Starbox Group Holdings Ltd 6-K, filed Aug 29, 2023
Starbox Group Holdings Ltd. (STBXF)
About this 6-K
Starbox Group Holdings Ltd filed this 6-K on August 29, 2023.
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 August 2023
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 ☐
Unaudited Interim Financial Statements and Footnotes
Starbox Group Holdings Ltd., a Cayman Islands company (the “Company”), is furnishing its unaudited financial statements and footnotes for the six months ended March 31, 2023 and 2022. The financial statements and notes are attached as Exhibit 99.1 to this report of foreign private issuer on Form 6-K, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended March 31, 2023 is attached as Exhibit 99.2 to this report of foreign private issuer on Form 6-K.
On August 29, 2023, the Company issued a press release announcing its unaudited financial results for the six months ended March 31, 2023 and 2022, a copy of which press release is attached as Exhibit 99.3 to this report of foreign private issuer on Form 6-K.
Audited Financial Statements and Footnotes of One Eighty Holdings Ltd. and Pro Forma Financial Statements of the Combined Company
As previously disclosed in the Company’s report of foreign private issuer on Form 6-K (File No. 001-41480), filed with the U.S. Securities and Exchange Commission on June 26, 2023, on the same date, the Company, as the issuer, and its wholly owned subsidiary, Starbox Global Ltd., a British Virgin Islands company (“Starbox Global”), as the buyer, entered into a share purchase agreement (the “Share Purchase Agreement”), with the five then shareholders of One Eighty Holdings Ltd. (the “One Eighty Shareholders”), as the sellers, with respect to One Eighty Holdings Ltd. (“One Eighty”), a Cayman Islands company, as the target company.
The Company closed the transactions contemplated by the Share Purchase Agreement on July 10, 2023 and Starbox Global acquired from the One Eighty Shareholders such number of ordinary shares of One Eighty representing 51% of the issued share capital in One Eighty. As a result, the Company indirectly acquired 51% of the equity interests in One Eighty. In compliance with Rule 3-05 of Regulation S-X, the balance sheets of One Eighty as of March 31, 2023 and September 30, 2022 and 2021 and the related statement of income (loss), changes in shareholder’s equity, and cash flows for the six months ended March 31, 2023 and the fiscal years ended September 30, 2022 and 2021, and the related notes and the unaudited pro forma condensed combined financial statements and notes of the Company as of and for the fiscal year ended September 30, 2022 are attached as Exhibit 99.1 and incorporated by reference herein.
The foregoing description of the Share Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Share Purchase Agreement, which was filed as Exhibit 10.1 to the Company’s Form 6-K dated June 26, 2023.
Exhibit Index
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: August 29, 2023 | By: | /s/ Lee Choon Wooi |
| Name: | Lee Choon Wooi | |
| Title: | Chief Executive Officer | |
Exhibit 99.1
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
| F-1 |
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2023 | As of September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Deposit and prepayments | ||||||||
| Prepaid income tax | ||||||||
| Prepayments | ||||||||
| Short-term investment | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Long-term investment | ||||||||
| Deferred tax assets, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Taxes payable | $ | $ | ||||||
| Deferred revenue | ||||||||
| Accounts payable | ||||||||
| Customer deposits | ||||||||
| Accrued liabilities and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Due to related parties | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Deferred tax liabilities, net | ||||||||
| Loan payables | ||||||||
| Operating lease liabilities, non-current | ||||||||
| 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, 2023 and September 30, 2022, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Less: dividend | ||||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating revenue | ||||||||
| Revenue from cash rebate services | $ | $ | ||||||
| Revenue from digital advertising services | ||||||||
| Revenue from payment solution services | ||||||||
| Revenue from software licensing | ||||||||
| Total operating revenue | ||||||||
| Operating expenses | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Selling, general, and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income, net | ||||||||
| Interest income | ||||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| Income before income tax | ||||||||
| Income tax expenses | ||||||||
| Net income | $ | $ | ||||||
| Other Comprehensive income | ||||||||
| Foreign currency translation gain (loss) | ( | ) | ||||||
| Total Comprehensive income | $ | $ | ||||||
| Net income per share - basic | $ | $ | ||||||
| Weighted average number of common shares outstanding - basic | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED MARCH 31, 2023 AND 2022
| Ordinary Shares | Additional paid-in | Retained earnings (accumulated | Accumulated other Comprehensive (Loss) / | |||||||||||||||||||||
| Shares | Amount | capital | deficit) | Income | Total | |||||||||||||||||||
| Balance at October 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Shares issued for equity financing | ||||||||||||||||||||||||
| Dividend paid | ||||||||||||||||||||||||
| Foreign currency translation gain | - | |||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance at October 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Net income (loss) | - | |||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompany notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| FOR SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||
| Disposal of fixed assets | ||||||||
| Depreciation and amortization | ||||||||
| Depreciation | ||||||||
| Amortization of right-of-use operating lease assets | ||||||||
| Change in deferred tax | ||||||||
| Operating lease expense | ||||||||
| Changes in operating assets / liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Deposit and prepayments | ||||||||
| Accounts payable | ||||||||
| Prepaid income tax | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Customer deposits | ||||||||
| Taxes payable | ( | ) | ||||||
| Accrued liabilities and other payables | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Disposal of fixed assets | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of loans | ( | ( | ||||||
| Fixed deposit in bank | ||||||||
| Proceeds from related parties | ||||||||
| Dividend paid | ||||||||
| Deferred initial public offering costs | ( | ) | ||||||
| Proceeds from equity financing | ||||||||
| Increase in due from related party | ( | ) | ||||||
| Repayment of related party borrowings | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | ( | ) | ||||||
| NET INCREASE (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 unaudited condensed consolidated financial statements.
| F-5 |
STARBOX GROUP HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023 (UNAUDITED) AND SEPTEMBER 30, 2022
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Business
Starbox Group Holdings Ltd. (“Starbox Group” or the “Company”), through its wholly-owned subsidiaries, 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. 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 RM1.00. On April 19, 2023, 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.
| F-6 |
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.
The following diagram illustrates the Company’s corporate structure after the reorganizations:
The consolidated financial statements of the Company as of March 31, 2023 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 |
| F-7 |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying unaudited 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 wholly owned subsidiaries. All inter-company balances and transactions are eliminated upon consolidation.
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.
Cash
Cash
includes 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 deposit with financial institutions in Malaysia is subject to certain protection under the requirement
of the deposit insurance system. The maximum insurance coverage limit is MYR
| F-8 |
Accounts receivable, net
Accounts receivable primarily include service fees generated from providing digital advertising 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, 2023 and September 30, 2022, there was no allowance for doubtful accounts recorded as the Company considers all of the outstanding accounts receivable fully collectible.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization 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 | ||||
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 | ||
| Content assets-licensed movies and television series |
Impairment of long-lived assets
Long-lived
assets with finite lives, primarily property and equipment, 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
| F-9 |
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, 2023 and September 30, 2022 based upon the short-term nature of the assets and liabilities.
Foreign currency translation
The functional currency for Starbox Group, Starbox International, and Starbox Global are the U.S Dollar (“US$”). Starbox Berhad, StarboxGB, StarboxSB, and StarboxPB use Malaysian Ringgit (“MYR”) as their functional currency. The Company’s consolidated financial statements have been translated into and reported in US$. 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, 2023 | September 30, 2022 | ||||
| Period-end spot rate | US$ |
US$ |
|||
| Average rate | 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.
| F-10 |
The Company currently generates its revenue from the following main sources:
Revenue from 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 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.
Revenue from 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
| F-11 |
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. For the six months ended March 31, 2023 and 2022, the Company only reported cash rebate revenue of $
Revenue from 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, a Malaysian Internet payment gateway company and a related-party entity controlled by one of the shareholders of the Company (“VE
Services”). 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
Revenue from software licensing
In 2023, the Company started software licensing business, in which the Company develops software such as data management system, licenses the use right of the system to customer for a term of period as license income, and provides related technology support and system maintenance services on an annual basis. The 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. The software license is considered a distinct performance obligation and accounted for separately from the technical support and system maintenance services. Revenue from distinct software license is recognized at the point in time when the software system is delivered to the customer. Revenue from annual 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.
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, 2023 and 2022 is as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2023 | 2022 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue from advertising services: | ||||||||
| Advertisement design and consultation services | $ | $ | ||||||
| Advertisement display services | ||||||||
| Gross revenue from advertising services | ||||||||
| Less: discount to customers for advertisement displays | ( | ) | ( | ) | ||||
| Sub-total of net revenue from advertising services | ||||||||
| Revenue from cash rebate services | ||||||||
| Revenue from payment solution services-related party | ||||||||
| Revenue from software licensing | ||||||||
| Total operating revenue | $ | $ | ||||||
| F-12 |
Deferred revenue
Deferred
revenue occurs when the Company has entered into a contract with a customer and cash payments are received or due prior to transfer of
control or satisfaction of the related performance obligation. The Company’s performance obligations are generally satisfied within
12 months of the initial contract date. As of March 31, 2023 and September 30, 2022 deferred revenue amounted to $
Software development costs
The Company expenses software development costs as it incurs them until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers.
Operating leases
On October 1, 2020, the Company adopted Accounting Standards Updates (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC 842”), which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The Company elected to apply practical expedients permitted under the transition method that allow the Company to use the beginning of the period of adoption as the date of initial application, to not recognize lease assets and lease liabilities for leases with a term of 12 months or less, to not separate non-lease components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing or expired contract contains a lease.
The Company used a modified retrospective method and did not adjust the prior comparative periods. Under the new lease standard, the Company determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease terms. The Company considers only payments that are fixed and determinable at the time of lease commencement.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment annually. There was no impairment for right-of-use lease assets as of March 31, 2023 and September 30, 2022.
| F-13 |
Operating costs
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. The Company’s operating costs for the six months ended March 31, 2023 and 2022, consisted of the following:
SCHEDULE OF OPERATING COSTS
| 2023 | 2022 | |||||||
| For the Six Months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Salary and employee benefit expenses | $ | $ | ||||||
| Professional and consulting service fees | ||||||||
| Marketing and promotional expenses | ||||||||
| Content license costs | ||||||||
| Website and facility maintenance expenses | ||||||||
| Depreciation and amortization | ||||||||
| Utility and office expenses | ||||||||
| Business travel and entertainment expenses | ||||||||
| Others | ||||||||
| Total operating costs | $ | $ | ||||||
Research and development
The
Company’s research and development activities primarily relate to the optimization and implementation of its websites and mobile
apps (such as leveraging browser caching, improving server response time, removing render-blocking JavaScript, reducing redirects, and
optimizing images), to improve their performance and drive more traffic. Research and development costs are expensed as incurred. Research
and development expenses included in 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 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, 2023 and 2022. The Company does not believe there was any uncertain tax provision as of March 31, 2023 and September 30, 2022.
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, 2023 and 2022. As of March 31, 2023, 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.
| F-14 |
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, 2023 and 2022, there were no dilutive shares.
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 statements of cash flows will not necessarily agree with changes in the corresponding balances on the 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.
Defined contribution plan
The full-time employees of the Company’s subsidiaries in Malaysia are entitled to the government mandated defined contribution plan, such as social security, employee provident fund, employment insurance, and human resource development fund, as required by labor laws in Malaysia. The Company is required to accrue and pay for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant government regulations, and make cash contributions to the government mandated defined contribution plan.
Employee defined contribution plan expenses amounted to $ and $ for the six months ended March 31, 2023 and 2022, respectively.
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
| F-15 |
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. In November 2019, the FASB issued ASU 2019-10, which extends the effective date for adoption of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11 to clarify its new credit impairment guidance in ASU 326. Accordingly, for public entities that are not smaller reporting entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements.
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 unaudited condensed 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, 2023 | September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable associated with digital advertising services | $ | $ | ||||||
| Accounts receivable associated with cash rebate services | ||||||||
| Accounts receivable from software licensing | ||||||||
| Accounts receivable, gross | ||||||||
| Less: allowance for doubtful account | ||||||||
| Accounts receivable, net | $ | $ | ||||||
The
September 30, 2022 accounts receivable balance has been fully collected. Approximately
SCHEDULE OF ACCOUNTS RECEIVABLE AND SUBSEQUENT COLLECTION
| Accounts receivable by aging bucket | Balance as of March 31, 2023 | 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 | $ | $ | % | |||||||||
| F-16 |
NOTE 4—PREPAYMENTS
Prepayments consisted of the following:
SCHEDULE OF PREPAYMENTS
| March 31, 2023 | September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Prepayments: | ||||||||
| Speedprop Global Sdn. Bhd. (1) | $ | $ | ||||||
| ARX Media Sdn. Bhd. (2) | ||||||||
| Boring Lark Sdn Bhd. (3) | ||||||||
| Teclutions Sdn. Bhd. (4) | ||||||||
| Others (5) | ||||||||
| Less: allowance for doubtful account | ||||||||
| Total prepayments | $ | $ | ||||||
The Company currently operates its business through its GETBATS, SEEBATS, and PAYBATS websites and mobile applications. 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 software application design and development project. Total contract
price amounted to MYR |
| F-17 |
| (3) | |
| (4) |
In
addition, 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 $ |
| (5) |
As of March 31, 2023 and September 30, 2022, 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, 2023 | September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Office equipment and furniture | $ | $ | ||||||
| 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, 2023 | September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Computer software and applications (1) | $ | $ | ||||||
| Computer system – AI calculation engine (2) | ||||||||
| Content assets- licensed movies and television series (3) | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible asset, net | $ | $ | ||||||
| F-18 |
| (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 $
Total
amortization of above-mentioned intangible assets amounted to $
NOTE 7 — TAXES
| a. | Corporate Income Taxes (“CIT”) |
Cayman Islands
Under the current tax laws of the Cayman Islands, 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.
| F-19 |
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
| 2023 | 2022 | |||||||
For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current tax provision: | ||||||||
| Cayman Islands | $ | $ | ||||||
| Malaysia | ||||||||
| Current tax provision | ||||||||
| Deferred tax provision: | ||||||||
| Cayman Islands | ||||||||
| Malaysia | ||||||||
| Deferred tax provision | ||||||||
| 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, 2022 and 2021, respectively, are as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2023 | 2022 | |||||||
For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Income tax provision computed based on Malaysia unified income tax statutory rate | $ | $ | ||||||
| Effect of tax exemption due to reduced income tax rate for small and medium sized companies | ( | ) | ||||||
| Permanent difference | ( | ) | ||||||
| Change in valuation allowance | ||||||||
| Actual income tax provision | $ | $ | ||||||
| F-20 |
Deferred tax assets
The Company’s deferred tax assets were comprised of the following:
SCHEDULE OF DEFERRED TAX ASSETS
As of March 31, 2023 | As
of | |||||||
| (Unaudited) | ||||||||
| Deferred tax assets derived from net operating loss carry forwards | $ | $ | ||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets | $ | $ | ||||||
Movement of valuation allowance:
SCHEDULE OF VALUATION ALLOWANCE
As of March 31, 2023 | As
of | |||||||
| (Unaudited) | ||||||||
| Balance at beginning of the period | $ | $ | ||||||
| Current period change | ( | ) | ||||||
| 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, 2023 | As
of | |||||||
| (Unaudited) | ||||||||
| Deferred tax liability derived from the difference between tax and book basis of depreciation expense | $ | $ | ||||||
| Deferred tax liability | $ | $ | ||||||
| b. | Prepaid Income Tax / Taxes Payable |
As
of March 31, 2023 and September 30, 2022, the prepaid income tax was $
Taxes payable consisted of the following:
SCHEDULE OF TAXES PAYABLE
As
of (Unaudited) | As of September 30, 2022 | |||||||
| Income tax payable | $ | $ | ||||||
| Service tax payable | ||||||||
| Total | $ | $ | ||||||
| F-21 |
NOTE 8 — 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 |
| b. | Due from a related party |
Due from a related party consisted of the following:
SCHEDULE OF DUE FROM A RELATED PARTY
| Name | March 31 2023 | September 30, 2022 | ||||||
| VE Services | $ | $ | ||||||
As of March 31, 2022, the balance of due from VE Services was commission receivable for referring payment solution services to VE Services.
| c. | Due to related parties |
Due to related parties consisted of the following:
SCHEDULE OF DUE TO RELATED PARTIES
| Name | March 31, 2022 ( Unaudited) | September 30, 2022 | ||||||
| Bizguide Corporate Service Sdn Bhd | $ | $ | ||||||
| KH Advisory Sdn Bhd | ||||||||
| Due to related parties | $ | $ | ||||||
As of March 31, 2023 and September 30, 2022, the balance of due to related parties was the fee to be paid for secretarial and tax consulting services received.
| 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. During the six months
ended March 31, 2023 and 2022, the Company referred 35 and 11 merchants to VE Services for payment processing and earned commission fees
of $
| F-22 |
| e. | 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 $
NOTE 9 — 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, (ii)
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
| F-23 |
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 $
NOTE 10 — CONCENTRATIONS AND CREDIT RISK
As of March 31, 2023 and September 30, 2022, 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, 2023, one customer accounted for
As
of March 31, 2023, one customer accounted for approximately
For
the six months ended March 31, 2023 and 2022, no single vendor accounted for more than
NOTE 11 — 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, 2023 and 2022, 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 12 — 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 $
| F-24 |
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, 2023 | September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| 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 | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of March 31, 2023 and September 30, 2022:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| March 31, 2023 | September 30, 2022 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * |
During
the six months ended March 31, 2023 and 2022, the Company incurred total ASC 842 operating lease expenses of $
As of March 31, 2023, the maturities of operating lease liabilities were as follows:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
| 12 months ending March 31, | Lease payment | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ||||
| Total | $ | |||
NOTE 13 — 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.
| F-25 |
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 four operating segments as defined by ASC 280, including digital advertising services, cash rebate services, payment solution services, and licensing income from software development services.
Revenue by service categories
The following tables present summary information by segment for the six months ended March 31, 2023 and 2022, respectively:
SCHEDULE OF SUMMARY INFORMATION BY SEGMENT
| For the Six Months Ended March 31, 2023 (Unaudited) | ||||||||||||||||||||
| Cash rebate services | Digital
advertising services | Payment
solution services | Software licensing | Total | ||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Operating costs | ||||||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||||||
| Income tax expense | ||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Capital expenditure | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| For the Six Months Ended March 31, 2022 (Unaudited) | ||||||||||||||||||||
| Cash rebate services | Digital
advertising services | Payment
solution services | Software licensing | Total | ||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Operating costs | ||||||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||||||
| Income tax expense | ||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Capital expenditure | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||||||
NOTE 14 — 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 June 26, 2023, Starbox Group, as the issuer, and its wholly owned subsidiary, Starbox Global, as the buyer, entered into a share purchase agreement (the “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.
| F-26 |
Pursuant
to the Share Purchase Agreement, Starbox Global agreed to acquire ordinary shares, par value US$ per share, of One
Eighty Ltd (the “Sale Shares”), representing
The following condensed unaudited pro forma consolidated results of operations for the Company for the six months ended March 31, 2023 and 2022 present the results of operations of the Company and One Eight Ltd as if the acquisitions occurred on October 1, 2022 and 2021, respectively.
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 CONDENSED UNAUDITED PRO FORMA 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 expenses | ||||
| Net income | ||||
| Less: net income attributable to non-controlling interests | ||||
| Net income attributable to Starbox Group Holdings Ltd. | $ | |||
For the Six Months Ended March 31, 2022 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Income from operations | ||||
| Other income | ||||
| Income tax expenses | ||||
| Net income | ||||
| Less: net income attributable to non-controlling interests | ||||
| Net income attributable to Starbox Group Holdings Ltd. | $ | |||
Effective on August 17, 2023, Starbox Rebates Sdn. Bhd. changed its name to Starbox Technologies Sdn. Bhd.
| F-27 |
ONE EIGHTY HOLDINGS LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Independent Auditors’ Report
The Board of Directors
One Eighty Holdings Ltd.:
Opinion
We have audited the consolidated financial statements of One Eighty Holdings Ltd. and its subsidiaries (the “Company”), which comprise the balance sheets as of September 30, 2022 and 2021, and the related statements of operations, changes in shareholders’ equity, and cash flows for each of the two years ended September 30, 2022 and 2021, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects. the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two fiscal years ended September 30, 2022, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are available to be issued.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we
| ● | Exercise professional judgment and maintain professional skepticism throughout the audit; | |
| ● | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements; | |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed; |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements; and | |
| ● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’ ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ YCM CPA, Inc.
We have served as the Company’s auditor since 2022.
PCAOB ID 6781
Irvine, California
August 29, 2023
| F-28 |
ONE EIGHTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
| 2022 | 2021 | |||||||
| AS OF SEPTEMBER 30, | ||||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deposit and prepayments | ||||||||
| Short-term investment | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Right-of-use assets, net | ||||||||
| Property, plant, and equipment, net | ||||||||
| Long-term investment | ||||||||
| Deferred tax assets, net | ||||||||
| Total noncurrent assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued liabilities and other payables | ||||||||
| Taxes payable | ||||||||
| Due to related parties | ||||||||
| Lease liability | ||||||||
| Total current liabilities | ||||||||
| NONCURRENT LIABILITIES | ||||||||
| Lease liability | ||||||||
| Loan payables | ||||||||
| Total noncurrent liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Paid in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Less: dividend | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-29 |
ONE EIGHTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| 2022 | 2021 | |||||||
| FOR THE FISCAL YEARS ENDED SEPTEMBER 30, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income | ||||||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income | ||||||||
| Income (loss) before income tax | ( | ) | ||||||
| Income tax expense (benefit) | ( | ) | ||||||
| Net income (loss) | ( | ) | ||||||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||
| Comprehensive income (loss) | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-30 |
ONE EIGHTY HOLDINGS LTD
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2022 and 2021
| capital | loss | earnings | equity | |||||||||||||
| Accumulated | ||||||||||||||||
| other | Total | |||||||||||||||
| Paid in | comprehensive | Retained | shareholders’ | |||||||||||||
| capital | loss | earnings | equity | |||||||||||||
| Balance at September 30, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2021 | ( | ) | ||||||||||||||
| Net income | ||||||||||||||||
| Net income (loss) | ||||||||||||||||
| Dividend paid | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-31 |
ONE EIGHTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2022 | 2021 | |||||||
| FOR THE FISCAL YEARS ENDED SEPTEMBER 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Change in deferred tax | ( | ) | ||||||
| Operating lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deposit and prepayments | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Customer deposits | ||||||||
| Taxes payable | ( | ) | ||||||
| Accrued liabilities and other payables | ||||||||
| Payment of lease liability | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Disposal of fixed assets | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Fixed deposit in bank | ( | ) | ||||||
| Proceeds from related parties | ||||||||
| Repayment to related parties | ( | ) | ||||||
| Dividend paid | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | ( | ) | ( | ) | ||||
| NET INCREASE IN CASH & EQUIVALENTS | ( | ) | ||||||
| CASH & EQUIVALENTS, BEGINNING OF YEAR | ||||||||
| CASH & EQUIVALENTS, END OF YEAR | $ | $ | ||||||
| 0 | ||||||||
| Supplemental Cash Flow Data: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-32 |
ONE EIGHTY HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Organization
On October 17, 2022, One Eighty Holdings Ltd. (“One Eighty Ltd”) was incorporated as an exempted company under the laws of the Cayman Islands by its then sole shareholder. One Eighty Ltd is not engaged in any active business operations and is merely acting as a holding company.
One Eighty Holdings Sdn. Bhd. (“One Eighty Holdings”) was incorporated as a private limited company under the laws of Malaysia on October 14, 2022 by the same sole shareholder. One Eighty Holdings is currently not engaged in any active business operations and is merely acting as a holding company.
180 Degrees Brandcom Sdn. Bhd. (“180 Degrees”), owned by the same shareholder, was formed in Kuala Lumpur, Malaysia, on March 28, 2013 to provide digital marketing, advertising consulting, and design services to business clients.
Media Elements Sdn. Bhd. (“Media Elements”), owned by the same shareholder, was formed in Kuala Lumpur, Malaysia, on October 4, 2002 to provide online and offline advertisement, social media, and big data management services to business clients.
Reorganization
A reorganization of the Company’s legal structure (the “Reorganization”) was completed on May 10, 2023.
The
reorganization involved (i) the transfer of
The Reorganization has been accounted for as a recapitalization among entities under common control since the same controlling shareholder controlled all these entities before and after the Reorganization. The consolidation of One Eighty Ltd 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 inter-company transactions.
Business
One Eighty Ltd and its wholly-owned subsidiaries (the “Company”) provide tech-enabled digital marketing and branding services in Southeast Asia. The Company’s current principal operations and geographic markets are substantially located in Malaysia.
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 U.S. Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the financial statements of One Eighty Holdings and its wholly owned subsidiaries 180 Degrees and Media Elements. All inter-company balances and transactions are eliminated upon consolidation.
| F-33 |
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 assets, the impairment of long-lived assets, realization of deferred tax assets, management of right-of-use assets, and lease liabilities. 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. The Company 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.
The
COVID-19 pandemic has adversely affected the Company’s business operations. Specifically, prior to April 1, 2022, significant governmental
measures implemented by the Malaysian government, including various stages of lockdowns, closures, quarantines, and travel bans, led
to the store closure of some of the Company’s offline merchants. As a result, the Company incurred a net loss of $
Cash
Cash
includes 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 deposit with financial institutions in Malaysia is subject to certain protection under the requirement
of the deposit insurance system. The maximum insurance coverage limit is MYR
Accounts receivable, net
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 September 30, 2022 and 2021, there was no allowance for doubtful accounts recorded as the Company considers all of the outstanding accounts receivable fully collectible.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization 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 | ||
| Equipment and furniture | ||
| Property |
| F-34 |
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).
Impairment of long-lived assets
Long-lived assets with finite lives, primarily property and equipment, 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 no impairments of these assets as of September 30, 2022 and 2021.
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, short-term investments, accounts receivable, prepaid expenses and other current assets, advance from customers, taxes payable, due to a related party, and accrued expenses and other current liabilities approximated the fair value of the respective assets and liabilities as of September 30, 2022 and 2021 based upon the short-term nature of the assets and liabilities.
Foreign currency translation
The functional currency for One Eighty Holdings, 180 Degrees, and Media Elements is Malaysian Ringgit (“MYR”). The Company’s consolidated financial statements have been translated into and reported in US$. Assets and liabilities accounts are translated using the exchange rate at each reporting period end date. Equity accounts are translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
SCHEDULE OF CURRENCY EXCHANGE RATE
| September 30, 2022 | September 30, 2021 | |||||||
| Year-end spot rate | US$ | US$ | ||||||
| Average rate | 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).
| F-35 |
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 and brand-building related consulting services (“creative income”)
The Company’s advertising service revenue is derived principally from advertising and brand-building 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 agreements with customers are fixed-price agreements, and the service fee depends on 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 proposal 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 customers accept the final deliverables, which marks the completion of the 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 photograph, commercial video and audio recording, and production services (“production income”)
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 ads 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 engineer) 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 edit, and the delivery of final quality product to customers to satisfy their ultimate advertising needs. As a result of these combined performance obligations, the Company delivers the final photograph and commercial 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 agreement, there are no future obligations and no rights of refund. The Company allocates contract price to such single performance obligation 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.
| F-36 |
Revenue from marketing and promotional campaign services
The Company assists merchants to plan, arrange, and execute seasonal on-the-ground sales and promotional campaign, normally within shopping malls. The Company’s services include providing the sales campaign proposals, coordinating with shopping mall owners for location rental, assisting merchant clients for equipment rental, advising the clients for 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.
Revenue from social media management services
The Company provides social media account management services to achieve the target impression requested by clients, assisting in monitoring clients’ media account deductions and payments, assisting clients in targeting specific audiences at specific times, and notifying clients of media account impressions and balances. The Company charges a fixed service fee based on the service scope. The service term duration is usually a few months. Once customers accepted the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. These management services are identified as a single performance obligation. The Company allocates contract price to such single performance obligation over the period, and revenue is recognized over the service period on a monthly basis when the services are rendered to customers for that month.
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.
Revenue from marketing material printing services
The Company provides printing services to customers, including printing of marketing posters, flyers, brochures, marketing catalogs, and retail point-of-sale and promotional materials. The agreement with customers for such printing services specifies the related service fees and payment terms. The only performance obligation for such services is to deliver the printed products to customers. Once customers accepted the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. Revenue from printing service is recognized at the point when the printed products are delivered to the customers.
The Company outsources most of the printing job to external printing companies, but the Company still acts as the principal for such services 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 printing companies to complete the printing job, and bears the risk for services that are not fully paid for by customers.
Revenue from media agency services
The Company sells media companies’ advertising space to customers on behalf of the media companies. Media channels booking includes press media booking, TV commercial airtime booking, broadcasting or radio media booking, billboard media booking, and digital media booking. The Company signs an agency agreement with media companies’ owners for selling their advertising space to merchant customers with advertising needs. The Company’s performance obligations include referring the merchant customer to the corresponding media company and getting paid from the media company a referral fee or commission at a pre-determined rate negotiated with the media company, which is a rate based on the advertising amount purchased or spent by the merchant customers. Revenue is recognized at the point when the merchant customer posted their advertisement on the media channel.
| F-37 |
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.
Disaggregation of revenue
The Company disaggregates its revenue by service types into six revenue streams, 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 revenue streams for the fiscal years ended September 30, 2022 and 2021 is as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2022 | 2021 | |||||||
| Creative income | $ | $ | ||||||
| Production income | ||||||||
| Promotional campaign services | ||||||||
| Social media management income | ||||||||
| Printing income | ||||||||
| Media agency income | ||||||||
| Total operating revenue | $ | $ | ||||||
Operating leases
On October 1, 2020, the Company adopted Accounting Standards Updates (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC 842”), which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The Company elected to apply practical expedients permitted under the transition method that allow the Company to use the beginning of the period of adoption as the date of initial application, to not recognize lease assets and lease liabilities for leases with a term of 12 months or less, to not separate non-lease components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing or expired contract contains a lease.
The Company used a modified retrospective method and did not adjust the prior comparative periods. Under the new lease standard, the Company determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease terms. The Company considers only payments that are fixed and determinable at the time of lease commencement.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment annually. There was no impairment for right-of-use lease assets as of September 30, 2022 and 2021.
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.
| F-38 |
An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the fiscal years ended September 30, 2022 and 2021. The Company does not believe there was any uncertain tax provision as of September 30, 2022 and 2021.
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 fiscal years ended September 30, 2022 and 2021. The Company’s income tax returns of its Malaysian subsidiaries filed for the fiscal years ended on September 30, 2017 and thereafter are subject to examination by the relevant taxing authorities.
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
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 statements of cash flows will not necessarily agree with changes in the corresponding balances on the 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.
Recently adopted accounting pronouncements
In December 2020, the FASB issued ASU 2020-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2020-12”). ASU 2020-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2020-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The adoption of the new guidance did not have a significant impact on the Company’s consolidated financial statements.
| F-39 |
Recent accounting pronouncements not yet adopted
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. In November 2019, the FASB issued ASU 2019-10, which extends the effective date for adoption of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11 to clarify its new credit impairment guidance in ASU 326. Accordingly, for public entities that are not smaller reporting entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
September 30, 2022 | September
30, 2021 | |||||||
| 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 September 30, 2022 | Subsequent collection | % of subsequent collection | |||||||||
| From 1 to 3 months | $ | $ | % | |||||||||
| From 4 to 6months | % | |||||||||||
| Over 6 months | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for doubtful accounts | - | |||||||||||
| Accounts receivable, net | $ | $ | % | |||||||||
| Accounts receivable by aging bucket | Balance as of September 30, 2021 | Subsequent collection | % of subsequent collection | |||||||||
| From 1 to 3 months | $ | $ | % | |||||||||
| From 4 to 6months | % | |||||||||||
| Over 6 months | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for doubtful accounts | - | |||||||||||
| Accounts receivable, net | $ | $ | % | |||||||||
| F-40 |
NOTE 4 — DEPOSIT AND PREPAYMENTS
Deposit and prepayments consisted of the following:
SCHEDULE OF DEPOSITS AND PREPAYMENTS
September 30, 2022 | September 30, 2021 | |||||||
| Deposit and prepayments | ||||||||
| Advance to suppliers | $ | $ | ||||||
| Deposit | ||||||||
| Prepaid expense | ||||||||
| Prepaid tax | ||||||||
| Other | ||||||||
| Less: allowance for doubtful account | ||||||||
| Total prepayments | $ | $ | ||||||
As of September 30, 2022 and 2021, there was 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 AND EQUIPMENT, NET
| September
30, 2022 | September
30, 2021 | |||||||
| Equipment and furniture | $ | $ | ||||||
| Property and land | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expenses were $
NOTE 6 — ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables, consisted of the following:
SCHEDULE OF ACCRUED LIABILITIES AND OTHER PAYABLES
| September
30, 2022 | September
30, 2021 | |||||||
| Accrued payroll | $ | $ | ||||||
| Other accrual | ||||||||
| Service payable | ||||||||
| Other payable | ||||||||
| 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 their media channels. The Company submits the advertisement fee to media companies within a short period of time when the Company receives service statement and invoice from the media companies.
| F-41 |
NOTE 7 — LOAN PAYABLES
The Company had the following loans at September 30, 2022 and 2021:
SCHEDULE OF LOANS
| Bank | Loan Agreement Date | Loan Amount | Interest Rate | Loan Term | Purpose of loan | Balance
at September 30, 2022 | Balance
at September 30, 2021 | |||||||||||||||
| CIMB BANK BERHAD | 5/23/2014 | $ | BLR*- | % | Real property loan | $ | $ | |||||||||||||||
| 5/23/2014 | BLR*- | % | Real property loan | |||||||||||||||||||
| Hong Leong Islamic Bank | 2/26/2019 | IFR**- | % | Real property loan | ||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| Hong Leong Islamic Bank | 4/23/2020 | % | Working capital | |||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||
| * | Base lending rate |
| ** | Islamic financing rate |
As of September 30, 2022, 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 September 30, | Loan payment | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total future minimum loan payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of loan liabilities | $ | |||
The
Company recorded interest expenses of $
| F-42 |
NOTE 8 — TAXES
a. Corporate Income Taxes (“CIT”)
Cayman Islands
Under the current tax laws of the Cayman Islands, 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.
Malaysia
180
Degrees and Media Elements 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
| 2022 | 2021 | |||||||
For the fiscal years ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Current income tax provision | ||||||||
| Cayman Island | $ | $ | ||||||
| Malaysia | ||||||||
| Subtotal | ||||||||
| Current income tax provision | ||||||||
| Deferred income tax provision | ||||||||
| Cayman Island | $ | $ | ||||||
| Malaysia | ( | ) | ||||||
| Subtotal | ( | ) | ||||||
| Deferred income tax provision | ( | ) | ||||||
| Total income tax provision | $ | $ | ( | ) | ||||
Reconciliation of the differences between the income tax provision computed based on Malaysia unified statutory income tax rate and the Company’s actual income tax provision for the fiscal years ended September 30, 2022 and 2021, respectively, were as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2022 | 2021 | |||||||
For the fiscal years ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Income tax provision computed based on Malaysia unified income tax statutory rate | $ | $ | ( | ) | ||||
| Effect of tax exemption due to reduced income tax rate for small and medium sized companies | ( | ) | ( | ) | ||||
| Effect of deferred tax | ||||||||
| Expenses not deductible for tax purposes | ||||||||
| Actual income tax expense (benefit) | $ | $ | ( | ) | ||||
| F-43 |
Deferred tax assets
The Company’s deferred tax assets were comprised of the following:
SCHEDULE OF DEFERRED TAX ASSETS
| 2022 | 2021 | |||||||
| As
of September 30, | ||||||||
| 2022 | 2021 | |||||||
| Deferred tax assets derived from net operating loss carry forwards | $ | $ | ||||||
| Unabsorbed capital allowances | ||||||||
| Depreciation of property & equipment | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
Temporary difference not subject to tax | ||||||||
| Deferred tax assets | $ | $ | ||||||
b. Taxes payable
Taxes payable consisted of the following:
SCHEDULE OF TAXES PAYABLE
September 30, 2022 |
September 30, 2021 |
|||||||
| Income tax payable | $ | $ | ||||||
| Service tax payable | ||||||||
| Total | $ | $ | ||||||
NOTE 9 — RELATED PARTY TRANSACTIONS
a. Name of related parties
SCHEDULE OF RELATED PARTIES
| Name of Related Party | Relationship to the Company | |
| Chan Chee Hong | ||
| Chan Foong Ming | ||
| 180 Degrees Strategic Communications Sdn Bhd | ||
| 181 Degree Holding Sdn Bhd | ||
| Infinity Elements Sdn Bhd | ||
| Expertliner Sdn Bhd | ||
| Milestone International Sdn Bhd |
b. Due from related parties
Due from related parties consisted of the following:
SCHEDULE OF DUE FROM A RELATED PARTY
| Name | September
30, 2022 | September
30, 2021 | ||||||
| Chan Chee Hong | $ | $ | ||||||
| Chan Foong Ming | ||||||||
| Expertliner Sdn Bhd | ||||||||
| Infinity Elements Sdn Bhd | ||||||||
| Milestone International Sdn Bhd | ||||||||
| Total | ||||||||
| Due from related parties | ||||||||
c. Due to related parties
Due to related parties consisted of the following:
SCHEDULE OF DUE TO RELATED PARTIES
| Name | September
30, 2022 | September
30, 2021 | ||||||
| 180 Degrees Strategic Communications Sdn Bhd | $ | $ | ||||||
| 181 Degree Holding Sdn Bhd | ||||||||
| Chan Chee Hong | ||||||||
| Total | ||||||||
| Due to related parties | ||||||||
| F-44 |
NOTE 10 — CONCENTRATIONS AND CREDIT RISK
As of September 30, 2022 and 2021, 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 fiscal year ended September 30, 2022, one major customer accounted for
As
of September 30, 2022, four major customers accounted
For
the fiscal year ended September 30, 2022, no major vendors accounted for more than
As
of September 30, 2022, three major vendors accounted
NOTE 11 — 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 fiscal years ended September 30, 2022 and 2021, 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 12 — LEASES
Effective
June 20, 2020, the Company entered into a 60-month lease for a photocopier. The monthly rent is approximately $
Supplemental balance sheet information related to the Company’s operating leases was as follows:
SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS
| September
30, 2022 | September
30, 2021 | |||||||
| 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 | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of September 30, 2022 and 2021:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES FOR OPERATING LEASES
| September
30, 2022 | September
30, 2021 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * | The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, the Company estimates its incremental borrowing rate based on the benchmark lending rate for three-year loans as published by Malaysia’s central bank in order to discount lease payments to present value. |
| F-45 |
During
the fiscal years ended September 30, 2022 and 2021, the Company incurred total ASC 842 operating lease expenses of $
As of September 30, 2022, the maturities of operating lease liabilities were as follows:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
| 12 months ending September 30, | Lease payment | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ||||
| Total | $ | |||
NOTE 13 — 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 June 26, 2023, Starbox Group Holdings Ltd., a Cayman Islands company (“Starbox”), as the issuer, and its wholly owned
subsidiary, Starbox Global Ltd., a British Virgin Islands company (“Starbox Global”), as the buyer, entered into a share
purchase agreement (the “Share Purchase Agreement”), with the then shareholders of One Eighty Ltd (the “One Eighty
Shareholders”), as the sellers, with respect to One Eighty Ltd, as the target company.
Pursuant
to the Share Purchase Agreement, Starbox Global acquire ordinary shares, par value US$ per share, of One Eighty Ltd
(the “Sale Shares”), representing
The following condensed unaudited pro forma consolidated results of operations for the Company for the fiscal years ended September 30, 2022 and 2021 present the results of operations of the Company and Starbox as if the acquisitions occurred on October 1, 2021 and 2020, respectively.
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 CONDENSED UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
| For
the Year Ended September 30, 2022 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Income from operations | ||||
| Other income | ||||
| Income tax expense | ||||
| Net income | ||||
| Less: net income attributable to non-controlling interests | 851,422 | |||
| Net income attributable to Starbox Group Holdings Ltd. | $ | 4,488,539 | ||
| For
the Year Ended September 30, 2021 | ||||
| (Unaudited) | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Income from operations | ||||
| Other income | ||||
| Income tax expense | ||||
| Net income | ||||
| Less: net loss attributable to non-controlling interests | (165,047 | ) | ||
| Net income attributable to Starbox Group Holdings Ltd. | $ | 1,275,867 | ||
| F-46 |
ONE EIGHTY HOLDINGS LTD.
CONDESED CONSOLIDATED BALANCE SHEETS
| AS OF MARCH 31, 2023 | AS OF SEPTEMBER 30, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deposit and prepayments | ||||||||
| Short-term investment | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Right-of-use asset, net | ||||||||
| Property, plant, and equipment, net | ||||||||
| Long-term investment | ||||||||
| Deferred tax assets, net | ||||||||
| Total noncurrent assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued liabilities and other payables | ||||||||
| Taxes payable | ||||||||
| Due to related parties | ||||||||
| Lease liability | ||||||||
| Total current liabilities | ||||||||
| NONCURRENT LIABILITIES | ||||||||
| Lease liability | ||||||||
| Loan payables | ||||||||
| Total noncurrent liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Paid in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Less: dividend | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-47 |
ONE EIGHTY HOLDINGS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| 2023 | 2022 | |||||||
FOR THE SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income | ||||||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income | ||||||||
| Income before income tax | ||||||||
| Income tax expense | ||||||||
| Net income | ||||||||
| Other comprehensive income | ||||||||
| Foreign currency translation income (loss) | ( | ) | ||||||
| Comprehensive income | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-48 |
ONE EIGHTY HOLDINGS LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED MARCH 31, 2023 and 2022
| Paid in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
| Balance at October 1, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||
| Net income | ||||||||||||||||
| Foreign currency translation gain | ||||||||||||||||
| Balance at March 31, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||
| Paid in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
| Balance at October 1, 2021 | $ | $ | ( | ) | $ | $ | ||||||||||
| Net income | ||||||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||
| Balance at March 31, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-49 |
ONE EIGHTY HOLDINGS LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2023 | 2022 | |||||||
| FOR THE SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Change in deferred tax | ( | ) | ||||||
| Operating lease expense | ||||||||
| Changes in operating and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deposit and prepayments | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Taxes payable | ( | ) | ||||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Proceeds from related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | ( | ) | ||||||
| NET INCREASE IN CASH EQUIVALENTS | ||||||||
| CASH AND EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| - | ||||||||
| Supplemental Cash Flow Data: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-50 |
ONE EIGHTY HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023 (UNAUDITED) AND SEPTEMBER 30, 2022
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Organization
On October 17, 2022, One Eighty Holdings Ltd. (“One Eighty Ltd”) was incorporated as an exempted company under the laws of the Cayman Islands by its then sole shareholder. One Eighty Ltd is not engaged in any active business operations and is merely acting as a holding company.
One Eighty Holdings Sdn. Bhd. (“One Eighty Holdings”) was incorporated as a private limited company under the laws of Malaysia on October 14, 2022 by the same sole shareholder. One Eighty Holdings is currently not engaged in any active business operations and is merely acting as a holding company.
180 Degrees Brandcom Sdn. Bhd. (“180 Degrees”), owned by the same shareholder, was formed in Kuala Lumpur, Malaysia, on March 28, 2013 to provide digital marketing, advertising consulting, and design services to business clients.
Media Elements Sdn. Bhd. (“Media Elements”), owned by the same shareholder, was formed in Kuala Lumpur, Malaysia, on October 4, 2002 to provide online and offline advertisement, social media, and big data management services to business clients.
Reorganization
A reorganization of the Company’s legal structure (the “Reorganization”) was completed on May 10, 2023.
The
reorganization involved (i) the transfer of
The Reorganization has been accounted for as a recapitalization among entities under common control since the same controlling shareholder controlled all these entities before and after the Reorganization. The consolidation of One Eighty Ltd 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 inter-company transactions.
Business
One Eighty Ltd and its wholly-owned subsidiaries (the “Company”) provide tech-enabled digital marketing and branding services in Southeast Asia. The Company’s current principal operations and geographic markets are substantially located in Malaysia.
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 U.S. Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the financial statements of One Eighty Holdings and its wholly owned subsidiaries 180 Degrees and Media Elements. All inter-company balances and transactions are eliminated upon consolidation.
| F-51 |
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 assets, the impairment of long-lived assets, realization of deferred tax assets, management of right-of-use assets, and lease liabilities. 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. The Company 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.
The
COVID-19 pandemic has adversely affected the Company’s business operations. Specifically, prior to April 1, 2022, significant governmental
measures implemented by the Malaysian government, including various stages of lockdowns, closures, quarantines, and travel bans, led
to the store closure of some of the Company’s offline merchants. As a result, the Company generated net income of $
Cash and Cash Equivalents
Cash
includes 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 deposit with financial institutions in Malaysia is subject to certain protection under the requirement
of the deposit insurance system. The maximum insurance coverage limit is MYR
Accounts receivable, net
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, 2023 and September 30, 2022, there was no allowance for doubtful accounts recorded as the Company considers all of the outstanding accounts receivable fully collectible.
| F-52 |
Investments
Investments with original maturities of 91 days to one year are considered short-term investments; investments with original maturities of more than one year are classified as long-term investments. The investments are carried at cost with interest earned, which approximates fair value.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization 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 | ||
| Equipment and furniture | ||
| Property |
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).
Impairment of long-lived assets
Long-lived assets with finite lives, primarily property and equipment, 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 no impairments of these assets as of March 31, 2023 and September 30, 2022.
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, short-term investments, accounts receivable, prepaid expenses and other current assets, advance from customers, taxes payable, due to a related party, and accrued expenses and other current liabilities approximated the fair value of the respective assets and liabilities as of March 31, 2023 and September 30, 2022 based upon the short-term nature of the assets and liabilities.
Foreign currency translation
The functional currency for One Eighty Holdings, 180 Degrees, and Media Elements is Malaysian Ringgit (“MYR”). The Company’s consolidated financial statements have been translated into and reported in US$. Assets and liabilities accounts are translated using the exchange rate at each reporting period end date. Equity accounts are translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
| F-53 |
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:
SCHEDULE OF CURRENCY EXCHANGE RATE
March 31, 2023 | September 30, 2022 | |||||||
| Spot rate | US$ | US$ | ||||||
| Average rate | 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 and brand-building related consulting services (“creative income”)
The Company’s advertising service revenue is derived principally from advertising and brand-building 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 agreements with customers are fixed-price agreements, and the service fee depends on 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 proposal 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 customers accept the final deliverables, which marks the completion of the 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.
| F-54 |
Revenue from photograph, commercial video and audio recording, and production services (“production income”)
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 ads 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 engineer) 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 edit, and the delivery of final quality product to customers to satisfy their ultimate advertising needs. As a result of these combined performance obligations, the Company delivers the final photograph and commercial 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 agreement, there are no future obligations and no rights of refund. The Company allocates contract price to such single performance obligation 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
The Company assists merchants to plan, arrange, and execute seasonal on-the-ground sales and promotional campaign, normally within shopping malls. The Company’s services include providing the sales campaign proposals, coordinating with shopping mall owners for location rental, assisting merchant clients for equipment rental, advising the clients for 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.
Revenue from social media management services
The Company provides social media account management services to achieve the target impression requested by clients, assisting in monitoring clients’ media account deductions and payments, assisting clients in targeting specific audiences at specific times, and notifying clients of media account impressions and balances. The Company charges a fixed service fee based on the service scope. The service term duration is usually a few months. Once customers accepted the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. These management services are identified as a single performance obligation. The Company allocates contract price to such single performance obligation over the period, and revenue is recognized over the service period on a monthly basis when the services are rendered to customers for that month.
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.
| F-55 |
Revenue from marketing material printing services
The Company provides printing services to customers, including printing of marketing posters, flyers, brochures, marketing catalogs, and retail point-of-sale and promotional materials. The agreement with customers for such printing services specifies the related service fees and payment terms. The only performance obligation for such services is to deliver the printed products to customers. Once customers accepted the final deliverables, which marks the completion of the agreements, there are no future obligations and no rights of refund. Revenue from printing service is recognized at the point when the printed products are delivered to the customers.
The Company outsources most of the printing job to external printing companies, but the Company still acts as the principal for such services 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 printing companies to complete the printing job, and bears the risk for services that are not fully paid for by customers.
Revenue from media agency services
The Company sells media companies’ advertising space to customers on behalf of the media companies. Media channels booking includes press media booking, TV commercial airtime booking, broadcasting or radio media booking, billboard media booking, and digital media booking. The Company signs an agency agreement with media companies’ owners for selling their advertising space to merchant customers with advertising needs. The Company’s performance obligations include referring the merchant customer to the corresponding media company and getting paid from the media company a referral fee or commission at a pre-determined rate negotiated with the media company, which is a rate based on the advertising amount purchased or spent by the merchant customers. Revenue is recognized at the point when the merchant customer posted their advertisement on the media channel.
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.
Disaggregation of revenue
The Company disaggregates its revenue by service types into six revenue streams, 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 revenue streams for the six months ended March 31, 2023 and 2022 is as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2023 | 2022 | |||||||
| Creative income | $ | $ | ||||||
| Production income | ||||||||
| Promotional campaign services | ||||||||
| Social media management income | ||||||||
| Printing income | ||||||||
| Media agency income | ||||||||
| Total operating revenue | $ | $ | ||||||
Operating leases
On October 1, 2020, the Company adopted Accounting Standards Updates (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC 842”), which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The Company elected to apply practical expedients permitted under the transition method that allow the Company to use the beginning of the period of adoption as the date of initial application, to not recognize lease assets and lease liabilities for leases with a term of 12 months or less, to not separate non-lease components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing or expired contract contains a lease.
| F-56 |
The Company used a modified retrospective method and did not adjust the prior comparative periods. Under the new lease standard, the Company determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease terms. The Company considers only payments that are fixed and determinable at the time of lease commencement.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment annually. There was no impairment for right-of-use lease assets as of March 31, 2023 and September 30, 2022.
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, 2023 and 2022. The Company does not believe there was any uncertain tax provision as of March 31, 2023 and September 30, 2022.
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, 2023 and 2022. The Company’s income tax returns of its Malaysian subsidiaries filed for the fiscal years ended on September 30, 2017 and thereafter are subject to examination by the relevant taxing authorities.
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
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 statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
| F-57 |
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.
Recently adopted accounting pronouncements
In December 2020, the FASB issued ASU 2020-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2020-12”). ASU 2020-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2020-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The adoption of the new guidance did not have a significant impact on the Company’s consolidated financial statements.
Recent accounting pronouncements not yet adopted
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. In November 2019, the FASB issued ASU 2019-10, which extends the effective date for adoption of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11 to clarify its new credit impairment guidance in ASU 326. Accordingly, for public entities that are not smaller reporting entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company plans to adopt this guidance effective October 1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
March 31, 2023 | September 30, 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful account | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| F-58 |
Approximately
SCHEDULE OF ACCOUNTS RECEIVABLE AND SUBSEQUENT COLLECTION
| Accounts receivable by aging bucket | Balance as of March 31, 2023 | Subsequent collection | % of subsequent collection | |||||||||
| From 1 to 3 months | $ | $ | % | |||||||||
| From 4 to 6 months | % | |||||||||||
| Over 6 months | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for doubtful accounts | - | |||||||||||
| Accounts receivable, net | $ | $ | % | |||||||||
| Accounts receivable by aging bucket | Balance as of September 30, 2022 | Subsequent collection | % of subsequent collection | |||||||||
| From 1 to 3 months | $ | $ | % | |||||||||
| From 4 to 6months | % | |||||||||||
| Over 6 months | % | |||||||||||
| Total gross accounts receivable | % | |||||||||||
| Allowance for doubtful accounts | - | |||||||||||
| Accounts receivable, net | $ | $ | % | |||||||||
NOTE 4 — DEPOSIT AND PREPAYMENTS
Deposit and prepayments consisted of the following:
SCHEDULE OF DEPOSITS AND PREPAYMENTS
March 31, 2023 | September 30, 2022 | |||||||
| Deposit and prepayments | ||||||||
| Advance to suppliers | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Prepaid income tax | ||||||||
| Other | ||||||||
| Less: allowance for doubtful account | ||||||||
| Total prepayments | $ | $ | ||||||
As of March 31, 2023 and September 30, 2022, there was allowance for doubtful accounts recorded as the Company considers all of the prepayments fully realizable.
| F-59 |
NOTE 5 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
March 31, 2023 | September 30, 2022 | |||||||
| Equipment and furniture | $ | $ | ||||||
| Property and land | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expenses were $
NOTE 6 — ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables, consisted of the following:
SCHEDULE OF ACCRUED LIABILITIES AND OTHER PAYABLES
March 31, 2023 | September 30, 2022 | |||||||
| Accrued payroll | $ | $ | ||||||
| Other accrual | ||||||||
| Service payable | ||||||||
| Other payable | ||||||||
| 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 service statement and invoice from the media companies.
NOTE 7 — LOAN PAYABLES
The Company had the following loans at March 31, 2023 and September 30, 2022:
SCHEDULE OF LOANS
| Bank | Loan Agreement Date | Loan Amount | Interest Rate | Loan Term | Purpose of loan | Balance at March 31, 2023 | Balance at September 30, 2022 | |||||||||||||||
| CIMB BANK BERHAD | 5/23/2014 | $ | BLR*- | % | Real property loan | $ | $ | |||||||||||||||
| 5/23/2014 | BLR*- | % | Real property loan | |||||||||||||||||||
| Hong Leong Islamic Bank | 2/26/2019 | IFR**- | % | Real property loan | ||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| 2/26/2019 | IFR**- | % | Real property loan | |||||||||||||||||||
| Hong Leong Islamic Bank | 4/23/2020 | % | Working capital | |||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||
| * | Base lending rate |
| ** | Islamic financing rate |
| F-60 |
As of March 31, 2023, 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 | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future minimum loan payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of loan liabilities | $ | |||
The Company recorded interest expenses
of $
NOTE 8 — TAXES
a. Corporate Income Taxes (“CIT”)
Cayman Islands
Under the current tax laws of the Cayman Islands, 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.
Malaysia
180
Degrees and Media Elements 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
For the six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Current income tax provision | ||||||||
| Cayman Island | $ | $ | ||||||
| Malaysia | ||||||||
| Subtotal | ||||||||
| Current income tax provision | ||||||||
| Deferred income tax provision | ||||||||
| Cayman Island | $ | $ | ||||||
| Malaysia | ( | ) | ||||||
| Subtotal | ( | ) | ||||||
| Deferred income tax provision | ( | ) | ||||||
| Total income tax provision | $ | $ | ||||||
| F-61 |
Reconciliation of the differences between the income tax provision computed based on Malaysia unified statutory income tax rate and the Company’s actual income tax provision for the six months ended March 31, 2023 and 2022, respectively, were as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
For the six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Income tax provision computed based on Malaysia unified income tax statutory rate | $ | $ | ||||||
| Effect of tax exemption due to reduced income tax rate for small and medium sized companies | ( | ) | ( | ) | ||||
| Effect of deferred tax | ( | ) | ||||||
| Expenses not deductible for tax purposes | ||||||||
| Actual income tax expense (benefit) | $ | $ | ||||||
Deferred tax assets
The Company’s deferred tax assets were comprised of the following:
SCHEDULE OF DEFERRED TAX ASSETS
As of March 31, 2023 | As of September 30, 2022 | |||||||
| Deferred tax assets derived from net operating loss carry forwards | $ | $ | ||||||
| Temporary difference not subject to tax | ( | ) | ||||||
| Depreciation of property & equipment | ( | ) | ||||||
| Deferred tax assets | $ | $ | ||||||
b. Taxes payable
Taxes payable consisted of the following:
SCHEDULE OF TAXES PAYABLE
March 31, 2023 | September 30, 2022 | |||||||
| Income tax payable | $ | $ | ||||||
| Service tax payable | ||||||||
| Total | $ | $ | ||||||
NOTE 9 — RELATED PARTY TRANSACTIONS
a. Name of related parties
SCHEDULE OF RELATED PARTIES
| Name of Related Party | Relationship to the Company | |
| Chan Chee Hong | ||
| Chan Foong Ming | ||
| 180 Degrees Strategic Communications Sdn Bhd | ||
| 181 Degree Holding Sdn Bhd | ||
| Infinity Elements Sdn Bhd | ||
| Expertliner Sdn Bhd | ||
| Milestone International Sdn Bhd |
| F-62 |
b. Due from related parties
Due from related parties consisted of the following:
SCHEDULE OF DUE FROM A RELATED PARTY
| Name | March 31, 2023 | September 30, 2022 | ||||||
| Chan Foong Ming | $ | $ | ||||||
| Expertliner Sdn Bhd | ||||||||
| Infinity Elements Sdn Bhd | ||||||||
| Milestone International Sdn Bhd | ||||||||
| Total | $ | $ | ||||||
c. Due to related parties
Due to related parties consisted of the following:
SCHEDULE OF DUE TO RELATED PARTIES
| Name | March 31, 2023 | September 30, 2022 | ||||||
| 180 Degrees Strategic Communications Sdn Bhd | $ | $ | ||||||
| 181 Degree Holding Sdn Bhd | ||||||||
| Chan Chee Hong | ||||||||
| Total | $ | $ | ||||||
NOTE 10 — CONCENTRATIONS AND CREDIT RISK
As of March 31, 2023 and September 30, 2022, 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, 2023, one major customer accounted for
As of March 31, 2023, three major
customers accounted for
For
the six months ended March 31, 2023, no major vendors accounted for more than
As
of March 31, 2023, no major vendors accounted for more than
NOTE 11 — 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, 2023 and 2022, 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.
| F-63 |
NOTE 12 — LEASES
Effective
June 20, 2020, the Company entered into a 60-month lease for a photocopier. The monthly rent is approximately $
Supplemental balance sheet information related to the Company’s operating leases was as follows:
SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS
| March 31, 2023 | September 30, 2022 | |||||||
| 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 | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of March 31, 2023 and September 30, 2022:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES FOR OPERATING LEASES
March 31, 2023 | September 30, 2022 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * | The Company’s lease agreements do not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, the Company estimates its incremental borrowing rate based on the benchmark lending rate for three-year loans as published by Malaysia’s central bank in order to discount lease payments to present value. |
During
the six months ended March 31, 2023 and 2022, the Company incurred total ASC 842 operating lease expenses of $
As of March 31, 2023, the maturities of operating lease liabilities were as follows:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
| 12 months ending March 31, | Lease payment | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ||||
| Total | $ | |||
NOTE 13 — 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 June 26, 2023, Starbox Group Holdings Ltd., a Cayman Islands company (“Starbox”), as the issuer, and its wholly owned subsidiary, Starbox Global Ltd., a British Virgin Islands company (“Starbox Global”), as the buyer, entered into a share purchase agreement (the “Share Purchase Agreement”), with the then shareholders of One Eighty Ltd (the “One Eighty Shareholders”), as the sellers, with respect to One Eighty Ltd, as the target company.
Pursuant
to the Share Purchase Agreement, Starbox Global acquire ordinary shares, par value US$ per share, of One Eighty Ltd
(the “Sale Shares”), representing
| F-64 |
STARBOX GROUP HOLDINGS LTD.
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
| F-65 |
STARBOX GROUP HOLDINGS LTD.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2023
| STARBOX GROUP HOLDINGS | ONE EIGHTY | PRO FORMA | PRO FORMA | ||||||||||||||
| LTD. | LTD | ADJUSTMENTS | CONSOLIDATED | ||||||||||||||
| ASSETS | |||||||||||||||||
| Current Assets | |||||||||||||||||
| Cash and cash equivalents | $ | 864,392 | $ | 1,434,174 | $ | - | $ | 2,298,566 | |||||||||
| Accounts receivable, net | 4,986,688 | 2,763,511 | - | 7,750,199 | |||||||||||||
| Prepaid income tax | 552,094 | - | - | 552,094 | |||||||||||||
| Deposit and prepayments | 14,448,012 | 775,381 | - | 15,223,393 | |||||||||||||
| Short-term investment | - | 132,855 | - | 132,855 | |||||||||||||
| Due from related parties | 1,682 | 94,493 | - | 96,175 | |||||||||||||
| Total Current Assets | 20,852,868 | 5,200,414 | - | 26,053,282 | |||||||||||||
| Non-Current Assets | |||||||||||||||||
| Property and equipment, net | 21,941 | 2,693,177 | 2,715,118 | ||||||||||||||
| Intangible assets, net | 18,824,416 | - | 100,188,000 | 1 | 119,012,416 | ||||||||||||
| Long-term investment | - | 226,600 | 53,055,300 | 3 | 53,281,900 | ||||||||||||
| - | - | (53,055,300 | ) | 5 | (53,055,300 | ) | |||||||||||
| Deferred tax assets | 44,387 | - | 44,387 | ||||||||||||||
| Right-of-use assets, net | 36,511 | 2,530 | - | 39,041 | |||||||||||||
| Goodwill | - | - | 23,598,166 | 2 | 23,598,166 | ||||||||||||
| Total Non-Current Assets | 18,882,868 | 2,966,694 | 123,786,166 | 145,635,728 | |||||||||||||
| Total Assets | $ | 39,735,736 | $ | 8,167,108 | $ | 123,786,166 | $ | 171,689,010 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
| Current Liabilities | |||||||||||||||||
| Accounts payable | $ | - | $ | 146,222 | $ | - | $ | 146,222 | |||||||||
| Taxes payable | 395,772 | 253,817 | - | 649,589 | |||||||||||||
| Customer deposits | 368,066 | 368,422 | - | 736,488 | |||||||||||||
| Accrued liabilities and other current liabilities | 348,627 | 483,564 | - | 832,191 | |||||||||||||
| Operating lease liabilities | 17,052 | 1,062 | - | 18,114 | |||||||||||||
| Due to related parties | 1,409 | 334,031 | - | 335,440 | |||||||||||||
| Total Current Liabilities | 1,130,926 | 1,587,118 | - | 2,718,044 | |||||||||||||
| Non-Current Liabilities | |||||||||||||||||
| Deferred tax liabilities | 318,603 | - | 24,045,120 | 1 | 24,363,723 | ||||||||||||
| Operating lease liabilities | 19,459 | 1,467 | - | 20,926 | |||||||||||||
| Loan payables | - | 2,289,569 | - | 2,289,569 | |||||||||||||
| Total Non-Current Liabilities | 338,062 | 2,291,036 | 24,045,120 | 26,674,218 | |||||||||||||
| Total Liabilities | 1,468,988 | 3,878,154 | 24,045,120 | 29,392,262 | |||||||||||||
| Shareholders’ Equity | |||||||||||||||||
| Ordinary shares | 61,172 | - | 19,699 | 3 | 80,871 | ||||||||||||
| Additional paid in capital | 30,674,988 | 336,055 | 50,683,568 | 1, 2, 3, 4,5 | 81,694,611 | ||||||||||||
| Accumulated other comprehensive income (loss) | 1,481,084 | (216,509 | ) | 106,089 | 4 | 1,370,664 | |||||||||||
| Retained earnings | 6,049,504 | 4,169,408 | (2,043,010 | ) | 4 | 8,175,902 | |||||||||||
| Total Company’s Shareholders’ Equity | 38,266,748 | 4,288,954 | 48,766,346 | 91,322,048 | |||||||||||||
| Non-controlling interest | - | - | 50,974,700 | 4 | 50,974,700 | ||||||||||||
| Total Liabilities and Equity | $ | 39,735,736 | $ | 8,167,108 | $ | 123,786,166 | $ | 171,689,010 | |||||||||
See accompanying notes to pro forma consolidated financial statements.
| F-66 |
STARBOX GROUP HOLDINGS LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2022
| STARBOX
GROUP. HOLDINGS | ONE EIGHTY | PRO FORMA | PRO FORMA | ||||||||||||||
| LTD | LTD | ADJUSTMENTS | CONSOLIDATED | ||||||||||||||
| Operating revenue | |||||||||||||||||
| Revenue | $ | 7,194,187 | $ | 6,173,897 | $ | — | $ | 13,368,084 | |||||||||
| Total operating revenue | 7,194,187 | 6,173,897 | 13,368,084 | ||||||||||||||
| Operating costs and expenses: | |||||||||||||||||
| Selling, general, and administrative expenses | 2,243,750 | 3,978,065 | 6,221,815 | ||||||||||||||
| Total operating costs and expenses | 2,243,750 | 3,978,065 | 6,221,815 | ||||||||||||||
| Income from operations | 4,950,437 | 2,195,832 | 7,146,269 | ||||||||||||||
| Non-operating income (expenses) | |||||||||||||||||
| Interest income | - | 50,593 | 50,593 | ||||||||||||||
| Other income, net | 59,377 | 49,830 | 109,207 | ||||||||||||||
| Total non-operating income, net | 59,377 | 100,423 | 159,800 | ||||||||||||||
| Income before income tax | 5,009,814 | 2,296,255 | 7,306,069 | ||||||||||||||
| Income tax expenses | 1,407,449 | 558,659 | 1,966,108 | ||||||||||||||
| Net Income | 3,602,365 | 1,737,596 | 5,339,961 | ||||||||||||||
| Less: net income attributable to non-controlling interest | (851,422 | ) | 4 | (851,422 | ) | ||||||||||||
| Net income attributable to Starbox Group Holdings Ltd. | 3,602,365 | 1,737,596 | (851,422 | ) | 4,488,539 | ||||||||||||
| Other comprehensive income | |||||||||||||||||
| Foreign currency translation loss | (585,619 | ) | (302,842 | ) | (888,461 | ) | |||||||||||
| Total Comprehensive income | 3,016,746 | 1,434,754 | 4,451,500 | ||||||||||||||
| Less: comprehensive income attributable to non-controlling interest | (703,029 | ) | 4 | (703,029 | ) | ||||||||||||
| Comprehensive income attributable to Starbox Group Holdings Ltd. | $ | 3,016,746 | $ | 1,434,754 | $ | (703,029 | ) | $ | 3,748,471 | ||||||||
| Net income per share - basic | $ | 0.09 | $ | 0.10 | $ | - | $ | 0.08 | |||||||||
| Weighted average shares outstanding | 40,544,863 | 17,510,000 | - | 58,054,863 | |||||||||||||
See accompanying notes to pro forma consolidated financial statements.
| F-67 |
STARBOX GROUP HOLDINGS LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED MARCH 31, 2023
| STARBOX GROUP HOLDINGS | ONE EIGHTY | PRO FORMA | PRO FORMA | ||||||||||||||
| LTD. | LTD | ADJUSTMENTS | CONSOLIDATED | ||||||||||||||
| Operating revenue | |||||||||||||||||
| Revenue | $ | 3,976,190 | $ | 2,785,448 | $ | — | $ | 6,761,638 | |||||||||
| Total operating revenue | 3,976,190 | 2,785,448 | 6,761,638 | ||||||||||||||
| Operating costs and expenses: | |||||||||||||||||
| Selling, general, and administrative expenses | 1,996,892 | 1,581,580 | 3,578,472 | ||||||||||||||
| Total operating costs and expenses | 1,996,892 | 1,581,580 | 3,578,472 | ||||||||||||||
| Income from operations | 1,979,298 | 1,203,868 | 3,183,166 | ||||||||||||||
| Non-operating income (expenses) | |||||||||||||||||
| Interest income | 7,757 | 2,247 | 10,004 | ||||||||||||||
| Other income, net | 5,163 | 15,553 | 20,716 | ||||||||||||||
| Total non-operating income, net | 12,920 | 17,800 | 30,720 | ||||||||||||||
| Income before income tax | 1,992,218 | 1,221,668 | 3,213,886 | ||||||||||||||
| Income tax expenses | 627,721 | 314,103 | 941,824 | ||||||||||||||
| Net income | 1,364,497 | 907,565 | 2,272,062 | ||||||||||||||
| Less: net income attributable to non-controlling interest | (444,707 | ) | 4 | (444,707 | ) | ||||||||||||
| Net income attributable to Starbox Group Holdings Ltd. | 1,364,497 | 907,565 | (444,707 | ) | 1,827,355 | ||||||||||||
| Other comprehensive income | |||||||||||||||||
| Foreign currency translation gain | 2,088,136 | 175,420 | 2,263,556 | ||||||||||||||
| Total Comprehensive income | 3,452,633 | 1,082,985 | 4,535,618 | ||||||||||||||
| Less: comprehensive income attributable to non-controlling interest | (530,663 | ) | 4 | (530,663 | ) | ||||||||||||
| Comprehensive income attributable to Starbox Group Holdings Ltd. | $ | 3,452,633 | $ | 1,082,985 | $ | (530,663 | ) | $ | 4,004,955 | ||||||||
| Net income per share - basic | $ | 0.03 | $ | 0.05 | $ | - | $ | 0.03 | |||||||||
| Weighted average shares outstanding | 53,089,286 | 17,510,000 | - | 70,599,286 | |||||||||||||
See accompanying notes to pro forma consolidated financial statements.
| F-68 |
STARBOX GROUP HOLDINGS LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – INTRODUCTION
On June 26, 2023, Starbox Group Holdings Ltd. (“Starbox Group” or the “Company”), as the issuer, and its wholly owned subsidiary, Starbox Global Ltd. (“Starbox Global”), as the buyer, entered into a share purchase agreement (the “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 Share Purchase Agreement, Starbox Global agreed to acquire 229,500,000 ordinary shares, par value US$0.0001 per share, of One Eighty Ltd (the “Sale Shares”), representing 51% of the issued share capital in One Eighty Ltd, from the One Eighty Shareholders. In consideration of the sale of Sale Shares, Starbox Group agreed to issue to the One Eighty Shareholders, in proportion to the ordinary shares of One Eighty Ltd they sell, an aggregate of 17,510,000 ordinary shares, par value US$0.001125 per share, of Starbox Group with an aggregate value of $53 million (the “Consideration Shares”) in two tranches. 8,755,000 Consideration Shares were issued to the One Eighty Shareholders on July 10, 2023 and the remaining 8,755,000 Consideration Shares will be issued on September 1, 2023, subject to the satisfaction by the One Eighty Shareholders of their obligations under the Share Purchase Agreement.
NOTE 2 - BASIS OF PRESENTATION
The unaudited pro forma consolidated balance sheets as of March 31, 2023 combine the historical balance sheets of Starbox Group and One Eighty Ltd as if the transaction had occurred on October 1, 2022. The unaudited pro forma consolidated statements of comprehensive income for the six months ended March 31, 2023 and for the fiscal year ended September 30, 2022 combine the historical consolidated statements of comprehensive income of Starbox Group and One Eighty Ltd, and have been prepared as if the transaction had occurred on October 1, 2022 and 2021, respectively. The unaudited pro forma consolidated financial statements have also been adjusted to give effect to pro forma events that are directly attributable to the transactions, factually supportable, and expected to have a continuing impact on the combined results.
The preliminary unaudited pro forma information is presented solely for informational purposes and is not necessarily indicative of the consolidated results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the consolidated company.
NOTE 3 – PRO FORMA ADJUSTMENTS
The following adjustments were made in the preparation of the unaudited pro forma consolidated balance sheets and unaudited pro forma consolidated statements of comprehensive income:
{1} Represents fair value of intangible assets arising from the acquisition and related deferred tax effect.
{2} Represents the goodwill arising from the purchase price exceeded the fair value of net assets purchased.
{3} Represents the purchase price to be paid by Starbox Group for the 51% equity interest of One Eighty Ltd.
{4} Represents the equity of 49% non-controlling interest and net income attributable to the non-controlling interest.
{5} Elimination of the long-term investment of Starbox Group in One Eight Ltd at consolidating level.
| F-69 |
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are building a cash rebate, digital advertising, payment solution, and software development business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. Through our subsidiaries in Malaysia, we connect retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants, provide digital advertising services to retail merchant customers (“advertisers”), provide payment solution services to merchants, and develop customized software systems for 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, 2023, and September 30, 2022, the GETBATS website and mobile app had 2,518,023 and 2,513,658 Members, respectively, and 832 and 820 Merchants, respectively. During the six months ended March 31, 2023 and 2022, we facilitated 161,306 and 188,718 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.
With our investing a substantial amount of funds to enhance the system, an increased number of members and merchants are adopting our system, resulting in the formation of a vast database. On March 24, 2023, we entered into a software development agreement with Brandavision Sdn Bhd (“Brandavision”) to develop a comprehensive data management system for Brandavision, grant them the access to our vast database, help to train the staff of Brandavision with respect to its use, and provide continuous technical support. For the six months ended March 31, 2023, we reported $1,740,472 revenue from software licensing to Brandavision. We expected to generate more revenue from the software licensing segment in the near future.
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, 2023 and 2022 we served 22 and 42 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 35 and 14 merchants to VE Services during the six months ended March 31, 2023 and 2022, 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.
For the six months ended March 31, 2023, we had total revenue of $3,976,190 and net income of $1,364,497. Revenue derived from digital advertising services, software licensing, cash rebate services, and payment solution services accounted for approximately 55.85%, 43.77%, 0.27%, and 0.11% of our total revenue for the period, respectively.
For the six months ended March 31, 2022, we had total revenue of $2,922,413 and net income of $1,256,019. Revenue derived from digital advertising services, cash rebate services, and payment solution services accounted for approximately 99.63%, 0.19%, and 0.18% of our total revenue for the period, respectively.
Results of Operations
Comparison of Results of Operations for the Six Months Ended March 31, 2023 and 2022
The following table summarizes our results of operations for the six months ended March 31, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2023 | 2022 | Variances | ||||||||||||||||||||||
| Amount | % of total revenue | Amount | % of total revenue | Amount | % | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Revenue from digital advertising services | $ | 2,220,794 | 55.85 | % | $ | 2,911,482 | 99.63 | % | $ | (690,688 | ) | (23.7 | )% | |||||||||||
| Revenue from software licensing | 1,740,472 | 43.77 | % | - | 1,740,472 | 100.0 | % | |||||||||||||||||
| Revenue from cash rebate services | 10,621 | 0.27 | % | 5,552 | 0.19 | % | 5,069 | 91.3 | % | |||||||||||||||
| Revenue from payment solution services – related party | 4,303 | 0.11 | % | 5,379 | 0.18 | % | (1,076 | ) | (20.0 | )% | ||||||||||||||
| Total operating revenue | 3,976,190 | 100.00 | % | 2,922,413 | 100.00 | % | 1,053,777 | 36.1 | % | |||||||||||||||
| Operating costs | ||||||||||||||||||||||||
| Cost, selling, general, and administrative expenses | 1,996,892 | 50.22 | % | 1,003,373 | 34.33 | % | 993,519 | 99.0 | % | |||||||||||||||
| Total operating costs | 1,996,892 | 50.22 | % | 1,003,373 | 34.33 | % | 993,519 | 99.0 | % | |||||||||||||||
| Income from operations | 1,979,298 | 49.78 | % | 1,919,040 | 65.67 | % | 60,258 | 3.1 | % | |||||||||||||||
| Other income | ||||||||||||||||||||||||
| Other income, net | 12,920 | 0.32 | % | 203 | 0.01 | % | 12,717 | 6,264.5 | % | |||||||||||||||
| Total other income, net | 12,920 | 0.32 | % | 203 | 0.01 | % | 12,717 | 6,264.5 | % | |||||||||||||||
| Income before income tax | 1,992,218 | 50.10 | % | 1,919,243 | 65.67 | % | 72,975 | 3.8 | % | |||||||||||||||
| Provision for income tax expenses | 627,721 | 15.79 | % | 663,224 | 22.69 | % | (35,503 | ) | (5.4 | )% | ||||||||||||||
| Net income | $ | 1,364,497 | 34.32 | % | $ | 1,256,019 | 42.98 | % | $ | 108,478 | 8.6 | % | ||||||||||||
Revenue
Our total revenue increased by $1,053,777, or 36.1%, to $3,976,190 for the six months ended March 31, 2023 from $2,922,413 for the six months ended March 31, 2022. The increase in our revenue was primarily due to increases in the revenue from our newly established software licensing service segment.
Our different revenue sources for the six months ended 2023 and 2022 were as follows:
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Revenue by service types: | ||||||||||||||||||||||||
| Revenue from digital advertising services | $ | 2,220,794 | 55.85 | % | $ | 2,911,482 | 99.63 | % | $ | (690,688 | ) | (23.7 | )% | |||||||||||
| Revenue from software licensing | 1,740,472 | 43.77 | % | - | - | % | 1,740,472 | 100.0 | % | |||||||||||||||
| Revenue from cash rebate services | 10,621 | 0.27 | % | 5,552 | 0.19 | % | 5,069 | 91.3 | % | |||||||||||||||
| Revenue from payment solution services – related party | 4,303 | 0.11 | % | 5,379 | 0.18 | % | (1,076 | ) | (20 | )% | ||||||||||||||
| Total operating revenue | $ | 3,976,190 | 100.00 | % | $ | 2,922,413 | 100.00 | % | $ | 1,053,777 | 36.1 | % | ||||||||||||
Revenue from Digital Advertising Services
Our revenue from digital advertising services decreased significantly by $690,688, or approximately 23.7%, from $2,911,482 in the six months ended March 31, 2022 to $2,220,794 in the six months ended March 31, 2023. The significant decrease was due to decreases in the number of advertisers for our services in the six months ended March 31, 2023 because of increased competition. The total number of advertisers that used our digital advertising services was 22 in the six months ended March 31, 2023 (including 18 repeat advertisers and four new advertisers). The total number of advertisers that used our digital advertising services was 42 for the six months ended March 31, 2022 (including 15 repeat advertisers and 27 new advertisers). The average advertising spending per advertiser was $138,800 and $69,321, for the six months ended March 31, 2023 and 2022, respectively.
The following table presents the breakdown of our revenue from digital advertising services for the six months ended March 31, 2023 and 2022:
| For the six months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Advertisement design and consultation services | $ | 543,925 | $ | 598,953 | ||||
| Advertisement display services, net of discount of $136,715 and $87,522, respectively | 1,676,869 | 2,312,529 | ||||||
| Total revenue from digital advertising services, net | $ | 2,220,794 | $ | 2,911,482 | ||||
During the six months ended March 31, 2023, six advertisers used our advertisement design and consultation services and we charged the advertising service fees in the range of approximately $2,400 to $38,000 for designated services. We generated revenue of $543,925 from providing advertisement design and consultation services for the six months ended March 31, 2023.
In addition, all 22 advertisers for the six months ended March 31, 2023 further used our services for advertisement display on our websites and mobile apps and third-party social media channels. Depending on the different advertisement distribution channels and the duration of the advertisement display, we charged advertising service fees in the range of approximately $5,000 to approximately $240,000 for designated services. Our revenue associated with advertisement display amounted to $1,676,869 (after deducting an aggregate discount of $136,715) in the six months ended March 31, 2023.
During the six months ended March 31, 2022, eight advertisers used our advertisement design and consultation services and we charged the advertising service fees in the range of approximately $2,400 to $10,000 for designated services. We generated revenue of $598,953 from providing advertisement design and consultation services for the six months ended March 31, 2022.
In addition, all 42 advertisers for the six months ended March 31, 2022 further used our services for advertisement display on our websites and mobile apps and third-party social media channels. Depending on the different advertisement distribution channels and the duration of the advertisement display, we charged advertising service fees in the range of approximately $5,000 to approximately $240,000 for designated services. Our revenue associated with advertisement display amounted to $2,312,529 (after deducting an aggregate discount of $87,522) in the six months ended Mach 31, 2022.
Revenue from software licensing
On March 24, 2023, our wholly owned subsidiary, Starbox Rebates Sdn. Bhd., a company limited by shares incorporated under the laws of Malaysia (“StarboxGB”), entered into a software licensing agreement with Brandavision. We agreed to develop a comprehensive data management system for Brandavision, grant it the access to our vast database, help to train the staff of Brandavision with respect to its use, and provide continuous technical support. The contract period is for 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). For the six months ended March 31, 2023, we recorded $1,740,472 revenue from providing services to Brandavision.
Revenue from Cash Rebates Offered by Retail Merchants
Our cash rebate service revenue increased by approximately 91.3% from $5,552 for the six months ended March 31, 2022 to $10,621 for the six months ended March 31, 2023. The cash rebate service revenue increased primarily due to an increase in the average cash rebate commission rate earned by the Company for the six months ended March 31, 2023 as compared to the six months ended March 31, 2022. 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 sales transaction amount of $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%. For the six months ended March 31, 2022, 31 Merchants offered total cash rebates of $23,765 to attract 3,083 Members to purchase products and services from these Merchants, with a sales transaction amount of $1,823,404. Total cash rebate of $18,213 to members was approximately 76% of total rebates offered by Merchants; the average cash rebate commission rate earney by the Company was approximately 24%.
Revenue from Payment Solution Services – Related Party
We started to provide payment solution services to merchants in May 2021. 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. Since VE Services is an entity controlled by one of our beneficial shareholders, our revenue of $4,304 from payment solution services in the six months ended March 31, 2023 was reported as revenue from a related party.
During the six months ended March 31, 2022, we referred 14 merchants (including three new merchants and 11 existing merchants) to VE Services for payment processing and earned commission fees of $5,379. Since VE Services is an entity controlled by one of our beneficial shareholders, our revenue from payment solution services for the six months ended March 31, 2022 was reported as revenue from a related party.
Operating Costs
The following table sets forth the breakdown of our operating costs for the six months ended March 31, 2023 and 2022:
| For the six months ended March 31, | ||||||||||||||||||||||||
| 2023 | 2022 | Variances | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Salary and employee benefit expenses | $ | 318,750 | 15.96 | % | $ | 195,904 | 19.52 | % | $ | 122,846 | 62.71 | % | ||||||||||||
| Professional and consulting service fees | 429,896 | 21.53 | % | 468,971 | 46.74 | % | (39,075 | ) | (8.33 | )% | ||||||||||||||
| Marketing and promotional expenses | 209,564 | 10.49 | % | 104,808 | 10.45 | % | 104,756 | 99.95 | % | |||||||||||||||
| Content license costs | 30,000 | 1.50 | % | 25,059 | 2.50 | % | 4,941 | 19.72 | % | |||||||||||||||
| Website and facility maintenance expenses | 147,345 | 7.38 | % | 49,725 | 4.96 | % | 97,620 | 196.32 | % | |||||||||||||||
| Depreciation and amortization | 193,662 | 9.70 | % | 44,147 | 4.40 | % | 149,515 | 338.68 | % | |||||||||||||||
| Utility and office expenses | 251,563 | 12.60 | % | 56,779 | 5.66 | % | 194,784 | 343.06 | % | |||||||||||||||
| Business travel and entertainment expenses | 71,479 | 3.58 | % | 17,522 | 1.75 | % | 53,957 | 307.94 | % | |||||||||||||||
| Others | 344,633 | 17.26 | % | 40,458 | 4.02 | % | 304,175 | 751.83 | % | |||||||||||||||
| Total operating costs | $ | 1,996,892 | 100.00 | % | $ | 1,003,373 | 100.00 | % | $ | 993,519 | 99.02 | % | ||||||||||||
Our operating costs accounted for approximately 50.22% and 34.33% of our total revenue for the six months ended March 31, 2023 and 2022, respectively. Our operating costs increased significantly by $993,519, or approximately 99.02%, from $1,003,373 in the six months ended March 31, 2022 to $1,996,892 in the six months ended March 31, 2023. The increase was primarily due to the following reasons:
| (1) | For the six months ended March 31, 2023, the salary expenses were $318,750, an increase of $122,846 compared with $195,904 in the six months ended March 31, 2022, primarily due to an increase in the number of employees from 17 for the six months ended March 31, 2022 to 25 for the six months ended March 31, 2023, in order to handle the increase in business activities associated with our digital advertising services, cash rebate services and the newly expanded business in software licensing services. |
| (2) | 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 $104,756, from $104,808 for the six months ended March 31, 2022 to $209,564 for the six months ended March 31, 2023, as a result of our increased marketing efforts to develop new merchants and advertisers for our services. |
| (3) | License costs represented service fees paid to third-party content providers to license movies and television series and put such licensed movies and television series on our SEEBATS website and mobile app to drive traffic. License costs slightly increased by $5,000, from $50,000 in fiscal year 2021 to $55,000 in fiscal year 2022. On November 1, 2021, we 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. We agreed to pay a content and service fee of $120,000 and a content delivery fee based on the amount of content delivered by the content provider, ranging from $1,700 to $660,000 per year under the Service and Licensing Agreement. We expect to renew the Service and Licensing Agreement with Shenzhen Yunshidian. Pursuant to a letter agreement dated July 15, 2021, Shenzhen Yunshidian also provided SEEBATS website and mobile app with movies and television series for a free trial run from August 1, 2021 to October 31, 2021, before we entered into the Service and Licensing Agreement. As a result of the Service and Licensing Agreement with Shenzhen Yunshidian, we capitalized content assets as part of our intangible assets and amortize the content assets using the straight-line method over the licensing period from November 1, 2021 to October 31, 2023. For the six months ended March 31, 2023 and 2022, the amortization of intangible assets-content assets of Shenzhen Yunshidian amounted to $30,000 and 25,059, respectively. |
| (4) | Website and facility maintenance expenses increased by $97,620, from $49,725 in the six months ended March 31, 2022 to $147,345 in six months ended March 31, 2023, because we incurred more costs to optimize and upgrade our IT system related to rebate calculation and AI calculation engine. |
| (5) | Our utility and office expenses increased significantly by $194,784, from $56,779 in the six months ended March 31, 2022 to $251,563 in the six months ended March 31, 2022, primarily due to increased office insurance expenses and increased office supply expenses resulting from increased staff. |
| (6) | Our depreciation and amortization expense increased significantly by $149,515, from $44,147 in the six months ended March 31, 2022 to $193,662 in the six months ended March 31, 2023, mainly due to increased amortization of intangible assets. In order to support our expansion of digital advertising service and cash rebate service businesses, in December 2021, we purchased packaged computer software and applications from a third-party vendor at the aggregate cost of MYR2.12 million (equivalent to $504,222) to improve certain functions of our cash rebate and digital advertising operating systems. In addition, from June 2022 to September 2022, we further purchased from the same third-party vendor the packaged computer software and applications in the aggregate amount of $501,412 (MYR2.32 million) to add an embedded treasure hunt system into our digital advertising operating systems, to improve the coding, rating, and comment function and optimize our SEEBATS mobile app. |
| In October 2022, we signed a new contract with ARX Media Sdn. Bhd. (“ARX”), to conduct a software application design and development project. Total contract price with ARX for the Rebates Mall software design and customization, augmented reality (“AR”) software development, and database processing capacity improvement amounted to MYR218.75 million (approximately $47.2 million) to be performed in the next three years. Pursuant to the contract terms, from November 2022 to December 2022, we made a total prepayment of $25.2 million (MYR111.0 million) as the first installment payment to ARX; of which, $18.13 million (MYR80 million) was transferred into intangible assets during the six months ended March 31, 2023, due to ARX having completed AI calculation engine development as part of the software project. AI calculation engine is a software solution designed to provide advance calculations and analysis based on artificial intelligence algorithms. | |
| (7) | Our business travel and entertainment expenses increased by $53,957 from $17,522 in the six months ended March 31, 2022 to $71,479 in the six months ended March 31, 2023, due to our increased efforts to expand our business operations into local and neighboring countries. |
| (8) | Others included trademark, employee defined contribution plan, bonus, and company’s employee uniform design and customization. Others increased by $304,175 from $40,458 in the six months ended March 31, 2022 to $344,633 in the six months ended March 31, 2023, primarily due to (i) increased trademark expenses by $69,990 and (ii) increased bonus by $176,635. |
We expect our overall operating costs, including marketing expenses, salaries, and professional and business consulting expenses, to continue to increase in the foreseeable future, as we plan to hire additional personnel and incur additional expenses in connection with the expansion of our business operations.
Provision for Income Taxes
Our provision for income taxes was $627,721 and $663,224 in the six months ended March 31, 2023 and 2022, respectively. Our subsidiaries Starbox Holdings Berhad (“Starbox Berhad”), StarboxGB, StarboxTV Sdn. Bhd. (“StarboxSB”), and Paybats Sdn. Bhd. (“StarboxPB”) are governed by the income tax laws of Malaysia. The income tax provision in respect of operations in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations, and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified 24% enterprise income tax rate, while preferential tax rates, tax holidays, and tax exemptions may be granted on a case-by-case basis. The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less, and gross income of not more than MYR50 million) is 17% for the first MYR600,000 (or approximately $150,000) taxable income for the six months ended March 31, 2023 and 2022, with the remaining balance being taxed at the 24% rate. For the six months ended March 31, 2023 and 2022, the tax saving as the result of the favorable tax rates and tax exemption amounted to $0 and $10,027, respectively, and per share effect of the favorable tax rate and tax exemption was $0.00. Other than StarboxSB and StarboxGB, Starbox Berhad and StarboxPB have each reported recurring operating losses since their inception. Management concluded that the chances for these two entities that suffered recurring losses in prior periods to become profitable in the foreseeable future and to utilize their net operating loss carry forwards were remote. Accordingly, we provided valuation allowances of $56,098 and $35,174 for the deferred tax assets of these subsidiaries at March 31, 2023 and September 30, 2022, respectively.
Net Income
As a result of the foregoing, we reported net income of $1,364,497 for the six months ended March 31, 2023, representing an increase of $108,478 from a net income of $1,256,019 for the six months ended March 31, 2022.
Liquidity and Capital Resources
Cash Flows for the Six Months Ended March 31, 2023 Compared to the Six Months Ended March 31, 2022
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, 2023 and as of the date of this report. 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, 2023 and September 30, 2022, none of the net assets of our consolidated subsidiaries in Malaysia were restricted net assets and there were no funds transferred from our Malaysia subsidiaries to us in the form of loans, advances, or cash dividends during the six months ended March 31, 2023 and 2022.
As of March 31, 2023, funds were transferred among our Cayman Islands holding company and our subsidiaries in Malaysia, as intercompany loans, and used for working capital purposes and amounted to approximately $28.8 million. Funds were transferred among our Malaysian subsidiaries, Starbox Berhad, StarboxGB, StarboxSB, and StarboxPB, as intercompany loans, and used for working capital purposes and amounted to approximately $26.6 million and $0 during the six months ended March 31, 2023 and 2022, respectively. We have not been notified of any restrictions which could limit our Malaysian subsidiaries’ ability to transfer cash among one another.
As of March 31, 2023, we had $864,392 in cash and cash on hand as compared to $17,778,895 as of September 30, 2022. We also had $4,986,688 and $2,032,717 in accounts receivable as of March 31, 2023 and September 30, 2022, respectively. Our accounts receivable included balances due from advertisers for digital advertising services rendered, and due from Brandavision for software licensing revenue, where our performance obligations had been satisfied and our fees had been billed but had not been collected as of the balance sheet date. Accounts receivable balance as of September 30, 2022 has been fully collected. Approximately 40% of the March 31, 2023 accounts receivable balance has been subsequently collected as of the date of this report and the remaining balance is expected to be collected by October 2023. The following table summarizes our outstanding accounts receivable and subsequent collection by aging bucket:
| Accounts receivable by aging bucket | Balance as of March 31, 2023 | Subsequent collection | % of subsequent collection | |||||||||
| Less than 6 months | $ | 4,617,556 | $ | 1,614,547 | 35 | % | ||||||
| From 7 to 9 months | 369,132 | 369,132 | 100 | % | ||||||||
| From 10 to 12 months | - | - | - | % | ||||||||
| Over 1 year | - | - | - | % | ||||||||
| Total gross accounts receivable | 4,986,688 | 1,983,679 | 40 | % | ||||||||
| Allowance for doubtful accounts | - | - | - | |||||||||
| Accounts receivable, net | $ | 4,986,688 | $ | 1,983,679 | 40 | % | ||||||
As of March 31, 2023, we had prepaid expenses of approximately $14.5 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, and (iv) and to design and develop a conversation AI Chatbot Integration mobile app and website. 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 $1,682 as of March 31, 2023, representing due from VE Services for commission receivable for referring payment solution services to VE Services. The balance due to a related party was $1,409 as of March 31, 2023, representing the fee to be paid for secretarial and tax consulting and filing services received from a company that is owned by our CFO. Such advance was non-interest bearing and due on demand.
As of March 31, 2023, our working capital balance amounted to approximately $19.7 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.
In connection with the above-mentioned business expansion into neighboring countries and investment on our IT infrastructure, we estimate the total related capital investment and expenditures to be approximately $57 million over the next three years, among which approximately $1 million will be required to support our expansion into the neighboring countries and approximately $20 million to $25 million will be required on IT software related investment within the next 12 months, based on management’s best estimate as of the date of this report. Currently, we plan to use our own cash to support our short-term business growth goal. Our major source of funding includes the following: (i) on August 25, 2022, we closed our initial public offering of 5,375,000 ordinary shares at a public offering price of $4.00 per ordinary share. We raised approximately $21.5 million in gross proceeds from the initial public offering and underwriters’ partial exercise of the over-allotment option, before deducting underwriting discounts and other related expenses, (ii) on November 3, 2022, we closed a private placement, in which we issued and sold an aggregate of 9,000,000 ordinary shares to investors at a price of $1.40 per share and received gross proceeds, before deducting the placement agent’s fees and other related offering expenses, of $12.60 million, and (iii) our operating cash flows from existing businesses as well as potentially from our expansion into neighboring countries within the next 12 months. 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, | ||||||||
| 2023 | 2022 | |||||||
| Net cash (used in) provided by operating activities | $ | (12,148,919 | ) | $ | 1,526,249 | |||
| Net cash used in investing activities | (17,877,183 | ) | (631,431 | ) | ||||
| Net cash provided by (used in) financing activities | 11,760,444 | (822,416 | ) | |||||
| Effect of exchange rate change on cash and restricted cash | 1,351,155 | (8,955 | ) | |||||
| Net increase (decrease) in cash | (16,914,503 | ) | 63,447 | |||||
| Cash, beginning of period | 17,778,895 | 2,295,277 | ||||||
| Cash, end of period | $ | 864,392 | $ | 2,358,724 | ||||
Operating Activities
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. The March 31, 2023 accounts receivable balance has been 30% collected as of the date of this report and the remaining balance is expected to be collected by October 2023; | |
| ● | 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; |
Net cash provided by operating activities was $1,526,249 for the six months ended March 31, 2022, and primarily consisted of the following:
| ● | net income of $1,256,019 for the six months ended March 31, 2022; | |
| ● | an increase in outstanding accounts receivable of $1,326,333. Our accounts receivable included balances due from customers for digital advertising services, cash rebate services, and payment solution services rendered, where our performance obligations had been satisfied, and our fees had been billed but had not been collected as of the balance sheet dates. Approximately 99.9% of the March 31, 2022 accounts receivable balance has been collected as of the date of this report; | |
| ● | an increase in outstanding taxes payable of $834,895, due to our increased taxable income. We plan to fully settle the tax liabilities with local tax authorities by early August 2022; and | |
| ● | an increase in deferred revenue of $579,355. Our customers are typically required to make certain prepayments to us before we provide digital advertising services to them. We record such prepayments as deferred revenue when our performance obligations associated with the delivery of digital advertising services to customers had not been satisfied as of the balance sheet date. Due to the generally short-term duration of the contracts, the majority of our unfulfilled performance obligations are satisfied within three months subsequent to the balance sheet date. |
Investing Activities
Cash used in investing activities was $17,877,183 for the six months ended March 31, 2023, which primarily included purchase of property and equipment of $13,183 and purchase of intangible assets of $17,864,000 during the period.
Cash used in investing activities was $631,431 for the six months ended March 31, 2022, which primarily included purchases of property and equipment of $5,011 and purchases of intangible assets of $626,420.
Financing Activities
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 repayment of borrowing from related parties in the amount of $6,366.
Cash used by financing activities was $822,416 for the six months ended March 31, 2022, which consisted of repayment of borrowing from a related party of $398,422, and payment for deferred initial public offering costs of $423,994.
Contractual Obligations
On August 20, 2021, our main operating subsidiaries in Malaysia started to lease office spaces from Zenapp Sdn Bhd (“Zenapp”), with an aggregate area of approximately 4,800 square feet, pursuant to three sub-tenancy agreements, each with a lease term from September 1, 2021 to August 31, 2023, and monthly rent of MYR10,000 (approximately $2,424). The sub-tenancy agreements may be renewed for successive two-year terms. The operating lease expenses for the six months ended March 31, 2023 and 2022 were $408,800 and nil, respectively. However, on April 30, 2022, we early terminated the sub-tenancy agreements with Zenapp and elected to enter into lease agreements directly with the same landlords for a term of one year from May 1, 2022 to April 30, 2023. There was no penalty derived from the early termination of the sub-tenancy agreements. In April 2023, the Company renewed the office lease agreement for additional two years with a lease maturity date in April 2025.
The following tables summarize our contractual obligations as of March 31, 2023:
| 12 months ending March 31, | Lease payment | |||
| 2024 | $ | 18,491 | ||
| 2025 | 18,491 | |||
| 2026 | 1,541 | |||
| Total future minimum lease payments | 38,523 | |||
| Less: imputed interest | 2,012 | |||
| Total | $ | 36,511 | ||
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 consist of service fees generated from providing digital advertising services, payment solution services to retail merchants, and software licencing revenue.
Accounts receivable are presented net of allowance for doubtful accounts. We determine the adequacy of allowance for doubtful accounts based on individual account analysis, historical collection trend, and best estimate of specific losses on individual exposures. We establish a provision for doubtful receivables when there is objective evidence that we may not be able to collect the amounts due. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2023 and September 30, 2022, there was no allowance for doubtful accounts recorded as we consider all of the outstanding accounts receivable fully collectible.
Revenue Recognition
On October 1, 2019, we adopted Accounting Standards Codification (“ASC”) 606 using the modified retrospective approach. The adoption of this standard did not have a material impact on our consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary.
To determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.
We currently generate our revenue from the following main sources:
Revenue from digital advertising services
The Company’s advertising service revenue is derived principally from advertising contracts with 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 adverting 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 $2,400 to approximately $38,000 for each of the service commitments, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the ads. Advertisers may elect to use any agreed-upon combination of services in one package, depending on their specific needs. For advertisement display 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 $240,000, 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 are services that are capable of being distinct and distinct in the context of advertising contracts. Each of the service commitments in advertisement design and consultation services, including advice on advertising strategies, customization and optimization of the desired content, length, color tone, layout, format, and presentation of the ads, are not distinct in the context of advertising contracts, because they are inputs to deliver the combined output of advertisements to be displayed as specified by the customer. Therefore, advertisement design and consultation services are identified as a single performance obligation. 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 until 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.
Revenue from software licensing
In 2023, the Company started a software licensing business, in whch the Company develops software such as data management system, licenses the use right of the system to customers for a term of period as license income, and provides related technology support and system maintenance services on an annual basis. The 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. The software license is considered a distinct performance obligation and accounted for separately from the technical support and system maintenance services. Revenue from distinct software license is recognized at the point in time when the software system is delivered to the customer. Revenue from annual 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 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 86% are awarded to retail shoppers, and the Company is entitled to receive and retain the remaining approximately 52% to 14% 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 these types 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. For the six months ended March 31, 2023 and 2022, the Company only reported cash rebate revenue of $10,621 and $5,552, respectively.
Revenue from payment solution services
In May 2021, the Company started to provide payment solution services to retail merchant customers by referring them to VE Services. The Company entered into the 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 0.525% 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. For the six months ended March 31, 2023 and 2022, the Company referred a total of 35 and 14 retail merchants to VE Services for payment processing and earned $4,304 and $5,379 revenue from providing payment solution services to customers, respectively.
Deferred revenue
Deferred revenue occurs when the Company has entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation. The Company’s performance obligations are generally satisfied within 12 months of the initial contract date. As of March 31, 2023 and September 30, 2022, deferred revenue amounted to $368,066 and nil, respectively. Revenue recognized for the six months ended March 31, 2023 and 2022 that was included in the deferred revenue balance at the beginning of the period was nil and $800,492, respectively.
Disaggregation of Revenue
We disaggregate our revenue from contracts by service types, as we believe it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors.
The summary of our disaggregation of revenue by service types for the six months ended March 31, 2023 and 2022 was as follows:
| For the Six Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue from advertising services: | ||||||||
| Advertisement design and consultation services | $ | 543,925 | $ | 598,953 | ||||
| Advertisement display services | 1,813,584 | 2,400,051 | ||||||
| Gross revenue from advertising services | 2,357,509 | 2,999,004 | ||||||
| Less: discount to customers for advertisement displays | (136,715 | ) | (87,522 | ) | ||||
| Sub-total of net revenue from advertising services | 2,220,794 | 2,911,482 | ||||||
| Revenue from software licensing | 1,740,472 | - | ||||||
| Revenue from cash rebate services | 10,621 | 5,552 | ||||||
| Revenue from payment solution services-related party | 4,304 | 5,379 | ||||||
| Total operating revenue | $ | 3,976,190 | $ | 2,922,413 | ||||
Income Tax
We account for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the six months ended March 31, 2023 and 2022. We do not believe there was any uncertain tax provision as of March 31, 2023 and September 30, 2022.
Our 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, 2023 and 2022. As of March 31, 2023 and September 30, 2022, all of the tax returns of our 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
We consider the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Targeted Transition Relief. In November 2019, the FASB issued ASU 2019-10, which extends the effective date for adoption of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11 to clarify its new credit impairment guidance in ASU 326. Accordingly, for public entities that are not smaller reporting entities, ASU 2016-13 and its amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, we plan to adopt this guidance effective October 1, 2023. We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2023 and September 30, 2022.
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.
Exhibit 99.3
 |
Starbox Group Holdings Ltd. Announces First Half of Fiscal Year 2023 Financial Results
Revenue and Net Profit Increased to $4.0 Million and $1.4 Million Respectively (Basic Earnings of $0.03 Per Share) with Technology-Driven Services Revenue Accounting for Approximately 43.8% of its Revenue |
 |
KUALA LUMPUR, Malaysia, August 29, 2023 /PRNewswire/ — Starbox Group Holdings Ltd. (Nasdaq: STBX) (“Starbox” or the “Company”), a service provider of cash rebates, digital advertising, and payment solutions with a goal of becoming a comprehensive AI solutions provider within Southeast Asia, today announced its unaudited financial results for the six months ended March 31, 2023.
Mr. Lee Choon Wooi, Chairman and Chief Executive Officer of Starbox, commented, “We are excited about the results we have accomplished for the first half of fiscal year 2023, where we saw robust growth across almost every key financial metric. Our revenue and net income grew for the first half of fiscal year 2023, demonstrating the fruition of our earlier investments in technology and successful execution of our strategic initiatives, namely new technology-driven services revenue via licensing and/or sale of our technologies. Moving forward, we expect to channel our efforts into continuous technological innovation as we believe technology such as artificial intelligence will be one of our key drivers for revenue growth for the foreseeable future. We plan to keep investing in our artificial intelligence-generated content (AIGC) engine, which we believe will revolutionize how people visualize ideas and provide invaluable tools for businesses across industries. We aim to disrupt the industry with our applications of AI technologies, thereby solidifying our market position, and generating long-term value for our shareholders.”
First Half of Fiscal Year 2023 Financial Highlights
| ● | Total revenue was $4.0 million for the six months ended March 31, 2023, an increase of 36.1% from $2.9 million for the same period of last year. | |
| ● | Income from operations was $2.0 million for the six months ended March 31, 2023, an increase of 3.1% from $1.9 million for the same period of last year. | |
| ● | Net income was $1.4 million for the six months ended March 31, 2023, an increase of 8.6% from $1.3 million for the same period of last year. |
First Half of Fiscal Year 2023 Operational Highlights
| ● | Number of advertisers was 22 during the six months ended March 31, 2023, compared to 42 during the six months ended March 31, 2022. | |
| ● | Number of members on the GETBATS website and mobile app was 2,518,023 as of March 31, 2023, compared to 2,513,658 as of September 30, 2022. | |
| ● | Number of merchants on the GETBATS website and mobile app was 832 as of March 31, 2023, compared to 820 as of September 30, 2022. | |
| ● | Number of transactions facilitated through GETBATS website and mobile app was 161,306 during the six months ended March 31, 2023, compared to 188,718 during the six months ended March 31, 2022. |
First Half 2023 Financial Results
Revenue
Total revenue was $4.0 million for the six months ended March 31, 2023, an increase of 36.1% from $2.9 million for the same period of last year. The increase in revenue was primarily due to increases in the revenue from our newly established software licensing service segment.
| ● | Revenue from digital advertising service was $2.2 million for the six months ended March 31, 2023, which decreased by 23.7% from $2.9 million for the same period of last year. The decrease was due to decreases in the number of advertisers for our services in the six months ended March 31, 2023. | |
| ● | Revenue from software licensing was $1.7 million for the six months ended March 31, 2023. The Company did not have revenue from software licensing for the same period of last year. On March 24, 2023, the Company’s wholly owned subsidiary, Starbox Technologies Sdn. Bhd., entered into a software licensing agreement with Brandavision Sdn Bhd, a Malaysia company (“Brandavision”). The Company will develop a comprehensive data management system for Brandavision, grant them the access to its vast database, help train the staff of Brandavision with respect to its use and provide continuous technical support. | |
| ● | Revenue from cash rebate services was $10,621 for the six months ended March 31, 2023, which increased by 91.3% from $5,552 for the same period of last year. The increase was primarily due to an increase in the average cash rebate commission rate earned by the Company for the six months ended March 31, 2023 as compared to the six months ended March 31, 2022. | |
| ● | Revenue from payment solution services was $4,303 for the six months ended March 31, 2023, which decreased by 20.0% from $5,379 for the same period of last year. |
Operating Cost
Operating costs were $2.0 million for the six months ended March 31, 2023, which increased by 99.0% from $1.0 million for the same period of last year. The increase was primarily due to the following reasons:
| ● | Salary and employee benefit expenses were $318,750 for the six months ended March 31, 2023, which increased by $122,846 from $195,904 for the same period of last year, primarily due to an increase in the number of employees from 17 for the six months ended March 31, 2022 to 25 for the six months ended March 31, 2023, in order to handle the increase in business activities associated with the Company’s digital advertising services, cash rebate services, and the newly expanded business in software licensing services. | |
| ● | Marketing and promotional expenses were $209,564 for the six months ended March 31, 2023, which increased by $104,756 from $104,808 for the same period of last year, as a result of our increased marketing efforts to develop new merchants and advertisers for our services. | |
| ● | License costs were $30,000 for the six months ended March 31, 2023, which increased by $4,941 from $25,059 for the same period of last year. | |
| ● | Website and facility maintenance expenses were $147,345 for the six months ended March 31, 2023, which increased by $97,620 from $49,725 for the same period of last year, primarily because the Company incurred more costs to optimize and upgrade its IT system related to rebate calculation and AI calculation engine. | |
| ● | Utility and office expenses were $251,563 million for the six months ended March 31, 2023, which increased by $194,784 from $56,779 for the same period of last year, primarily due to increased office insurance expenses and increased office supply expenses resulting from an increased number of staff. |
| ● | Depreciation and amortization expenses were $193,662 for the six months ended March 31, 2023, which increased by $149,515, from $44,147 for the same period of last year, mainly due to increased amortization of intangible assets. | |
| ● | Business travel and entertainment expenses were $71,479 for the six months ended March 31, 2023, which increased by $53,957 from $17,522 for the same period of last year, due to the Company’s increased efforts to expand its business operations into local and neighboring countries. | |
| ● | Others were $344,633 for the six months ended March 31, 2023, which increased by $304,175 from $40,458 for the same period of last year, primally due to (i) increased trademark expenses by $69,990 and (ii) increased bonus by $176,635. |
Provision for Income Taxes
Provision for income taxes was $0.6 million for the six months ended March 31, 2023, which decreased by 5.4% from $0.7 million for the same period of last year.
Net Income
Net income was $1.4 million for the six months ended March 31, 2023, which increased by $0.1 million from $1.3 million for the same period of last year.
Basic Earnings per Share
Basic earnings per share was $0.03 for the six months ended March 31, 2023, compared to basic and diluted earnings per share of $0.03 for the same period of last year.
Balance Sheet
As of March 31, 2023, the Company had cash of $0.9 million, compared to $17.8 million as of September 30, 2022.
Cash Flow
Net cash used in operating activities was $12.1 million for the six months ended March 31, 2023, compared to net cash provided by operating activities of $1.5 million for the same period of last year.
Net cash used in investing activities was $17.9 million for the six months ended March 31, 2023, compared to $0.6 million for the same period of last year.
Net cash provided by financing activities was $11.8 million for the six months ended March 31, 2023, compared to net cash used in financing activities of $0.8 million for the same period of last year.
About Starbox Group Holdings Ltd.
Headquartered in Malaysia, Starbox Group Holdings Ltd. is a technology-driven, rapidly growing company with innovation as its focus. Starbox is aiming to be a comprehensive AI solutions provider within Southeast Asia and also engages in building a cash rebate, digital advertising, and payment solution business ecosystem targeting micro, small, and medium enterprises that lack the bandwidth to develop an in-house data management system for effective marketing. The Company connects retail merchants with retail shoppers to facilitate transactions through cash rebates offered by retail merchants on its GETBATS website and mobile app. The Company provides digital advertising services to advertisers through its SEEBATS website and mobile app, GETBATS website and mobile app and social media. The Company also provides payment solution services to merchants. For more information, please visit the Company’s website: https://ir.starboxholdings.com.
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “approximates,” “assesses,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the U.S. Securities and Exchange Commission.
For more information, please contact:
Starbox Group Holdings Ltd.
Investor Relations
Department Email:
ir@starboxholdings.com
Ascent Investors Relations LLC
Tina Xiao
Phone: +1 917-609-0333
Email: tina.xiao@ascent-ir.com
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2023 | As of September 30, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and equivalents | $ | 864,392 | $ | 17,778,895 | ||||
| Accounts receivable, net | 4,986,688 | 2,032,717 | ||||||
| Prepaid income tax | 552,094 | - | ||||||
| Prepayments | 14,448,012 | 4,269,611 | ||||||
| Due from related parties | 1,682 | 1,473 | ||||||
| Total current assets | 20,852,868 | 24,082,696 | ||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | 21,941 | 13,380 | ||||||
| Intangible assets, net | 18,824,416 | 903,768 | ||||||
| Right-of-use assets, net | 36,511 | 42,574 | ||||||
| Total non-current assets | 18,882,868 | 959,722 | ||||||
| TOTAL ASSETS | $ | 39,735,736 | $ | 25,042,418 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Taxes payable | $ | 395,772 | $ | 1,404,128 | ||||
| Deferred revenue | 368,066 | - | ||||||
| Accrued liabilities and other current liabilities | 348,627 | 541,050 | ||||||
| Operating lease liabilities, current | 17,052 | 15,833 | ||||||
| Due to related parties | 1,409 | 7,361 | ||||||
| Total current liabilities | 1,130,926 | 1,968,372 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Deferred tax liabilities, net | 318,603 | - | ||||||
| Operating lease liabilities, non-current | 19,459 | 26,741 | ||||||
| Total non-current liabilities | 338,062 | 26,741 | ||||||
| TOTAL LIABILITIES | 1,468,988 | 1,995,113 | ||||||
| COMMITMENT AND CONTINGENCY | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred shares, par value $0.001125, 5,000,000 shares authorized, no shares issued and outstanding | - | - | ||||||
| Ordinary shares, par value $0.001125, 883,000,000 shares authorized, 54,375,000 shares and 45,375,000 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively | 61,172 | 51,047 | ||||||
| Additional paid in capital | 30,674,988 | 18,918,303 | ||||||
| Accumulated other comprehensive income (loss) | 1,481,084 | (607,052 | ) | |||||
| Retained earnings | 6,049,504 | 4,685,007 | ||||||
| Total shareholders’ equity | 38,266,748 | 23,047,305 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 39,735,736 | $ | 25,042,418 | ||||
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating revenue | ||||||||
| Revenue from cash rebate services | $ | 10,621 | $ | 5,552 | ||||
| Revenue from digital advertising services | 2,220,794 | 2,911,482 | ||||||
| Revenue from payment solution services | 4,303 | 5,379 | ||||||
| Revenue from software licensing | 1,740,472 | - | ||||||
| Total operating revenue | 3,976,190 | 2,922,413 | ||||||
| Operating expenses | ||||||||
| Selling, general, and administrative expenses | 1,996,892 | 1,003,373 | ||||||
| Total operating expenses | 1,996,892 | 1,003,373 | ||||||
| Income from operations | 1,979,298 | 1,919,040 | ||||||
| Other income, net | ||||||||
| Interest income | 7,757 | - | ||||||
| Other income, net | 5,163 | 203 | ||||||
| Total other income, net | 12,920 | 203 | ||||||
| Income before income tax | 1,992,218 | 1,919,243 | ||||||
| Income tax expenses | 627,721 | 663,224 | ||||||
| Net income | $ | 1,364,497 | $ | 1,256,019 | ||||
| Other Comprehensive income | ||||||||
| Foreign currency translation gain (loss) | 2,088,136 | (9,188 | ) | |||||
| Total Comprehensive income | $ | 3,452,633 | $ | 1,246,831 | ||||
| Net income per share - basic | $ | 0.03 | $ | 0.03 | ||||
| Weighted average number of common shares outstanding - basic | 53,089,286 | 40,000,000 | ||||||
STARBOX GROUP HOLDINGS LTD AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| FOR SIX MONTHS ENDED MARCH 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 1,364,497 | $ | 1,256,019 | ||||
| Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||
| Disposal of fixed assets | 2,928 | - | ||||||
| Depreciation and amortization | 253,662 | 69,147 | ||||||
| Amortization of right-of-use operating lease assets | 9,111 | 42,974 | ||||||
| Change in deferred tax | 313,963 | - | ||||||
| Changes in operating assets / liabilities: | ||||||||
| Accounts receivable | (2,809,804 | ) | (1,326,333 | ) | ||||
| Prepaid income tax | (544,054 | ) | - | |||||
| Prepaid expenses and other current assets | (9,621,687 | ) | (63,935 | ) | ||||
| Deferred revenue | 362,706 | 579,355 | ||||||
| Taxes payable | (1,063,540 | ) | 834,895 | |||||
| Operating lease liabilities | (9,111 | ) | (42,974 | ) | ||||
| Accrued expenses and other current liabilities | (407,590 | ) | 177,101 | |||||
| Net cash provided by (used in) operating activities | (12,148,919 | ) | 1,526,249 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | (13,183 | ) | (5,011 | ) | ||||
| Purchase of intangible assets | (17,864,000 | ) | (626,420 | ) | ||||
| Net cash used in investing activities | (17,877,183 | ) | (631,431 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Deferred initial public offering costs | - | (423,994 | ) | |||||
| Proceeds from equity financing | 11,766,810 | - | ||||||
| Increase in due from related party | (134 | ) | - | |||||
| Repayment of related party borrowings | (6,232 | ) | (398,422 | ) | ||||
| Net cash provided by (used in) financing activities | 11,760,444 | (822,416 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | 1,351,155 | (8,955 | ) | |||||
| NET INCREASE (DECREASE) IN CASH & EQUIVALENTS | (16,914,503 | ) | 63,447 | |||||
| CASH & EQUIVALENTS, BEGINNING OF PERIOD | 17,778,895 | 2,295,277 | ||||||
| CASH & EQUIVALENTS, END OF PERIOD | 864,392 | 2,358,724 | ||||||
| Supplemental Cash Flow Data: | ||||||||
| Income tax paid | $ | 2,011,188 | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||