total
amortization of above-mentioned intangible assets amounted to $
As of March 31, 2024, the estimated future amortization expenses of the intangible assets were as follow:
SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE
| 12 months ending March 31, | Amortization expenses | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 7 — ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables, consisted of the following:
SCHEDULE OF ACCRUED LIABILITIES AND OTHER PAYABLES
| March 31, 2024 | September 30, 2023 | |||||||
| Accrued expenses | $ | $ | ||||||
| Service payables | ||||||||
| Other payables | ||||||||
| Accrued liabilities and other payables | $ | $ | ||||||
Service payable represented the advertisement fee the Company collects on behalf of the media companies for customers posting the advertisement on the media channels. The Company submits the advertisement fee to media companies within a short period of time when the Company receives a service statement and invoice from the media companies. Other payables were mainly advances from customers.
NOTE 8 — LOANS PAYABLE
The Company had the following bank loans as of March 31, 2024, which arose from acquisition of One Eighty Ltd on June 26, 2023:
SCHEDULE OF LOANS
| Bank | Loan Agreement Date | Loan Amount | Interest Rate | Loan Term | Purpose of loan | Balance at March 31, 2024 | ||||||||||||
| CIMB BANK BERHAD | $ | BLR*- | % | $ | ||||||||||||||
| BLR*- | % | |||||||||||||||||
| Hong Leong Islamic Bank | IFR**- | % | ||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| Hong Leong Islamic Bank | % | |||||||||||||||||
| Total | $ | $ | ||||||||||||||||
| Bank | Loan Agreement Date | Loan Amount | Interest Rate | Loan Term | Purpose of loan | Balance at September 30, 2023 | ||||||||||||
| CIMB BANK BERHAD | $ | BLR*- | % | $ | ||||||||||||||
| BLR*- | % | |||||||||||||||||
| Hong Leong Islamic Bank | IFR**- | % | ||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| IFR**- | % | |||||||||||||||||
| Hong Leong Islamic Bank | % | |||||||||||||||||
| Total | $ | $ | ||||||||||||||||
| * | |
| ** |
The above bank loans were for the acquisition of freehold office buildings and working capital purposes, and were secured by the following:
| a. | A facility agreement as principal instrument; |
| b. | Joint and several guarantee by the directors of 180 Degrees; |
| c. | A corporate guarantee by 180 Degree Strategic Communications Sdn Bhd.; |
| d. | A deed of assignment over the properties, power of attorney, and other documents or security documents may be required by the banks from time to time; |
| e. | First-party/third-party upfront fixed deposit; |
| f. | A memorandum of deposit (creating a charge) and letter of authorization by the directors of 180 Degrees in favor of the banks in respect of fixed deposits together with all interest accruing from time to time in respect of the fixed deposits; and |
| g. | A guarantee from Credit Guarantee Corporation Bhd. |
Loans from a third party
On October 27, 2023, the Company entered into a loan agreement with a third-party for $, with an annual interest rate of %. The loan is unsecured and required to be repaid on . As of March 31, 2024, the outstanding loan balance was $with accrued interest of $.
On October 30, 2023, the Company entered into another loan agreement with the same third-party for $, with an annual interest rate of %. The loan is unsecured and required to be repaid on , and the Company repaid $to this unrelated party on February 19, 2024. As of March 31, 2024, the outstanding loan balance was $.
On January 31, 2024, the Company entered into another new loan agreement with the same third-party for $, with an annual interest rate of % The loan is unsecured and required to be repaid on . As of March 31, 2024, the outstanding loan balance was $.
As of March 31, 2024, the future minimum loan payments to be paid by the year are as follows:
SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS TO BE PAID
| 12 months ending March 31, | Loan payment | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total future minimum loan payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of loan liabilities | $ | |||
The
Company recorded interest expenses of $
NOTE 9 — TAXES
| a. | Corporate Income Taxes (“CIT”) |
Cayman Islands and BVI
Under the current tax laws of the Cayman Islands and BVI, the Company is not subject to tax on its income or capital gains. In addition, no Cayman Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.
Republic of Seychelles
ProSeeds,
Trade Router, and Carnegie Hill are incorporated in the Republic of Seychelles.
Malaysia
Starbox
Berhad, StarboxGB, StarboxSB, and StarboxPB are governed by the income tax laws of Malaysia. The income tax provision in respect of operations
in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations,
and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified
The components of the income tax provision were as follows:
SCHEDULE OF INCOME TAX PROVISION
| 2024 | 2023 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current tax provision: | ||||||||
| Cayman Islands | $ | $ | ||||||
| Republic of Seychelle | ||||||||
| Malaysia | ||||||||
| Current income tax provision | ||||||||
| Deferred tax provision: | ||||||||
| Cayman Islands | ||||||||
| Malaysia | ||||||||
| Deferred income tax provision (benefit) | ||||||||
| Income tax provision | $ | $ | ||||||
Reconciliation of the differences between the income tax provision computed based on the Malaysia unified statutory income tax rate and the Company’s actual income tax provision for the six months ended March 31, 2024 and 2023, respectively, were as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2024 | 2023 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Income tax provision computed based on Malaysia unified income tax statutory rate | $ | ( | ) | $ | ||||
| Tax rate difference | ||||||||
| Permanent difference | ( | ) | ||||||
| Change in valuation allowance | ||||||||
| Actual income tax provision | $ | $ | ||||||
Deferred tax assets
The Company’s deferred tax assets were comprised of the following:
SCHEDULE OF DEFERRED TAX ASSETS
As of March 31, 2024 | As of September 30, 2023 | |||||||
| Deferred tax assets derived from net operating loss carry forwards | $ | $ | ||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Effect of foreign currency translation | ( | ) | ||||||
| Deferred tax assets | $ | $ | ||||||
Movement of valuation allowance:
SCHEDULE OF VALUATION ALLOWANCE
As of March 31, 2024 | As of September 30, 2023 | |||||||
| Balance at beginning of the period | $ | $ | ||||||
| Current period change | ||||||||
| Effect of foreign currency translation | ( | ) | ||||||
| Balance at end of the period | $ | $ | ||||||
The
Company periodically evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount of the deferred
tax assets by a valuation allowance to the extent it believes a portion will not be realized. Management considers new evidence, both
positive and negative, that could affect the Company’s future realization of deferred tax assets including its recent cumulative
earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant
factors. The Company has four subsidiaries in Malaysia, namely Starbox Berhad, StarboxGB, StarboxSB, and StarboxPB. Other than StarboxSB
and StarboxGB, which have generated taxable income through providing advertising services to customers, Starbox Berhad and StarboxPB
have reported recurring operating losses since their inception. Management concluded that the chances for these three entities that suffered
recurring losses in prior periods to become profitable in the foreseeable near future and to utilize their net operating loss carry forwards
were remote. Accordingly, the Company provided valuation allowance of $
Deferred tax liability
The Company’s deferred tax liability was comprised of the following:
SCHEDULE OF DEFERRED TAX LIABILITY
As of March 31, 2024 | As of September 30, 2023 | |||||||
| Difference between tax and book basis of depreciation and amortization expense | $ | $ | ||||||
| Intangible assets acquired through the acquisition of One Eighty Ltd. | ||||||||
| Less: deferred tax assets | ( | ) | ( | ) | ||||
| Deferred tax liability, net | $ | $ | ||||||
| b. | Taxes payable |
As of March 31, 2024 and September 30, 2023, taxes payable consisted of the following:
SCHEDULE OF TAXES PAYABLE
As of March 31, 2024 | As of September 30, 2023 | |||||||
| Income tax payable | $ | $ | ||||||
| Service tax payable | ||||||||
| Less: Tax prepaid | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
NOTE 10 — RELATED PARTY TRANSACTIONS
| a. | Name of related parties |
SCHEDULE OF RELATED PARTIES
| Name of Related Party | Relationship to the Company | |
| Choo Keam Hui | ||
| Zenapp Sdn Bhd (“Zenapp”) | ||
| Bizguide Corporate Service Sdn Bhd | ||
| KH Advisory Sdn Bhd | ||
| VE Services | ||
| Chan Chee Hong | ||
| Chan Foong Ming | ||
| 180 Degrees Strategic Communications Sdn Bhd | ||
| 181 Degree Holding Sdn Bhd | ||
| Infinity Elements Sdn Bhd |
| b. | Due from related parties |
Due from related parties consisted of the following:
SCHEDULE OF DUE FROM A RELATED PARTY
| Name | March 31, 2024 | September 30, 2023 | ||||||
| 181 Degree Holding Sdn Bhd | $ | $ | ||||||
| Chan Foong Ming | ||||||||
| Chan Chee Hong | ||||||||
| Infinity Elements Sdn Bhd | ||||||||
| Total | $ | $ | ||||||
| Due from related party | $ | $ | ||||||
As of March 31, 2024 and September 30, 2023, the balances due from Chan Foong Ming and Chan Chee Hong were short-term advances, unsecured, bear no interest and were payable upon demand, and the balance due from Infinity Elements Sdn Bhd was ordinary trade in nature between Media Elements Sdn Bhd and Infinity Elements Sdn Bhd.
| c. | Due to related parties |
Due to related parties consisted of the following:
SCHEDULE OF DUE TO RELATED PARTIES
| Name | March 31, 2024 | September 30, 2023 | ||||||
| Bizguide Corporate Service Sdn Bhd | $ | $ | ||||||
| KH Advisory Sdn Bhd | ||||||||
| 180 Degrees Strategic Communications Sdn Bhd | ||||||||
| 181 Degree Holding Sdn Bhd | ||||||||
| Chan Foong Ming | ||||||||
| Choo Keam Hui | ||||||||
| Chan Chee Hong | ||||||||
| Total | $ | $ | ||||||
| Due to related party | $ | $ | ||||||
As of March 31, 2024, the balance due to Chan Foong Ming and Choo Keam Hui were short-term advances, unsecured, bearing no interest and payable upon demand, and the balance due to 180 Degrees Strategic Communications Sdn Bhd was ordinary trade in nature.
As of September 30, 2023, the balance due to Bizguide Corporate Service Sdn Bhd and KH Advisory Sdn Bhd was the fee to be paid for secretarial and tax consulting services, and the balance due to 180 Degree Holding Sdn Bhd and 180 Degrees Strategic Communications Sdn Bhd was ordinary trade in nature.
| d. | Revenue from a related party |
In
May 2021, the Company started to provide payment solution services to merchants by referring them to VE Services. As of March 31, 2024
and September 30, 2023, the Company referred 39 and 37 merchants to VE Services for payment processing and earned an accumulative
total in commission fees of $
| e. | Office leases |
Prior
to August 2021, the Company had not directly entered into any office lease agreements. The lease expenses were paid by Zenapp on behalf
of the Company, with an estimated amount of $
NOTE 11 — SHAREHOLDERS’ EQUITY
Ordinary Shares
The Company was incorporated under the laws of the Cayman Islands on September 13, 2021. The original authorized share capital of the Company was $ divided into shares, comprised of (i) ordinary shares, par value $ per share, and (ii) preferred shares, par value $ per share. The preferred shares have not been issued. The Company issued ordinary shares with par value of $ per share to its shareholders prior to the reverse split as described below.
On
June 8, 2022, the Company’s shareholders approved (i) an increase in the Company’s authorized share capital from $
to $, divided into shares, comprised of ordinary shares, par value $ per share, and
preferred shares, par value $ per share,
As a result of such corporate actions, (i) the number of the Company’s authorized preferred shares has been reduced from the original shares to shares at par value of $ per share, of which preferred shares have been issued and outstanding and (ii) the number of authorized ordinary shares has been increased from shares to shares, and the number of issued and outstanding ordinary shares has been reduced from the original shares to shares at par value of $ per share. Unless otherwise indicated, all references to preferred shares, ordinary shares, options to purchase ordinary shares, share data, per share data, and related information have been retroactively adjusted, where applicable, to reflect the above-mentioned reverse split and share capital change as if it had occurred at the beginning of the earlier period presented (see Note 1).
Initial Public Offering
On
August 23, 2022, the Company’s ordinary shares commenced trading on the Nasdaq Capital Market under the symbol “STBX.”
On August 25, 2022, the Company closed its initial public offering (“IPO”) of ordinary shares at a public offering
price of $ per ordinary share. The Company raised approximately $
Underwriter Representative Warrants
In
connection with the Company’s IPO, the Company also agreed to issue warrants to the underwriter, to purchase
Private Placement
On
October 26, 2022, the Company entered into certain subscription agreements (the “Subscription Agreements”) with four investors
(the “Subscribers”). Pursuant to the Subscription Agreements and in reliance on Rule 902 of Regulation S (“Regulation
S”) promulgated under the Securities Act of 1933, as amended, the Company agreed to sell and the Subscribers agreed to purchase
an aggregate of ordinary shares of the Company at a price of $ per share (the “Private Placement”). On November
3, 2022, the Company closed the Private Placement and issued and sold an aggregate of ordinary shares to the Subscribers at
a price of $ per share for the gross proceeds of $
Acquisition of One Eighty Ltd
On July 10, 2023, the Company issued the first tranche of consideration shares, an aggregate of ordinary shares, to the then shareholders of One Eighty Ltd in connection with the acquisition of % of the issued share capital in One Eighty Ltd.
On September 1, 2023, the Company issued the second tranche of consideration shares, an aggregate of ordinary shares, to the then shareholders of One Eighty Ltd in connection with the acquisition of % of the issued share capital in One Eighty Ltd.
At-the-market offering
In
October 2023, the Company sold a total of ordinary shares of the Company through at-the-market offerings for net proceeds of
$
Shares issued for R&D expenses
The
Company issued ordinary shares on November 13, 2023, at the
share price of $per share for a total fair value of $
The
Company issued ordinary shares on February 19, 2024, at the
share price of $per share for a total fair value of $
The
Company issued ordinary shares on March 22, 2024, at the share
price of $per share for a total fair value of $
ProSeeds, Trade Router, and Carnegie Hill have no operations but own a series of advanced multi-level marketing software, AIGC system, and Advanced Intelligent system. ProSeeds, Trade Router, and Carnegie Hill are not considered a business under ASC 805-10, because they do not have any process or system to create the output from the software systems they own. Accordingly, the Company accounts for the transactions as asset acquisitions in accordance with ASC 805-50. The Company will integrate these intangible assets into a comprehensive and advanced AI system along with other modules and software the Company is going to acquire or develop. Therefore, the Company expensed these intangible assets they acquired as R&D expenses as the feasibility stage of the comprehensive and advanced AI system has not been reached.
NOTE 12 — CONCENTRATIONS AND CREDIT RISK
As of March 31, 2024 and September 30, 2023, the Company’s substantial assets were located in Malaysia and the Company’s substantial revenue was derived from its subsidiaries located in Malaysia.
For
the six months ended March 31, 2024, two customers accounted for
For
the six months ended March 31, 2023, one customer accounted for
As
of March 31, 2024, one customer accounted for more than
As
of September 30, 2023, three customers accounted for approximately
For
the six months ended March 31, 2024 and 2023, no single vendor accounted for more than
NOTE 13 — CONTINGENCIES
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. For the six months ended March 31, 2024 and 2023, the Company did not have any material legal claims or litigation that, individually or in aggregate, could have a material adverse impact on the Company’s consolidated financial position, results of operations, and cash flows.
NOTE 14 — LEASES
Supplemental balance sheet information related to the Company’s operating leases was as follows:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO OPERATING LEASE
| March 31, 2024 | September 30, 2023 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Right-of-use assets - accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use assets, net | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
During
the six months ended March 31, 2024 and 2023, the Company incurred total ASC 842 operating lease expenses of $
Office leases
Prior
to August 2021, the Company had not directly entered into any office lease agreements. The lease expenses were paid by Zenapp on behalf
of the Company, with an estimated amount of $
The weighted average remaining lease terms and discount rates for all of office leases were as follows as of March 31, 2024 and September 30, 2023:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| March 31, 2024 | September 30, 2023 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * |
As of March 31, 2024, the maturities of operating lease liabilities were as follows:
SCHEDULE OF THE MATURITIES OF OPERATING LEASE LIABILITIES
| 12 months ending March 31, | Lease payment | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | $ | |||
Equipment leases
Effective
as of June 20, 2020, the Company entered into a
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of March 31, 2024 and September 30, 2023:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| March 31, 2024 | September 30, 2023 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * |
As of March 31, 2024, the maturities of operating lease liabilities were as follows:
SCHEDULE OF THE MATURITIES OF OPERATING LEASE LIABILITIES
| 12 months ending March 31, | Lease payment | |||
| 2024 | $ | |||
| 2025 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | $ | |||
NOTE 15 — SEGMENT REPORTING
An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker (the “CODM”) in order to allocate resources and assess the performance of the segment.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM or decision-making group, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s CODM for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the CODM, reviews operating results by the revenue of different services. Based on management’s assessment, the Company has determined that it has following operating segments as defined by ASC 280, including advertising services, cash rebate and payment solution and media booking services, software licensing income from software development services, advertisement production income, and promotional campaign services.
Revenue by service categories
The following tables present summary information by segment for the six months ended March 31, 2024 and 2023, respectively:
SCHEDULE OF SUMMARY INFORMATION BY SEGMENT
| For the Six Months ended March 31, 2024 | ||||||||||||||||||||||||
Cash rebate and payment solution and media booking | Advertising services | Software licensing | Production income | Promotional campaign services | Total | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net income | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Capital expenditure | ||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| For the Six Months Ended March 31, 2023 | ||||||||||||||||
| Cash rebate and payment services | Digital
advertising services | Software licensing | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating costs | ||||||||||||||||
| Income (loss) from operations | ( | ) | ||||||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) | ( | ) | ||||||||||||||
| Capital expenditure | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
NOTE 16 - ACQUISITIONS OF SUBSIDIARIES
On June 26, 2023, the Company, as the issuer, and Starbox Global, as the purchaser, entered into the One Eighty Share Purchase Agreement with the One Eighty Shareholders, as the sellers, with respect to One Eighty Ltd, as the target company.
Pursuant
to the One Eighty Share Purchase Agreement, Starbox Global acquired ordinary shares, par value US$per share, of One Eighty Sale Shares, representing
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Goodwill as a result of the acquisition of One Eighty Ltd is calculated as follows:
SCHEDULE OF BUSINESS ACQUISITION
| Total purchase considerations
for | $ | |||
| Fair value of assets acquired: | ||||
| Cash & cash equivalents | ||||
| Accounts receivable, net | ||||
| Deposit and prepayments | ||||
| Other receivables | ||||
| Short-term deposit | ||||
| Due from related parties | ||||
| Tax receivable | ||||
| Deferred tax | ||||
| Long-term deposit | ||||
| Right-of-use assets, net | ||||
| Property, plant and equipment, net | ||||
| Intangible assets acquired | ||||
| Total assets acquired | ||||
| Fair value of liabilities assumed: | ||||
| Accounts payable | ( | ) | ||
| Advance from customer | ( | ) | ||
| Accrued liabilities and other payables | ( | ) | ||
| Due to related parties | ( | ) | ||
| Lease Liability - current | ( | ) | ||
| Loan payable | ( | ) | ||
| Lease Liability -noncurrent | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Total net assets acquired | ||||
| Goodwill as a result of the acquisition | $ |
The following condensed unaudited pro forma consolidated results of operations for the Company and One Eighty Ltd for the six months ended March 31, 2023 present the results of operations of the Company and One Eighty Ltd as if the acquisitions occurred on October 1, 2022.
The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.
SCHEDULE OF PROFORMA CONSOLIDATED RESULTS OF OPERATIONS
| For
the Six Months Ended March 31, 2023 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Income from operations | ||||
| Other income | ||||
| Income tax expense | ||||
| Net income | ||||
| Less: net income attributable to non-controlling interests | ||||
| Net income attributable to the Company | $ | |||
NOTE 17 — SUBSEQUENT EVENTS
The Company evaluated the subsequent events through the date of this report, and determined the following subsequent events that need to be disclosed:
On
April 4, 2024, the Company, as the issuer, and Irace Technology, as the purchaser, entered into a share sale agreement, with the four
then shareholders of Rainbow Worldwide Co., Ltd (collectively, the “Rainbow Worldwide Shareholders”), as the sellers, with
respect to Rainbow Worldwide Co., Ltd, a company incorporated in Samoa (“Rainbow Worldwide”). Irace Technology acquired shares of Rainbow Worldwide, representing
On April 5, 2024, the Company entered a loan agreement with a third-party company for $, with an annual interest of %, the loan was required to be repaid on April 4, 2029.
On April 25, 2024, the Company entered a loan agreement with a third-party company for $, with an annual interest of %, the loan was required to be repaid on April 24, 2029.
On
May 3, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Bella Bambina
Limited (“Bella Bambina”), as the seller, with respect to certain shopping rebate and loyalty software and related assets
(the “Loyalty Engine Software”). Irace Technology acquired all of the rights, title, and interests in the Loyalty Engine
Software. In consideration, on May 21, 2024, the Company issued to the four shareholders of Bella Bambina an aggregate of ordinary shares (per share price of US$)
with a fair value of $
On May 27, 2024, the Company entered a loan agreement with a third-party company for $ (MYR ), with no interest, the loan was required to be repaid on May 26, 2027.
On May 27, 2024, the Company entered a loan agreement with a third -party company for $ (MYR ), with no interest, the loan was required to be repaid on May 26, 2027.
On
May 28, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Raetia
Holdings Limited (“Raetia Holdings”), as the seller, with respect to certain virtual reality software and related assets
(the “Virtual Reality Software”). Irace Technology acquired from Raetia Holdings all of the rights, title, and interests
in the Virtual Reality Software. In consideration, on June 13, 2024, the Company issued to the four shareholders of Raetia Holdings an
aggregate of ordinary shares (per share price of US$)
with a fair value of $
On June 1, 2024, the Company entered a loan agreement with a third-party company for $ (MYR ), with no interest, the loan was required to be repaid on November 30, 2024.
On June 1, 2024, the Company entered a loan agreement with a third-party company for $ (MYR), with no interest, the loan was required to be repaid on November 30, 2024.
On June 1, 2024, the Company entered a loan agreement with a third-party company for $ (MYR ), with no interest, the loan was required to be repaid on November 30, 2024.
On June 11, 2024, the Company entered a loan agreement with a third-party company for $, with an annual interest of %, the loan was required to be repaid on June 10, 2029.
On
June 14, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Bardi
Equity Limited (“Bardi Equity”), as the seller, with respect to certain virtual space rebates mall module software and related
assets (the “Virtual Space Software”). Irace Technology agreed to acquire from Bardi Equity all of the rights, title, and
interests in the Virtual Space Software for consideration of an aggregate of ordinary shares (per share price of US$)
of the Company with an aggregate value of US$
At
the 2024 annual general meeting of shareholders of the Company held on June 27, 2024, at 8:30 a.m., Eastern Time, the shareholders of
the Company approved and adopted, among other resolutions, (1) as an ordinary resolution, to authorize, establish, and designate two
new classes of ordinary shares of the Company, being Class A Ordinary Shares and Class B Ordinary Shares; and (2) as an ordinary resolution,
to redesignate: (i) the authorized and issued ordinary shares
held by Nevis International B & T Sdn Bhd (the “Nevis Shares”) as Class B Ordinary Shares; (ii) of the authorized and issued ordinarysShares,
not including the Nevis Shares, as Class A Ordinary Shares; and (iii) of the authorized but unissued ordinary shares
as Class A Ordinary Shares. Pursuant to the resolutions,
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are building a cash rebate, advertising, payment solution, and software licensing business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. Through our subsidiaries in Malaysia, we connect retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants, provide advertising services to retail merchant customers (“advertisers”), provide payment solution services to merchants, and license customized software systems to our clients. Substantially all of our current operations are located in Malaysia.
Our cash rebate business is the foundation of the business ecosystem we are building. We have cooperated with retail merchants, which have registered on the GETBATS website and mobile app as merchants (“Merchants”), to offer cash rebates on their products or services, which have attracted retail shoppers to register on the GETBATS website and mobile app as members (“Members”) in order to earn cash rebates for shopping online and offline. As the number of Members grows and sales of the existing Merchants increase, more retail merchants are willing to cooperate with us. As of March 31, 2024 and September 30, 2023, the GETBATS website and mobile app had 2,524,635 and 2,523,802 Members, respectively, and 842 and 841 Merchants, respectively. During the six months ended March 31, 2024 and 2023, we facilitated 114,120 and 161,306 transactions through the GETBATS website and mobile app, respectively. We generate revenue by keeping an agreed-upon portion of the cash rebates offered by Merchants on the GETBATS website and mobile app.
Making use of the vast Member and Merchant data we have collected from the GETBATS website and mobile app, we help advertisers design, optimize, and distribute advertisements through online and digital channels. We primarily distribute advertisements through (i) our SEEBATS website and mobile app, on which viewers can watch movies and television series for free through OTT streaming, which is a means of providing television and film content over the Internet at the request and to suit the requirements of the individual consumer, (ii) our GETBATS website and mobile app to its Members, and (iii) social media, mainly consisting of accounts of influencers and bloggers. During the six months ended March 31, 2024 and 2023, we served one and 22 advertisers, respectively. We generate revenue through service fees charged to the advertisers.
To diversify our revenue sources and supplement our cash rebate and digital advertising service businesses, we started to provide payment solution services to merchants in May 2021 by referring them to VE Services Sdn Bhd, a Malaysian Internet payment gateway company and a related-party entity controlled by one of our beneficial shareholders (“VE Services”). Pursuant to an appointment letter dated October 1, 2020 with VE Services (the “Appointment Letter”), we serve as its independent merchant recruitment and onboarding agent and refer merchants to VE Services for payment processing. We referred 39 and 35 merchants to VE Services during the six months ended March 31, 2024 and 2023, respectively. We generate insignificant revenue through commissions from VE Services for our referrals and such revenue has been reported as revenue from a related party in our consolidated financial statements.
During the fiscal year ended September 30, 2023, we started our software licensing business. In March 2023 and May 2023, we entered into two software licensing agreements with two Malaysian companies, respectively. In August 2023, we entered into a software licensing agreement with a Hong Kong-based company. Pursuant to the software licensing agreements, we granted the licensees access to our data management system and agreed to help train their staff with respect to the use of the data management system. In July 2023, we entered into a third software licensing agreement with a Philippines-based company, pursuant to which we licensed our AI Rebates Calculation Engine System and agreed to provide technology support. We generate revenue through license fees and annual technical support and maintenance fees charged to the clients.
On June 26, 2023, we acquired 51% ownership of One Eighty Holdings Ltd, a Cayman Islands company, and its subsidiaries, to further expand our business of online and offline advertisement, including advertisement consultation, design, production, agency services, as well as marketing and promotional campaign services. We provide brand-building-related consulting services with fixed-priced terms, and our services include market research, advertisement idea conceptualization, brand positioning proposals, and final proposals and solutions. We provide production services for customers who already have conceptualized ideas for advertisement or other types of visual or audio content. Our production services range from photography, video recording, audio recording, script development, and equipment rental, to post-production editing. We also generate revenue from marketing and promotional campaign services. We assist merchants to plan, arrange, and execute seasonal on-the-ground sales and promotional campaigns, typically located in shopping malls. Our services include providing the sales campaign proposals, coordinating with shopping mall owners for venue rental, assisting merchant clients with rental equipment, advising merchant clients on site layout arrangements and decorations, and providing product display strategies. In addition to these services, we also perform media booking agency services to sell advertisement lots on behalf of media companies. We generate insignificant revenue from our media booking agency services.
On September 7, 2023, One Eighty Ltd incorporated Benefit Pointer Limited (“Benefit Pointer”) in the British Virgin Islands. Benefit Pointer does not have any operations as of this report date.
On September 7, 2023, Starbox International incorporated Irace Technology Limited (“Irace Technology”) in the British Virgin Islands. Irace Technology is engaged in software development, marketing, and licensing.
On October 26, 2023, we, as the issuer, and Starbox International, as the purchaser, entered into a share sale agreement (the “ProSeeds Share Sales Agreement”) with the three then shareholders of ProSeeds Limited (collectively, the “ProSeeds Shareholders”), as the sellers, with respect to ProSeeds Limited, a company incorporated in Seychelles (“ProSeeds”). Pursuant to the Share Sale Agreement, Starbox International agreed to acquire 100,000 shares of ProSeeds (the “ProSeeds Sale Shares”), representing 100% of the issued and paid-up share capital in ProSeeds, from the ProSeeds Shareholders for a consideration of US$12,000,000. In consideration for the sale of the ProSeeds Sale Shares, we agreed to issue to the ProSeeds Shareholders, an aggregate of 12,000,000 ordinary shares of the Company. The 12,000,000 ordinary shares were issued on November 13, 2023 with a fair value of $3,780,000 at the share price of $0.315 per share.
On January 26, 2024, we, as the issuer, and Starbox International, as the purchaser, entered into a share sale agreement (the “Trade Router Share Sales Agreement”) with the four then shareholders of Trade Router Ltd. (collectively, the “Trade Router Shareholders”), as the sellers, with respect to Trade Router Ltd., a company incorporated in Seychelles (“Trade Router”). Pursuant to the Share Sale Agreement, Starbox International agreed to acquire 100,000 shares of Trade Router (the “Trade Router Sale Shares”), representing 100% of the issued and paid-up share capital in Trade Router, from the Trade Router Shareholders for a consideration of US$2,000,000. In consideration for the sale of the Trade Router Sale Shares, we agreed to issue to the Trade Router Shareholders, an aggregate of 8,000,000 ordinary shares of the Company. The 8,000,000 ordinary shares were issued on February 19, 2024 with a fair value of $2,728,000 at the share price of $0.341 per share.
On March 7, 2024, we, as the issuer, and Irace Technology, as the purchaser, entered into a share sale agreement (the “Carnegie Hill Share Sales Agreement”) with the four then shareholders of Carnegie Hill Limited (collectively, the “Carnegie Hill Shareholders”), as the sellers, with respect to Carnegie Hill Limited, a company incorporated in Seychelles (“Carnegie Hill”). Pursuant to the Share Sale Agreement, Irace Technology agreed to acquire 100,000 shares of Carnegie Hill, representing 100% of the issued and paid-up share capital in Carnegie Hill, from the Carnegie Hill Shareholders for a consideration of $5,400,000. In consideration for the sale of the Carnegie Hill Sale Shares, we agreed to issue to the Carnegie Hill Shareholders an aggregate of 18,000,000 ordinary shares of the Company. The 18,000,000 ordinary shares were issued on March 22, 2024 with a fair value of $5,166,000 at the share price of $0.287 per share.
On April 4, 2024, the Company, as the issuer, and Irace Technology, as the purchaser, entered into a share sale agreement, with the four then shareholders of Rainbow Worldwide Co., Ltd (collectively, the “Rainbow Worldwide Shareholders”), as the sellers, with respect to Rainbow Worldwide Co., Ltd, a company incorporated in Samoa (“Rainbow Worldwide”). Irace Technology acquired 100,000 shares of Rainbow Worldwide, representing 100% of the issued and paid-up share capital in Rainbow Worldwide. In consideration, on April 19, 2024, the Company issued to the Rainbow Worldwide Shareholders, an aggregate of 18,000,000 ordinary shares (per share price of US$0.25) with a fair value of $3,420,000 at the share price of $0.19 per share.
On May 3, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Bella Bambina Limited (“Bella Bambina”), as the seller, with respect to certain shopping rebate and loyalty software and related assets (the “Loyalty Engine Software”). Irace Technology acquired all of the rights, title, and interests in the Loyalty Engine Software. In consideration, on May 21, 2024, the Company issued to the four shareholders of Bella Bambina an aggregate of 21,500,000 ordinary shares (per share price of US$0.20) with a fair value of $4,192,500 at the share price of $0.195 per share.
On May 28, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Raetia Holdings Limited (“Raetia Holdings”), as the seller, with respect to certain virtual reality software and related assets (the “Virtual Reality Software”). Irace Technology acquired from Raetia Holdings all of the rights, title, and interests in the Virtual Reality Software. In consideration, on June 13, 2024, the Company issued to the four shareholders of Raetia Holdings an aggregate of 25,000,000 ordinary shares (per share price of US$0.20) with a fair value of $4,375,000 at the share price of $0.175 per share.
On June 14, 2024, the Company, as the issuer, Irace Technology, as the purchaser, entered into a software purchase agreement with Bardi Equity Limited (“Bardi Equity”), as the seller, with respect to certain virtual space rebates mall module software and related assets (the “Virtual Space Software”). Irace Technology agreed to acquire from Bardi Equity all of the rights, title and interests in the Virtual Space Software for consideration of an aggregate of 29,000,000 ordinary shares (per share price of US$0.20) of the Company with an aggregate value of US$5,800,000. The consideration shares will be issued to the four shareholders of Bardi Equity on a closing date as may be agreed upon among the Company, Irace Technology, and Bardi Equity, subject to the satisfaction certain obligations under the software purchase agreement.
At the 2024 annual general meeting of shareholders of the Company held on June 27, 2024, at 8:30 a.m., Eastern Time, the shareholders of the Company approved and adopted, among other resolutions, (1) as an ordinary resolution, to authorize, establish, and designate two new classes of ordinary shares of the Company, being Class A Ordinary Shares and Class B Ordinary Shares; and (2) as an ordinary resolution, to redesignate: (i) the 12,800,000 authorized and issued Ordinary Shares held by Nevis International B & T Sdn Bhd (the “Nevis Shares”) as Class B Ordinary Shares; (ii) 161,704,984 of the authorized and issued Ordinary Shares, not including the Nevis Shares, as Class A Ordinary Shares; and (iii) 708,495,016 of the authorized but unissued Ordinary Shares as Class A Ordinary Shares. Pursuant to the resolutions, (i) holders of Class A Ordinary Shares and Class B Ordinary Shares will have the same rights except for voting and conversion rights; (ii) in respect of all matters subject to vote at general meetings of the Company, each holder of Class A Ordinary Shares will be entitled to one vote per one Class A Ordinary Share and each holder of Class B Ordinary Shares will be entitled to 100 votes per one Class B Ordinary Share; (iii) the Class A Ordinary Shares will not be convertible into shares of any other class; and (iv) the Class B Ordinary Shares will be convertible into Class A Ordinary Shares at any time after issuance at the option of the holder, and each one Class B Ordinary Share will be convertible into 10 Class A Ordinary Shares.
For the six months ended March 31, 2024, we had total revenue of $4,448,521. Revenue derived from 1) advertising services, 2) software licensing, 3) cash rebate, payment solution services and media booking, 4) production services, and 5) marketing and promotional campaign services accounted for approximately 23.68%, 46.74%, 6.29%, 14.67%, and 8.61% of our total revenue for the period, respectively.
For the six months ended March 31, 2023, we had total revenue of $3,976,190. Revenue derived from advertising services, software licensing, and cash rebate and payment solutions services accounted for approximately 55.85%, 43.77%, and 0.38% of our total revenue for the period, respectively.
A. Results of Operations
Comparison of Results of Operations for the Six Months Ended March 31, 2024 and 2023
The following table summarizes our results of operations for the six months ended March 31, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2024 | 2023 | Increase (Decrease) | ||||||||||||||||||||||
| Amount | % of total revenue | Amount | % of total revenue | Amount | % | |||||||||||||||||||
| Operating revenue | ||||||||||||||||||||||||
| Advertising services | $ | 1,053,614 | 23.68 | % | $ | 2,220,794 | 55.85 | % | $ | (1,167,180 | ) | (52.56 | )% | |||||||||||
| Cash rebate and payment solution services and media booking | 279,816 | 6.29 | % | 14,924 | 0.38 | % | 264,892 | 1,774.94 | % | |||||||||||||||
| Software licensing | 2,079,112 | 46.74 | % | 1,740,472 | 43.77 | % | 338,640 | 19.46 | % | |||||||||||||||
| Production services | 652,745 | 14.67 | % | - | - | % | 652,745 | 100.00 | % | |||||||||||||||
| Marketing and promotional campaign service | 383,234 | 8.61 | % | - | - | % | 383,234 | 100.00 | % | |||||||||||||||
| Total operating revenue | 4,448,521 | 100.00 | % | 3,976,190 | 100.00 | % | 472,331 | 11.88 | % | |||||||||||||||
| Operating costs | ||||||||||||||||||||||||
| Cost, selling, general and administrative expenses | 17,364,488 | 390.34 | % | 1,996,892 | 50.22 | % | 15,367,596 | 769.58 | % | |||||||||||||||
| Total operating costs | 17,364,488 | 390.34 | % | 1,996,892 | 50.22 | % | 15,367,596 | 769.58 | % | |||||||||||||||
| (Loss) Income from operations | (12,915,967 | ) | (290.34 | )% | 1,979,298 | 49.78 | % | (14,895,265 | ) | (752.55 | )% | |||||||||||||
| Other income | ||||||||||||||||||||||||
| Other income, net | 72,045 | 1.62 | % | 12,920 | 0.32 | % | 59,125 | 457.62 | % | |||||||||||||||
| Total other income, net | 72,045 | 1.62 | % | 12,920 | 0.32 | % | 59,125 | 457.62 | % | |||||||||||||||
| (Loss) Income before income tax | (12,843,922 | ) | (288.72 | )% | 1,992,218 | 50.10 | % | (14,836,140 | ) | (744.70 | )% | |||||||||||||
| Provision for income tax expenses | 810,723 | 18.22 | % | 627,721 | 15.79 | % | 183,002 | 29.15 | % | |||||||||||||||
| (Loss) Income before noncontrolling interest | (13,654,645 | ) | (306.95 | )% | 1,364,497 | 34.32 | % | (15,019,142 | ) | (1,100.71 | )% | |||||||||||||
| Loss attributable to noncontrolling interest | (250,908 | ) | (5.64 | )% | - | - | % | (250,908 | ) | 100.00 | % | |||||||||||||
| Net (loss) income to the Company | $ | (13,403,737 | ) | (301.31 | )% | $ | 1,364,497 | 34.32 | % | $ | (14,768,234 | ) | (1,082.32 | )% | ||||||||||
Revenue
Our total revenue increased by $472,331, or 11.88%, to $4,448,521 for the six months ended March 31, 2024 from $3,976,190 for the six months ended March 31, 2023. The increase in total revenue was primarily due to increases in the revenue from software licensing and the revenue from our subsidiary, One Eighty Ltd, and its subsidiaries, which was partly offset by decreased revenue from advertising services.
Our different revenue sources for the six months ended March 31, 2024 and 2023 were as follows:
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Revenue by service types: | ||||||||||||||||||||||||
| Revenue from advertising services | $ | 1,053,614 | 23.68 | % | $ | 2,220,794 | 55.85 | % | $ | (1,167,180 | ) | (52.56 | )% | |||||||||||
| Revenue from software licensing | 2,079,112 | 46.74 | % | 1,740,472 | 43.77 | % | 338,640 | 19.46 | % | |||||||||||||||
| Revenue from cash rebate, payment solution services, and media booking | 279,816 | 6.29 | % | 14,924 | 0.38 | % | 264,892 | 1,774.94 | % | |||||||||||||||
| Revenue from production services | 652,745 | 14.67 | % | - | - | % | 652,745 | 100.00 | % | |||||||||||||||
| Revenue from promotional campaign services | 383,234 | 8.61 | % | - | - | % | 383,234 | 100.00 | % | |||||||||||||||
| Total operating revenue | $ | 4,448,521 | 100.00 | % | $ | 3,976,190 | 100.00 | % | $ | 472,331 | 11.88 | % | ||||||||||||
Revenue from Advertising Services
Our revenue from advertising services decreased significantly by $1,167,180, or approximately 52.56%, from $2,220,794 for the six months ended March 31, 2023 to $1,053,614 for the six months ended March 31, 2024. The decrease was due to decreases in the number of advertisers for our digital advertising services for the six months ended March 31, 2024 due to shifts in advertising market behavior after the pandemic; however, we had $793,195 advertising design and consultation revenue from our subsidiary, One Eighty Ltd, and its subsidiaries during the six months ended March 31, 2024.
The following table presents the breakdown of our revenue from advertising services for the six months ended March 31, 2024 and 2023:
| For the six months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Advertisement design and consultation services | $ | 793,195 | $ | 543,925 | ||||
| Advertisement display services, net of discount of $18,029 and $136,715, respectively | 260,419 | 1,676,869 | ||||||
| Total revenue from digital advertising services, net | $ | 1,053,614 | $ | 2,220,794 | ||||
Revenue from software licensing
On March 24, 2023, our wholly owned subsidiary, Starbox Technologies (“StarboxGB,” FKA: Starbox Rebates Sdn. Bhd), entered into a software licensing agreement with Brandavision Sdn Bhd. (“Brandavision”). We agreed to customize a comprehensive data management system for Brandavision, grant it the access to our vast database, help train the staff of Brandavision with respect to its use, and provide continuous technical support. The contract period is three years, commencing March 24, 2023, and ending March 23, 2026. The total contract sum during the contract period is RM12,400,000 (equivalent to US$2.8 million). Following the successful execution of the Brandavision agreement, StarboxGB engaged in similar agreements with additional clients, achieving various milestones throughout. These endeavors culminated in cumulative revenue of $2,079,112 and $1,740,472 from the software licensing business for the six months ended March 31, 2024 and 2023.
Revenue from Cash Rebates Offered by Retail Merchants, Payment Solution Services, and Media Booking
Our revenue from cash rebate service, payment solution services, and media booking increased by approximately 1,775% from $14,924 ($10,621 cash rebate revenue and $4,303 payment solution revenue) for the six months ended March 31, 2023 to $279,816 ($4,612 cash rebate revenue, $2,763 payment solution revenue, and $272,441 from media booking revenue) for the six months ended March 31, 2024. The cash rebate service revenue decreased primarily due to a decrease in cash rebate commission rate for the six months ended March 31, 2024 as compared to the six months ended March 31, 2023. For the six months ended March 31, 2024, 35 Merchants offered total cash rebates of $18,484 to attract 827 Members to purchase products and services from these Merchants, with a total sales transaction amount of $1,943,737. Total cash rebates of $16,168 paid to Members was approximately 87% of total rebates offered by Merchants; the average cash rebate commission rate earned by the Company was approximately 13%. For the six months ended March 31, 2023, 26 Merchants offered total cash rebates of $11,348 to attract 1,791 Members to purchase products and services from these Merchants, with a sales transaction amount totaling $1,218,647. Total cash rebate of $5,440 to Members was approximately 48% of total rebates offered by Merchants; the average cash rebate commission rate earned by the Company was approximately 52%.
We started to provide payment solution services to Merchants in May 2021. During the six months ended March 31, 2024, we referred 39 merchants (including two new Merchants and 37 existing Merchants) to VE Services for payment processing and earned commission fees of $2,763. Since VE Services is an entity controlled by one of our beneficial shareholders, our revenue of $2,763 from payment solution services in the six months ended March 31, 2024 was reported as revenue from a related party. During the six months ended March 31, 2023, we referred 35 merchants (including 21 new Merchants and 14 existing Merchants) to VE Services for payment processing and earned commission fees of $4,304.
Revenue from Production Services and Promotional Campaign Services
Our revenue from advertisement production services was $652,745, and revenue from promotional campaign services was $383,234 for the six months ended March 31, 2024, which resulted from the acquisition of One Eighty Ltd and its subsidiaries on June 26, 2023.
Costs and operating expenses
The following table sets forth the breakdown of our operating costs for the six months ended March 31, 2024 and 2023:
| For the Six Months ended March 31, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Cost of revenue | $ | 1,192,345 | 6.87 | % | $ | 6,383 | 0.32 | % | $ | 1,185,962 | 18,580 | % | ||||||||||||
| Salary and employee benefit expenses | 654,188 | 3.77 | % | 318,750 | 15.96 | % | 335,438 | 105.24 | % | |||||||||||||||
| Professional and consulting service fees | 467,439 | 2.69 | % | 429,896 | 21.53 | % | 37,543 | 8.73 | % | |||||||||||||||
| Marketing and promotional expenses | 228,432 | 1.32 | % | 209,564 | 10.49 | % | 18,868 | 9.00 | % | |||||||||||||||
| Content license costs | 5,023 | 0.03 | % | 30,000 | 1.50 | % | (24,977 | ) | (83.26 | )% | ||||||||||||||
| Factoring (rebate) fee | 197,872 | 1.14 | % | - | - | % | 197,872 | 100.00 | % | |||||||||||||||
| Depreciation and amortization | 2,138,939 | 12.32 | % | 193,662 | 9.70 | % | 1,945,277 | 1,004.47 | % | |||||||||||||||
| Utility and office expenses | 86,299 | 0.50 | % | 251,563 | 12.60 | % | (165,264 | ) | (65.69 | )% | ||||||||||||||
| Business travel and entertainment expenses | 96,422 | 0.56 | % | 71,479 | 3.58 | % | 24,943 | 34.90 | % | |||||||||||||||
| Research and development | 11,796,112 | 67. 93 | % | 147,345 | 7.38 | % | 11,648,767 | 7,905.78 | % | |||||||||||||||
| Others | 501,417 | 2.89 | % | 338,250 | 16.94 | % | 163,167 | 48.24 | % | |||||||||||||||
| Total operating costs | $ | 17,364,488 | 100.00 | % | $ | 1,996,892 | 100.0 | % | $ | 15,367,596 | 769.58 | % | ||||||||||||
Our cost of revenue mainly consisted of labor costs and production costs for our advertisement consultation, design, and production services from our subsidiary, One Eighty Ltd, and its subsidiaries.
Our operating expenses accounted for approximately 390.34% and 50.22% of our total revenue for the six months ended March 31, 2024 and 2023, respectively. Our operating expenses increased significantly by $15,367,596, or approximately 769.58%, from $1,996,892 for the six months ended March 31, 2023 to $17,364,488 in the six months ended March 31, 2024. The increase was primarily due to the following reasons:
| (1) | For the six months ended March 31, 2024, the research and development (“R&D”) expenses were $11,796,112, an increase of $11,648,767 compared with $147,345 for the six months ended March 31, 2023. The increase in R&D expenses was attributable to the acquisition of three new subsidiaries who own a series of advanced multi-level marketing software, AIGC”, and Advanced Intelligent system. |
| (2) | For the six months ended March 31, 2024, the salary expenses were $654,188, an increase of $335,438 compared with $318,750 in the six months ended March 31, 2023, primarily due to an increase in the number of employees from 25 for the six months ended March 31, 2023 to 103 for the six months ended March 31, 2024, following the acquisition of One Eighty Ltd and its subsidiaries. |
| (3) | Professional and consulting service fees, increased by $37,543 from $429,896 in the six months ended March 31, 2023, to $467,439 in the six months ended March 31, 2024. This increase was attributable to our merger and acquisition activities during the six months ended March 31, 2024, which incurred additional professional fees, necessitating specialized expertise and consultancy services. |
| (4) | The marketing and promotional expenses primarily included expenses incurred to develop Members, Merchants, and advertisers, and to broaden our brand awareness. Our marketing and promotional expenses increased by $18,868, from $209,564 for the six months ended March 31, 2023 to $228,432 for the six months ended March 31, 2024, as a result of our increased marketing efforts to develop new merchants and advertisers for our services, as well as on-going brand awareness expenses. |
| (5) | Factoring (rebate) fee increased by $197,872, from nil in the six months ended March 31, 2023 to $197,872 in six months ended March 31, 2024. On March 26, 2024, the Company entered into a debt transfer agreement with a third party, Prime King Investment Limited (“Prime King”). Under this agreement, Prime King will assume all rights, duties, and obligations related to the total debt of $1.4 million (MYR6.7 million) that certain customers owed to the Company, and Prime King will be responsible for paying the Company the outstanding balance after deducting a fixed service fee of 3%. |
| (6) | Our depreciation and amortization expenses increased significantly by $1,945,277, from $193,662 in the six months ended March 31, 2023 to $2,138,939 in the six months ended March 31, 2024, mainly due to increased amortization of intangible assets, including $1.4 million for trademark, $9.2 million for technology, and $12.9 million for customer relationship arising from the acquisition of One Eighty Ltd in June 2023. |
Provision for Income Taxes
Our provision for income taxes was $810,723 and $627,721 in the six months ended March 31, 2024 and 2023, respectively. Our subsidiaries Starbox Holdings Berhad (“Starbox Berhad”), StarboxGB, StarboxTV Sdn. Bhd. (“StarboxSB”), Paybats Sdn. Bhd. (“StarboxPB”), 180 Degrees Brandcom Sdn Bhd (“180 Degrees”), and Media Elements Sdn Bhd (“Media Elements”) are governed by the income tax laws of Malaysia. The increase in provision for income tax in the six months ended March 31, 2024 compared to same period of 2023 is primarily due to the acquisition of new subsidiaries. The income tax provision in respect of operations in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations, and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified 24% enterprise income tax rate, while preferential tax rates, tax holidays, and tax exemptions may be granted on a case-by-case basis. The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less, and gross income of not more than MYR50 million) is 15% for the first MYR150,000 (approximately $37,500) taxable income, 17% for taxable income between MYR150,000 (approximately $37,500) to MYR600,000 (approximately $150,000), with the remaining balance of taxable income being taxed at the 24% rate. For the six months ended March 31, 2024 and 2023, the tax rate for each of the Company’s Malaysia subsidiaries was 24%, as a result the consolidated paid-in capital of the Company exceeded MYR2,500,000.
On June 13, 2023, StarboxGB submitted an application to be recognized as a Malaysia Digital Status company. This application received approval from the Malaysia Digital Economy Corporation Sdn Bhd (MDEC) on February 28, 2024. The approved business activities include (a) artificial intelligence in (i) Starbox AI data analysis & management tools and related services; (ii) Starbox AI calculation engine and related services; (iii) Starbox AI content solution and related services; and (b) creative media technology in Starbox VR solutions and related services. The approval is subject to certain terms and conditions, and StarboxGB is entitled to a 100% tax exemption for the approved business activities mentioned herein for a period of five years.
Our subsidiaries Starbox Global, Starbox International, Irace Technology, and Benefit Pointer are governed by the income tax laws of the British Virgin Islands, wherein the Company is not subject to tax on its income or capital gains. In addition. Our subsidiaries, ProSeeds, Trade Router, and Carnegie Hill, are governed by the income tax laws of Seychelles. The standard corporate tax for companies in Seychelles is levied on companies at the following progressive rates: taxable income up to SCR1 million is subject to a tax rate of 15% (reduced from 25%, effective January 1, 2022); and taxable income above SCR1 million is subject to a tax rate of 25% (reduced from 30%, effective January 1, 2022).
Net Income (loss)
As a result of the foregoing, we reported a net loss of $13,403,737 for the six months ended March 31, 2024, representing an increase in net loss by $14,768,234 from a net income of $1,364,497 for the six months ended March 31, 2023. The increase in the net loss was mainly due to increased operating costs including R&D expenses as mentioned above.
B. Liquidity and Capital Resources
Cash Flows for the Six Months Ended March 31, 2024 Compared to the Six months Ended March 31, 2023
We were incorporated in the Cayman Islands as a holding company and our Cayman Islands holding company did not have active business operations as of March 31, 2024. Our consolidated assets and liabilities and consolidated revenue and net income are the operation results of our subsidiaries in Malaysia. Our Malaysian subsidiaries’ ability to transfer funds to us in the form of loans or advances or cash dividends is not materially restricted by regulatory provisions in accordance with laws and regulations in Malaysia. Our subsidiaries in Malaysia are free to remit divestment proceeds, profits, dividends, or any income arising from our investment in Malaysia, as long as the payment is made in foreign currency, instead of Malaysian Ringgit, and in accordance with the Foreign Exchange Notices issued by the Bank Negara Malaysia (the Central Bank of Malaysia). As of March 31, 2024 and September 30, 2023, none of the net assets of our consolidated subsidiaries in Malaysia were restricted net assets.
As of March 31, 2024, we had $479,493 in cash and cash on hand as compared to $2,524,957 as of September 30, 2023. We also had $1,129,776 and $9,405,155 in accounts receivable as of March 31, 2024 and September 30, 2023, respectively. Our accounts receivable included balances due from advertisers for advertising services rendered, and due from software licensing, where our performance obligations had been satisfied and our fees had been billed but had not been collected as of the balance sheet date. Approximately 99% of the September 30, 2023 accounts receivable balance has been subsequently collected as of the date of this report. Approximately 56% of the accounts receivable balance as of March 31, 2024 has been collected as of the date of this report. The following table summarizes our outstanding accounts receivable and subsequent collection by aging bucket:
| Accounts receivable by aging bucket | Balance as of March 31, 2024 | Subsequent collection | % of subsequent collection | |||||||||
| Less than 6 months | $ | 987,980 | $ | 526,406 | 53 | % | ||||||
| From 7 to 9 months | 46,929 | 35,620 | 76 | % | ||||||||
| From 10 to 12 months | 58,766 | 58,575 | 99 | % | ||||||||
| Over 1 year | 21,105 | 974 | 5 | % | ||||||||
| Total gross accounts receivable | 1,114,780 | 621,575 | 56 | % | ||||||||
| Allowance for doubtful accounts | (2,642 | ) | - | - | ||||||||
| Accounts receivable, net | $ | 1,112,138 | $ | 621,575 | 56 | % | ||||||
As of March 31, 2024, we had prepaid expenses of approximately $24.1 million, which primarily consisted of prepayments to third-party vendors to help us (i) design, develop, and optimize the AR travel guide app with the key commercial objective to provide personalized instant rebates, voucher distribution, and ad placements for merchants, (ii) to conduct software application design, development, conceptualization, and visualization for our Virtual Reality Rebate Mall project, and upgrade our existing software and operating systems to increase the data processing capability, to diversify our business operation model, and to support our future business expansion, (iii) to design and develop the Artificial Intelligence Chatbot System and maintenance, (iv) to design and develop a conversation AI Chatbot Integration mobile app and website, (v) create a comprehensive software suite featuring AI-driven advertising, analytics, management tools, market insights analysis, and AR target management, and (iv) develop a AIGC videos to images (AI powered) system. There was no allowance for doubtful accounts recorded for such prepayments, as we consider all of the prepayments fully realizable.
The balance due from a related party was $28,608 as of March 31, 2024, representing the balance arising from ordinary trade in nature with related party companies. The balance due to a related party was $241,922 as of March 31, 2024, representing certain expenses that were paid by related party individuals, such advance was non-interest bearing and due on demand, as well as balance arising from ordinary trade in nature with a related party company.
As of March 31, 2024, our working capital balance amounted to approximately $25.4 million. In assessing our liquidity, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue in the future, and our operating and capital expenditure commitments.
To further grow our advertiser, Member, and Merchant bases and increase our future revenue and cash flows, we plan to selectively launch our cash rebate and digital advertising services in other countries in Southeast Asia during the next three years, starting from markets such as the Philippines, Thailand, and Indonesia. To accomplish such expansion plan, we will need to establish representative offices or appoint local partners, hire new sales, marketing, and support personnel in the countries in which we will launch our services, improve or upgrade our websites and mobile apps to adapt to local languages and cultures, and promote our brands in these countries. In addition to our geographic business expansion, in order to upgrade our existing software and operating systems to increase the data processing capability, to diversify our business operation model and to support our future business growth, we also plan to put a significant amount of investment into our IT system and infrastructure. We will outsource the software and application design and development to third-party vendors for market research, feasibility study, AR app and Virtual Reality Mall Data Management system software conceptualization, visualization, system coding, testing, debugging, and AI Chatbot system design and integration. We believe such IT related investment will help us diversify our future business scope, increase our competitive advantage, and benefit our future long-run growth.
We believe that our current cash and cash flows provided by operating activities will be sufficient to meet our working capital needs in the next 12 months from the date of this report. However, we may incur additional capital needs in the long term. We may also seek additional financing, to the extent required, and there can be no assurance that such financing will be available on favorable terms, or at all. All of our business expansion endeavors involve risks and will require significant management, human resources, and capital expenditure. There is no assurance that the investment to be made by us as contemplated under our future plans will be successful and generate the expected return. If we are not able to manage our growth or execute our strategies effectively, or at all, our business, results of operations, and prospects may be materially and adversely affected.
The following table sets forth a summary of our cash flows for the six months indicated:
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (2,201,330 | ) | $ | (12,148,919 | ) | ||
| Net cash used in investing activities | (303,369 | ) | (17,877,183 | ) | ||||
| Net cash provided by financing activities | 265,236 | 11,760,444 | ||||||
| Effect of exchange rate change on cash and restricted cash | 193,999 | 1,351,155 | ||||||
| Net decrease in cash | (2,045,464 | ) | (16,914,503 | ) | ||||
| Cash, beginning of period | 2,524,957 | 17,778,895 | ||||||
| Cash, end of period | $ | 479,493 | $ | 864,392 | ||||
Operating Activities
Net cash used in operating activities was $2,201,330for the six months ended March 31, 2024, and primarily consisted of the following:
| ● | a net loss of $13,654,645 for the six months ended March 31, 2024; | |
| ● | an increase in R&D expenses that were paid through issuance of shares of $11,674,000; | |
| ● | an increase in depreciation and amortization expense of $2,145,213; | |
| ● | a decrease in outstanding accounts receivable of $8,258,820. Our accounts receivable included balances due from customers for advertising services, software licensing services, cash rebate and payment solution services rendered, media booking services, as well as advertisement production, and promotional campaign services, where our performance obligations had been satisfied, and our fees had been billed but had not been collected as of the balance sheet dates. The March 31, 2024 accounts receivable balance has been 45% collected as of the date of this report; | |
| ● | an increase in prepayment and other current assets of approximately $9,600,915. In order to upgrade our existing software and operating systems to increase the data processing capability, to diversify our business operation model and to support our future business expansion, we signed a few agreements with third-party technological and software development vendors to (i) conduct software application design and development of an AR travel guide app with the key commercial objective to provide additional digital ad placements for merchants, and to convert online traffic to offline merchants to improve our data processing capacity for instant rebates, and air-drop voucher for merchants, and (ii) conduct a market research, feasibility study, VR Mall Data Management system software conceptualization, visualization, system coding, testing, and debugging for our Virtual Reality Rebate Mall project, to initialize and rollout the application as a progressive web portal, which can be further developed into a mobile app to allow integration to various platforms, (iii) design and develop an Artificial Intelligence Chatbot System and maintenance, (iv) design and develop a conversation AI Chatbot Integration mobile app and website, (v) create a comprehensive software suite featuring AI-driven advertising, analytics, management tools, market insights analysis, and AR target management, and (iv) develop a system to develop AIGC videos to images (AI powered). As of March 31, 2024, we had prepaid approximately $24.1 million to these vendors, and we consider all of the prepayments fully realizable; | |
| ● | a decrease in accounts payable of $765,664, mainly resulting from payment of vendors’ outstanding balance; and | |
| ● | a decrease in accrued expenses and other current liabilities of $272,022, mainly resulting from payments to settle the September 30, 2023 vendors’ payable balance. |
Net cash used in operating activities was $12,148,919 for the six months ended March 31, 2023, and primarily consisted of the following:
| ● | net income of $1,364,497 for the six months ended March 31, 2023; | |
| ● | an increase in outstanding accounts receivable of $2,809,804. Our accounts receivable included balances due from customers for digital advertising services, software licensing services, cash rebate services, and payment solution services rendered, where our performance obligations had been satisfied, and our fees had been billed but had not been collected as of the balance sheet dates; |
| ● | an increase in prepayment and other current assets of approximately $9,621,687. In order to upgrade our existing software and operating systems to increase the data processing capability, to diversify our business operation model and to support our future business expansion, we signed a few agreements with third-party technological and software development vendors to (i) conduct software application design and development to our develop AR travel guide app with the key commercial objective to provide additional digital ad placements for merchants, and to convert online traffic to offline merchants to improve our data processing capacity for instant rebates, and air-drop voucher for merchants, and (ii) conduct a market research, feasibility study, VR Mall Data Management system software conceptualization, visualization, system coding, testing, and debugging for our Virtual Reality Rebate Mall project, to initialize and rollout the application as a progressive web portal, which can be further developed into a mobile app to allow integration to various platforms, (iii) design and develop an Artificial Intelligence Chatbot System and maintenance, and (iv) design and develop a conversation AI Chatbot Integration mobile app and website. As of March 31, 2023, we had prepaid approximately $14.5 million to these vendors, and we consider all of the prepayments fully realizable; | |
| ● | an increase in prepaid income tax of $544,054, because we made income tax prepayment to local tax authorities based on estimated taxable income and such prepayment which will be reconciled and settled upon filing our income tax returns; | |
| ● | a decrease in outstanding taxes payable of $1,063,540, mainly resulting from payment to settle the September 30, 2022 income tax payable balance. |
Investing Activities
Cash used in investing activities was $303,369 for the six months ended March 31, 2024, which primarily included purchases of property and equipment of $28,535 and long-term deposits of $274,834 during the period.
Cash used in investing activities was $17,877,183 for the six months ended March 31, 2023, which primarily included purchases of property and equipment of $13,183 and purchases of intangible assets of $17,864,000 during the period.
Financing Activities
Cash provided by financing activities was $265,236for the six months ended March 31, 2024, which primarily included borrowings from related parties of $154,473and proceeds from loans of $386,260, partly offset by repayments of borrowing from related parties in an amount of $98,076and a loss from equity financing of $177,421.
Cash provided by financing activities was $11,760,444 for the six months ended March 31, 2023, which consisted of net proceeds from our private placement of $11,766,810, offset by repayments of borrowing from related parties in an amount of $6,366.
Contractual Obligations
Office lease
Prior to August 2021, the Company had not directly entered into any office lease agreements. The lease expenses were paid by Zenapp on behalf of the Company, with an estimated amount of $4,200 for the fiscal year ended September 30, 2020, and approximately $3,850 for the period from October 2020 to August 2021. On August 20, 2021, the Company’s main operating subsidiaries in Malaysia started to lease office spaces from Zenapp, with an aggregate area of approximately 4,800 square feet, pursuant to three sub-tenancy agreements, each with a lease term from September 1, 2021 to August 31, 2023 and monthly rent of MYR10,000 (approximately $2,424). In the end of April 2022, the Company terminated the sub-tenancy agreements with Zenapp, and entered into three lease agreements directly with Berjaya Steel Works Sdn Bhd and Woon Chun Yin for a term of one year from May 1, 2022 to April 30, 2023 with the monthly rent of MYR6,288, MYR6,288, and MYR6,800, respectively, (approximately $1,460, $1,460, and $1,580, respectively). There was no penalty for the early termination of the sub-tenancy agreements. In May 2023 and June 2023, the Company renewed each of the office lease agreements for an additional two years, and each with a lease maturity date in April 2025. The monthly rent of the three leases is MYR6,700, MYR6,700, and MYR7,100, respectively (approximately $1,500, $1,500, and $1,590, respectively).
The following tables summarize our contractual obligations as of March 31, 2024:
| 12 months ending March 31, | Lease payment | |||
| 2025 | $ | 47,443 | ||
| 2026 | 52,396 | |||
| 2027 | 20,904 | |||
| 2028 | 1,503 | |||
| Total future minimum lease payments | 122,246 | |||
| Less: imputed interest | (2,884 | ) | ||
| Total | $ | 119,362 | ||
Equipment leases
Effective June 20, 2020, the Company entered into a 60-month lease for a photocopier. The monthly rent is approximately $95.
As of March 31, 2024, the maturities of operating lease liabilities were as follows:
| 12 months ending March 31, | Lease payment | |||
| 2024 | $ | 1,113 | ||
| 2025 | 278 | |||
| Total future minimum lease payments | 1,391 | |||
| Less: imputed interest | (45 | ) | ||
| Total | $ | 1,346 | ||
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe that the critical accounting policies as disclosed in this report reflect the more significant judgments and estimates used in preparation of our consolidated financial statements. Further, we elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the Jumpstart Our Business Startups Act of 2012. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements.
The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial
statements:
Uses of estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include the valuation of accounts receivable, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, the discount rate used to calculate lease liabilities, the amount of worldwide tax provision, realization of deferred tax assets, provision necessary for contingent liabilities, and revenue recognition. Actual results could differ from those estimates.
Accounts receivable, net
Accounts receivable primarily include service fees generated from providing online and offline advertising services, branding services, payment solution services to retail merchant customers, advertisement production and promotional campaign services.
Accounts receivable are presented net of allowance for doubtful accounts. The Company determines the adequacy of allowance for doubtful accounts based on individual account analysis, historical collection trend, and the best estimate of specific losses on individual exposures. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2024 and September 30, 2023, The bad debt allowance was $2,642 and $101,947, respectively.
Revenue recognition
To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company currently generates its revenue from the following main sources:
Revenue from advertising services
a) Digital advertising services
The Company’s advertising service revenue is derived principally from advertising contracts with retail merchant customers (the “advertisers”), which allow advertisers to place advertisements on the Company’s websites and mobile apps and third-party social media channels over a particular period of time. The advertising contracts specify the related fees and payment terms and provide evidence of the arrangements. The Company’s digital advertising services are to (i) provide advertisement design and consultation services to help advertisers precisely shape their digital advertising strategies and optimize the design, content, and layout of their advertisements and (ii) the displaying of advertisers’ advertisements of products and services on the Company’s websites and mobile apps and third-party social media channels over a particular period of time and in a variety of forms, such as logos, banners, push notification, and posts by accounts of influencers and bloggers, to help promote advertisers’ products and services and enhance their brand awareness. Advertisers may elect to engage with the Company for only advertisement display services or both advertisement design and consultation services and advertisement display services.
In connection with these digital advertising services, the Company charges retail merchant customers nonrefundable digital advertising service fees. For advertisement design and consultation services, the Company’s stand-alone selling price ranges from approximately $4,000 to approximately $85,000 for each of the service commitments, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the advertisements. Advertisers may elect to use any agreed-upon combination of services in one package, depending on their specific needs. For advertisement display through logos, banners, push notifications, and posts by accounts of influencers and bloggers, the Company charges advertisers service fees with a range from approximately $5,000 to approximately $300,000, depending on the distribution channels used and the duration of the advertisement display. The Company is acting as a principal in providing digital advertising services to customers, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified services. The Company recognizes revenue for the amount of fees it receives from its customers, after deducting discounts and net of service taxes under ASC 606.
The Company identifies advertisement design and consultation services and advertisement display services as two separate performance obligations, as each is a service that is capable of being distinct and distinct in the context of advertising contracts. Each of the service commitments in advertisement design and consultation services, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the advertisements, are not distinct in the context of advertising contracts, because they are inputs to deliver the combined output of advertisements to be displayed as specified by the customer. Therefore, advertisement design and consultation services are identified as a single performance obligation. The Company allocates revenue to each performance obligation based on its stand-alone selling price, which is specified in the contracts.
The Company’s advertisement design and consultation services are normally rendered within a short period of time, ranging from a few days to a month. As all the benefits enjoyed by the customers can be substantially realized at the time when the design and consultation services are completed, the Company recognizes revenue at the point when designated services are rendered and accepted by the customers. The Company does not provide rights of return, credits or discounts, price protection, or other similar privileges to customers for such services and accordingly no variable consideration included in such services.
The majority of the Company’s advertising contracts are for the provision of advertisement display on the Company’s websites and mobile apps and social media channels for a fixed period of time (ranging from a few weeks to a few months) without a guaranteed minimum impression level. In instances where certain discounts are provided to customers for advertisement displays, such discounts are reported as deduction of revenue. Revenue from advertisement services is recognized over the period the advertisement is displayed. Advances from customers are deferred first and then recognized as revenue upon the completion of the contract. There are no future obligations after the completion of the contract and no rights of refund related to the impression levels.
b) Brand-building-related consulting services
The Company’s advertising service revenue is derived principally from its advertising- and brand-building-related consulting service agreements with customers, pursuant to which the Company provides creative ideas, strategies, proposals, and solutions to customers for advertising and brand positioning, helping them create appropriate advertising languages or images, identifying appropriate communication media channels, incorporating advertising and brand promotion strategies into their marketing plans, and recommending and coordinating the customers with relevant media channels for advertisement display or broadcasting. The Company’s advertising and brand-building-related consulting service agreements with customers are fixed-price agreements, and the service fees depend on the job scope and complexity of each project. It normally takes a few months to one year to complete a project, including market research, advertisement idea conceptualization, brand positioning proposals, and final delivery of customer-accepted proposals and solutions.
Each of the service promises in an advertising- and brand-building-related consulting service agreement is not distinct in the context because they are the inputs to deliver the combined output. Therefore, these performance obligations are identified as a combined single performance obligation. Once a customer accepts the final deliverables, which marks the completion of an agreement, there are no future obligations and no rights of refund. The Company allocates contract price to such single performance obligation over the service period. Revenue from such services is recognized over the period. Advances or deposits from customers are deferred first and then recognized as revenue until the completion of the service.
The Company is acting as a principal in these transactions and records revenue earned and costs incurred related to these transactions on a gross basis, because the Company has discretion in establishing prices, and is responsible for fulfilling the promises and transferring services to the customer and assumes fulfilment risk.
Revenue from cash rebate, payment solution services, and media booking
a) Cash rebate services
The Company also utilizes its websites and mobile apps to connect retail merchants and retail shoppers and facilitate retail shoppers to purchase consumer products or services from retail merchants online or offline under the cash rebate programs offered by retail merchants. The cash rebate offered by retail merchants range from 0.3% to 99.99% based on the sales price of the products or services, among which approximately 48% to 90% are awarded to retail shoppers, and the Company is entitled to receive and retain the remaining approximately 52% to 10% as cash rebate revenue for facilitating online and offline sales transactions. There is a single performance obligation in the contract, as the performance obligation is to facilitate the sales transactions between the retail shoppers and the retail merchants.
The Company merely acts as an agent in this type of transactions. The Company does not have control of the goods or services under the sales transactions between the retail merchants and retail shoppers, has no discretion in establishing prices, and does not have the ability to direct the use of the goods or services to obtain substantially all the benefits. The Company recognizes cash rebate revenue at the point when retail merchants and retail shoppers are connected and the sales transactions are facilitated and completed. Revenue is reported net of service taxes.
b) Payment solution services
In May 2021, the Company started to provide payment solution services to retail merchant customers by referring them to VE Services, a Malaysian Internet payment gateway company and a related-party entity controlled by one of the shareholders of the Company. The Company entered into an appointment letter with VE Services and started to refer retail merchant customers to VE Services to process payments through multiple payment methods, such as FPX, Alipay, Maybank QR Pay, Boost, Touch ‘n Go, and GrabPay. VE Services first charges retail merchants a service fee ranging from 1.50% to 2.50%, based on the processed payment amount and payment processing methods used, and the Company is entitled to receive a portion of the service fees as commissions for the referrals. The commission rate ranges from 0.15% to 0.35% based on the total service fees collected by VE Services from the retail merchants when the payment processing is completed. The Company merely acts as an agent in this type of transaction. The Company has no discretion in establishing prices and does not have the ability to direct the use of the services to obtain substantially all the benefits. Such revenue is recognized at the point when the payment is processed and the Company’s performance obligations are satisfied.
c) Media booking
The Company also sells media companies’ advertising spaces to merchant customers on behalf of media companies. Media channel booking includes press media booking, TV commercial airtime booking, broadcasting or radio media booking, billboard media booking, and digital media booking. The Company signs agency agreements with media companies to sell their advertising spaces to merchant customers who have advertising needs. The Company’s performance obligations include referring merchant customers to media companies and getting paid by media companies referral fees or commissions at pre-determined rates negotiated with the media companies, which are rates based on advertising amounts purchased or spent by merchant customers. Revenue is recognized at the point when merchant customers posted their advertisements on the media channels. The Company is acting as an agent in these transactions, as it does not have discretion in establishing prices, and is not responsible for fulfilling the promise and providing customers the specified services and deliverables.
Revenue from software licensing
In 2023, the Company started its software licensing business, in which the Company develops software, such as the data management system, licenses the use right of the software to customers for certain periods of time for licensing incomes, and provides related technology support and system maintenance services on a monthly basis. A software licensing contract with a customer includes promises to transfer software products and provide technical support and system maintenance services, which are generally capable of being distinct performance obligations. Software licensing is considered a distinct performance obligation and accounted for separately from the technical support and system maintenance services. Revenue from distinct software licensing is recognized at the point in time when the software is delivered to the customers. Revenue from technical support, system maintenance, and upgrade is recognized over the period in which the service is provided. The standalone sales prices (“SSPs”) for distinct performance obligations are based on directly observable pricing. In instances where the SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.
Revenue from photograph, commercial video and audio recording, and production services (“production services”)
The Company signs fixed-price agreements with customers who already have their own concept or ideas for the commercial photo, video, and audio, but need professionals and talents to help turn their unique vision, voice, and expression into displayable and captivating advertisements in photograph, video, or audio format. The Company’s performance obligations include identifying, organizing, and coordinating with professional teams (including qualified photographer, videographer, film directors, actors or models, commercial voiceover talents, stylists, makeup artists, editors, video and audio engineers, and music mixing engineers) to perform such services, shooting location rental, equipment and transportation vehicle rental, developing the script for the dialog for photographing and video and audio recording, post production editing, and the delivery of final quality products to customers to satisfy their advertising needs. As a result of these combined performance obligations, the Company delivers the final photograph, video, or audio recording outputs to customers when the related services are rendered. These services are not distinct in the context of the service agreements because they are the inputs to deliver the combined output to the customers. The agreement with customers for such photograph, commercial video and audio recording, and production services specifies the service fees, payment terms, work scope, and arrangements. Once customers accept the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. The Company allocates contract price to such single performance obligations at the point when the services are rendered and the photograph, video, and audio recording products are delivered to customers. Revenue is recognized at the point when the final products are delivered to customers and are accepted by them.
The Company is acting as a principal and records revenue earned and costs incurred related to these transactions on a gross basis, because the Company has the discretion in establishing prices, is responsible for fulfilling the promises and delivering the final products to the customer, assumes fulfilment risk having latitude in select third-party professional teams to complete the advertising production job, and bears the risk for services that are not fully paid for by customers.
Revenue from marketing and promotional campaign services and others
The Company assists merchants in planning, arranging, and executing seasonal on-the-ground sales and promotional campaigns, normally in shopping malls. The Company’s services include providing sales campaign proposals, coordinating with shopping mall owners for location rental, assisting merchant clients with equipment rental, advising the clients on site layout arrangements and decorations, and providing product display strategies. The Company considers these a single performance obligation. It usually takes a few days to a few weeks from the preparation of the marketing and sales campaign event to the execution. The service agreement with a merchant client is a fixed-price agreement, and the Company is entitled to receive the payment when the related services are rendered. Contract price is allocated to one single performance obligation upon rendering the services. Revenue is recognized at the point when the marketing and promotion event is organized and related services are performed.
The Company is acting as a principal for such service and records revenue earned and costs incurred related to these services on a gross basis, because the Company has latitude in establishing prices, and is responsible for fulfilling the promise and providing customers with the specified services.
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the six months ended March 31, 2024 and 2023. The Company does not believe there was any uncertain tax provision as of March 31, 2024 and September 30, 2023.
The Company’s operating subsidiaries in Malaysia are subject to the income tax laws of Malaysia. No significant income was generated outside Malaysia for the six months ended March 31, 2024 and 2023. As of March 31, 2024, all of the Company’s tax returns of its Malaysian subsidiaries remained open for statutory examination by relevant tax authorities for seven years from the date the corporate income tax return was filed.
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
In November 2023, the FASB issued ASU 2023-07, the amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company’s management does not believe the adoption of ASU 2023-07 will have a material impact on its financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of operations and comprehensive income, and statements of cash flows.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2024 and December 31, 2023.
Trend Information
Other than as disclosed elsewhere in this report, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenue, income from continuing operations, profitability, liquidity, or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
Inflation
Inflation does not materially affect our business or the results of our operations.
Seasonality
Our revenue, cash flow, operating results, and other key operating and performance metrics may vary from quarter to quarter, due to the seasonal nature of our advertisers’ budgets and spending on advertising campaigns. For example, advertising spending tends to rise in holiday seasons with consumer holiday spending, or closer to end-of-year in fulfilment of their annual advertising budgets, which may lead to an increase in our revenue and cash flow during such periods. Moreover, advertising inventory in holiday seasons may be more expensive, due to increased demand for advertising inventory. While our historical revenue growth may have, to some extent, masked the impact of seasonality, if our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a material impact on our revenue, cash flow, and operating results from period to period.