10-Q 1 f10q0923_societypass.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2023

 

Or

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission File Number: 001-41037

 

SOCIETY PASS INCORPORATED

(Exact name of registrant as specified in its charter)

 

Nevada   83-1019155
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

701 S. Carson StreetSuite 200 Carson CityNevada 89701

(Address of principal executive offices)

 

(+65) 6518-9385

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol   Name of each exchange on which registered
Common Stock, par value $0.0001 per share   SOPA   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

 

Yes  No 

 

As of November 13, 2023, there were 32,859,593 shares of the registrant’s common stock, $0.0001 par value, outstanding.

 

 

 

 

 

 

Table of Contents

 

    Page
PART I FINANCIAL INFORMATION 1
Item 1. Financial Statements (Unaudited) 1
  Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 1
  Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three and Nine Months ended September 30, 2023 and 2022 2
  Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months ended September 30, 2023 and 2022 3
  Condensed Consolidated Statements of Cash Flows for the Three and Nine Months ended September 30, 2023 and 2022 4
  Notes to Condensed Consolidated Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49
Item 3. Quantitative and Qualitative Disclosures About Market Risk 69
Item 4. Controls and Procedures 69
PART II OTHER INFORMATION 70
Item 1. Legal Proceedings 70
Item 1A. Risk Factors 70
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 70
Item 3. Defaults Upon Senior Securities 70
Item 4. Mining Safety Disclosure 70
Item 5. Other Information 70
Item 6. Exhibits 71
SIGNATURES 72

 

i

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

SOCIETY PASS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(Currency expressed in United States Dollars (“US$”))

 

   September 30, 2023
(Unaudited)
   December 31, 2022
(Audited)
 
ASSETS        
Current assets:        
Cash and cash equivalents  $8,220,075   $18,930,986 
Restricted cash   61,353    72,350 
Accounts receivable, net   1,296,594    951,325 
Inventories   838,843    310,932 
Contract assets   29,362    20,310 
Deposits, prepayments and other receivables   1,445,593    2,711,042 
Deferred tax assets   159,841    
 
Total current assets   12,051,661    22,996,945 
           
Non-current assets:          
Intangible assets, net   6,287,769    7,458,089 
Goodwill   223,197    
 
Property, plant and equipment, net   725,744    706,038 
Right of use assets, net   1,448,904    1,537,670 
Total non-current assets   8,685,614    9,701,797 
TOTAL ASSETS  $20,737,275   $32,698,742 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payables  $1,819,543   $1,296,571 
Contract liabilities   1,209,211    1,405,090 
Accrued liabilities and other payables   6,179,359    8,325,225 
Due to related parties   34,651    22,311 
Deferred tax liabilities   69,000    69,000 
Operating lease liabilities   532,997    467,938 
Loan   22,383    28,164 
Total current liabilities   9,867,144    11,614,299 
           
Non-current liabilities          
Operating lease liabilities   921,576    1,073,126 
TOTAL LIABILITIES   10,788,720    12,687,425 
           
COMMITMENTS AND CONTINGENCIES   
 
    
 
 
Convertible preferred shares: $0.0001 par value, 5,000,000 shares authorized, 4,916,500 and 4,916,500 shares undesignated as of September 30, 2023 and December 31, 2022, respectively   
 
    
 
 
Series A shares: 10,000 shares designated; 0 and 0 Series A shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   
    
 
Series B shares: 10,000 shares designated; 0 and 0 Series B shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   
    
 
Series B-1 shares: 15,000 shares designated; 0 and 0 Series B-1 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   
    
 
Series C shares: 15,000 shares designated; 0 and 0 Series C shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively, net of issuance cost   
    
 
Series C-1 shares: 30,000 shares designated; 0 and 0 Series C-1 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively, net of issuance cost   
    
 
           
SHAREHOLDERS’ EQUITY          
Series X Super Voting Preferred Stock, $0.0001 par value, 3,500 shares designated; 3,500 and 3,500 Series X shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   
    
 
Common shares: $0.0001 par value, 95,000,000 shares authorized; 31,089,593 and 27,082,849 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   3,109    2,708 
Additional paid-in capital   104,900,466    101,427,160 
Less: Common shares held in treasury, at cost; 611,605 and 0 shares at September 30, 2023 and December 31, 2022   (640,525)   
 
Accumulated other comprehensive gain (loss)   (284,337)   56,527 
Accumulated deficit   (93,610,677)   (81,138,563)
Total equity attributable to Society Pass Incorporated   10,368,036    20,347,832 
Non-controlling interest   (419,481)   (336,515)
TOTAL EQUITY   9,948,555   20,011,317 
TOTAL LIABILITIES AND EQUITY  $20,737,275   $32,698,742 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

1

 

 

SOCIETY PASS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”))

 

   Three months ended
September 30,
   Nine months ended
September 30,
 
   2023   2022   2023   2022 
Revenue, net                
Sales – online ordering  $87,201   $645,074   $456,972   $1,561,625 
Sales – digital marketing   1,784,695    1,211,428    4,579,429    1,211,428 
Sales – online ticketing and reservation   390,384    178,206    1,433,133    178,206 
Sales – data   2,977    15,441    23,648    21,083 
Software sales   3,809    34    5,696    21,924 
Hardware sales   
-
    81    
-
    150 
Total revenue   2,269,066    2,050,264    6,498,878    2,994,416 
                     
Cost of sales:                    
Cost of online ordering   (77,061)   (614,500)   (436,796)   (1,467,358)
Cost of digital marketing   (1,457,213)   (1,068,000)   (3,728,058)   (1,068,000)
Cost of online ticketing and reservation   (110,862)   (6,007)   (282,406)   (6,007)
Cost of data   (7,055)   (8,956)   (40,409)   (9,931)
Software sales   (54,311)   (44,800)   (185,249)   (150,005)
Hardware sales   
-
    (66)   
-
    (111)
Total cost of revenue   (1,706,502)   (1,742,329)   (4,672,918)   (2,701,412)
Gross income   562,564    307,935    1,825,960    293,004 
                     
Operating expenses:                    
Sales and marketing expenses   (236,874)   (212,666)   (466,252)   (662,058)
Software development costs   (12,649)   (19,759)   (41,777)   (56,627)
Impairment loss   
-
    (250,417)   
-
    (779,000)
General and administrative expenses   (4,455,546)   (9,925,469)   (14,326,481)   (23,111,531)
Total operating expenses   (4,705,069)   (10,408,311)   (14,834,510)   (24,609,216)
                     
Loss from operations   (4,142,505)   (10,100,376)   (13,008,550)   (24,316,212)
                     
Other income (expense):                    
JV income   816    
-
    7,660    
-
 
Gain from early lease termination   
-
    
-
    1,064    
-
 
Interest income   34,613    41,817    133,807    47,889 
Interest expense   (278)   (11,277)   (930)   (15,706)
Waiver of loan payable   188,738    
-
    203,938    
-
 
Written-off of fixed assets   (5,093)   
-
    (7,676)   
-
 
Other income   6,409    7,105    55,612    45,398 
Total other income (expense)   225,205    37,645    393,475    77,581 
                     
Loss before income taxes   (3,917,300)   (10,062,731)   (12,615,075)   (24,238,631)
                     
Income taxes   (746)   (736)   (2,414)   (2,835)
                     
NET LOSS   (3,918,046)   (10,063,467)   (12,617,489)   (24,241,466)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (56,117)   (103,674)   (145,375)   (228,971)
                     
NET LOSS ATTRIBUTABLE TO NON-SOCIETY PASS INCORPORATED  $(3,861,929)  $(9,959,793)  $(12,472,114)  $(24,012,495)
                     
Other comprehensive loss:                    
Net loss   (3,918,046)   (10,063,467)   (12,617,489)   (24,241,466)
Foreign currency translation adjustment   (49,685)   136,145    (278,455)   157,844 
                     
COMRPEHENSIVE LOSS  $(3,967,731)  $(9,927,322)  $(12,895,944)  $(24,083,622)
                     
Net loss attributable to non-controlling interest   (56,117)   (103,674)   (145,375)   (228,971)
Foreign currency translation adjustment attributable to non-controlling interest   50,401    8,473    62,409    11,829 
Comprehensive loss attributable to Society Pass Incorporated  $(3,962,015)  $(9,832,121)  $(12,812,978)  $(23,866,480)
                     
Net loss per share attributable to Society Pass Incorporated:                    
– Basic  $(0.14)  $(0.39)  $(0.45)  $(1.01)
– Diluted  $(0.14)  $(0.39)  $(0.45)  $(1.01)
                     
Weighted average common shares outstanding                    
– Basic   28,483,858    25,302,206    27,917,875    23,856,503 
– Diluted   28,483,858    25,302,206    27,917,875    23,856,503 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2

 

 

SOCIETY PASS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”))

 

  

Three and Nine months ended September 30, 2023
                   Accumulated             
   Preferred Stock   Common Stock   Treasury Stock   Additional   other       Non-   Total 
   Number of       Number of       Number of       Paid in   comprehensive   Accumulated   controlling   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   income   deficits   interest   Deficit 
Balances at January 1, 2023   3,500   $    27,082,849   $2,708       $   $101,427,160   $56,527   $(81,138,563)  $(336,515)  $20,011,317 
Shares issued for services           196,078    20            546,489                546,509 
Shares issued for accrued salaries           109,156    11            113,480                113,491 
Shares issued upon the exercise options             783,440    78            1,226,715                1,226,793 
Shares repurchase during the period                   511,760    (541,988)                   (541,988)
Foreign currency translation adjustment                               (382,217)       (18,199)   (400,416)
Net loss for the year                                   (5,294,927)   (95,286)   (5,390,213)
Balances at March 31, 2023   3,500   $    28,171,523   $2,817    511,760   $(541,988)  $103,313,844   $(325,690)  $(86,433,490)  $(450,000)  $15,565,493 
Shares issued for services                           149,625                149,625 
Shares issued for accrued salaries           285,716    28            230,804                230,832 
Shares repurchase during the period                   99,845    (98,537)                   (98,537)
Foreign currency translation adjustment                               141,438        30,207    171,645 
Net income (loss) for the year                                   (3,315,258)   6,028    (3,309,230)
Balances at June 30, 2023   3,500   $    28,457,239   $2,845    611,605   $(640,525)  $103,694,273   $(184,252)  $(89,748,748)  $(413,765)  $12,709,828 
                                                        
Shares issued for services           

2,000,000

    200            

929,425

                

929,625

 
Shares issued for accrued salaries           454,540    46            214,286                214,332 
Shares issued to acquire subsidiary           

177,814

    18            

62,482

                

62,500

 
Foreign currency translation adjustment                               

(100,085

)       50,401    

(49,684

)
Net income (loss) for the year                                   (3,861,929)   (56,117)   (3,918,046)
Balances at September 30, 2023   3,500   $    31,089,593   $3,109    611,605   $(640,525)  $104,900,466   $(284,337)  $(93,610,677)  $(419,481)  $

9,948,555

 

 

   Three and Nine months ended September 30, 2022 
              Accumulated             
   Preferred Stock   Common stock   Additional   other       Non-      
   Number of       Number of       paid-in    comprehensive   Accumulated   controlling   Total 
   shares   Amount   shares   Amount   capital    (loss) income   deficits   interests   equity 
Balance as of January 1, 2022   3,500   $    19,732,406   $1,973   $79,833,290   $(54,340)  $(47,352,456)  $(102,784)  $32,325,683 
Shares issued for services           116,000    11    1,632,162                1,632,173 
Shares issued for accrued salaries           25,444    3    86,466                86,469 
Sale of units in public offering (net of expense)           3,484,845    348    10,402,543                10,402,891 
Shares issued to acquire subsidiary           226,629    23    799,977                800,000 
Share issued upon the exercise of warrant           160,000    16    356,984                357,000 
Share issued for accrued services           13,273    1    119,456                119,457 
Fair value of stock  option granted for director’s bonus                   303,990                303,990 
Shares issued to acquire non-controlling interest           2,497        22,470                   22,470 
Foreign currency translation adjustment                       (42,161)       (3,015)   (45,176)
Net loss for the period                           (6,548,378)   (43,027)   (6,591,405)
                                              
Balance as of March 31, 2022   3,500   $    23,761,094   $2,375   $93,557,338   $(96,501)  $(53,900,834)  $(148,826)  $39,413,552 
                                              
Share issued upon the exercise of warrant           27,300    3    55,887                55,890 
Shares issued for services           370,000    37    1,694,702                1,694,739 
Shares issued for accrued salaries           29,353    3    61,747                61,750 
Shares issued for director’s remuneration           316,092    32    899,964                899,996 
Shares issued to acquire subsidiary           40,604    4    83,236                83,240 
Fair value of stock option granted for director’s bonus                   (303,990)               (303,990)
Reverse Shares issued to acquire non-controlling interest                   (22,470)               (22,470)
Net loss for the period                           (7,504,324)   (82,270)   (7,586,594)
Foreign currency translation adjustment                       60,504        6,371    66,875 
                                              
Balance as of June 30, 2022   3,500   $    24,544,443   $2,454   $96,026,414   $(35,997)  $(61,405,158)  $(224,725)  $34,362,988 
                                              
Shares issued for services           617,332    61    1,827,428                1,827,489 
Shares issued for accrued salaries           37,229    4    68,996                69,000 
Shares issued for acquire business operation           69,072    7    133,993                134,000 
Shares issued to acquire subsidiary           609,327    61    1,175,941                1,176,002 
Net loss for the period                           (9,959,793)   (103,674)   (10,063,467)
Foreign currency translation adjustment                       127,672        8,473    136,145 
                                              
Balance as of September 30, 2022   3,500        25,877,403    2,587    99,232,772    91,675    (71,364,951)   (319,926)   27,642,157 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

SOCIETY PASS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”))

 

   Nine Months ended
September 30,
 
   2023   2022 
Cash flows from operating activities:        
Net loss  $(12,617,489)  $(24,241,466)
Adjustments to reconcile net loss to net cash used in operating activities          
Bad debts   283,519    
 
Depreciation and amortization   1,103,200    2,449,338 
Gain from early lease termination   (1,064)   
 
Written-off of fixed assets   7,676    
 
Waiver of loan payable   (203,938)   
 
Impairment loss   
    779,000 
Financing charges – first insurance funding   
    7,769 
Stock based compensation for services   3,411,207    6,105,057 
Deferred tax assets   (159,841)   
 
Change in operating assets and liabilities:          
Accounts receivable   (407,061)   545,962 
Inventories   143,314    (30,404)
Deposits, prepayments and other receivables   1,355,079    4,260,141 
Contract assets   (9,052)   (9,019)
Contract liabilities   (317,060)   873,672 
Accounts payables   541,740    (953,756)
Accrued liabilities and other payables   (3,209,471)   687,000 
Advances to related parties   216,278    (1,352,189)
Right of use assets   422,785    252,536 
Operating lease liabilities   (377,787)   (254,648)
Net cash used in operating activities   (9,817,965)   (10,881,007)
           
Cash flows from investing activities:          
Purchase of property, plant, and equipment   (185,255)   (449,545)
Purchase of intangible assets   (143,771)   
 
Purchase of subsidiary   
    (820,000)
Purchase of asset in a business operation   
    (80,000)
Cash from purchase of subsidiary and business operation   32,739    1,643,659 
Net cash provided by (used in) investing activities   (296,287)   294,114 
           
Cash flows from financing activities:          
Repurchase of common share   (640,525)   
 
Purchase of subsidiary   

(10,000

)    
Proceed from the issuance of preferred stock and exercise of warrants into preferred stock   
    412,890 
Proceeds from public offering, net of offering expenses   
    10,402,891 
Repayment of loan   
    (632,876)
Net cash provided by (used in) financing activities   (650,525)   10,182,905 
Effect on exchange rate change on cash and cash equivalents   42,869    146,504 
NET CHANGE IN CASH AND CASH EQUIVALENTS   (10,721,908)   (257,484)
CASH AND CASH EQUIVALENT AT BEGINNING OF YEAR   19,003,336    23,264,777 
           
CASH AND CASH EQUIVALENT AT END OF YEAR  $8,281,428   $23,007,293 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $930   $
 
Cash paid for income tax  $
   $
 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES          
Shares issued to acquire subsidiary  $37,500   $2,059,242 
Shares issued to acquire business operation   
    134,000 
Shares issued for accrued services  $
   $119,457 
Impact of adoption of ASC 842 - lease obligation and ROU asset  $
   $228,612 
Common stock issued for accrued salaries  $
   $
 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

 

 

SOCIETY PASS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Currency expressed in United States Dollars (“US$”))

 

NOTE1 DESCRIPTION OF BUSINESS AND ORGANIZATION

 

Society Pass Incorporated (the “Company”) was incorporated in the State of Nevada on June 22, 2018, under the name of Food Society Inc. On October 3, 2018, the Company changed its company name to Society Pass Incorporated. The Company, through its subsidiaries, mainly sells and distributes the hardware and software for a Point of Sales (POS)application in Vietnam. The Company also has online lifestyle platform to enable consumers to purchase high-end brands of all categories under its own brand name of “Leflair.” The Company has made several acquisitions in calendar year 2022 and 2023, as follows:

 

In February 2022, the Company completed the acquisition of 100% of the equity interest of New Retail Experience Incorporated and Dream Space Trading Company Limited through its subsidiary – Push Delivery Pte Limited, which two companies mainly provide an on-line grocery and food delivery platform in the Philippines and Vietnam respectively.

 

In May 2022, the Company completed another acquisition of 100% of the equity interests of Gorilla Networks Pte Ltd, Gorilla Mobile Pte Ltd, Gorilla Connects Pte Ltd and Gorilla Networks (VN) Co Ltd (collectively, “Gorilla Networks”), providing Singapore telecommunication reselling services.

 

On July 7, 2022, the Company and its wholly owned subsidiary Thoughtful Media Group Incorporated collectively acquired 100% of the equity interests of Thoughtful Media Group Incorporated and AdActive Media, Inc. (collectively “Thoughtful Media”), whose business provides services to advertisers that helps to make internet advertising more effective.

 

On July 21, 2022, the Company acquired 100% of the equity interests of Mangan PH Food Delivery Service Corp. (“Mangan), a Philippines restaurant and grocery delivery business. On July 21, 2023, Mangan was disposed to a third party company.

 

  On August 15, 2022, the Company and its 95%-owned subsidiary SOPA Technology, Pte, Ltd., collectively acquired 75% of the outstanding capital stock of Nusatrip International Pte Ltd. (“Nusatrip”) and also purchased all of the outstanding capital stock of PT Tunas Sukses Mandiri (“Tunas”), a company existing under the law of the Republic of Indonesia, and both engaged in online ticketing and reservation services.
     
  On April 1, 2023, the Company’s 100% owned subsidiary Thoughtful Media Group Inc and Adactive Media CA Inc acquired 100% of outstanding capital stock of PT Wahana Cerita Indonesia, an Indonesia company operating digital marketing and event organizing.
     
  On April 1, 2023, the Company’s 99% owned subsidiary Nusatrip International Pte. Ltd. acquired 100% of the outstanding capital stock of Mekong Leisure Travel Company Limited (changed business nature from Join Stock Company), a Vietnam travel agency.
     
  On July 1, 2023, the Company’s 99% owned subsidiary Mekong Leisure Travel Company Limited acquired 100% of the outstanding capital stock of Vietnam International Travel and Service Joint Stock Company, a Vietnam travel agency.

 

5

 

 

On February 10, 2021, the Company effected a 750 for 1 forward stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in these financial statements and its footnotes have been retroactively adjusted for the years presented, unless otherwise indicated, to give effect to the forward stock split.

 

On September 21, 2021, the Company effected a 1 for 2.5 reverse stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in these financial statements and its footnotes have been retroactively adjusted for the years presented, unless otherwise indicated, to give effect to the reverse stock split.

 

The forward stock split and reverse stock split transactions described above had no effect on the stated value of the preferred stock and the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance with the respective certificate of designations. The number of authorized shares of preferred stock also remained unchanged.

 

The registration statement for the Company’s Initial Public Offering became effective on November 8, 2021. On November 8, 2021, the Company entered into an underwriting agreement with Maxim Group LLC (the “Underwriter”) related to the offering of 2,888,889 shares of the Company’s common stock (the “Firm Shares”), at a public offering price of $9.00 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable for 45 days, to purchase an additional 236,111 shares of common stock (the “Option Shares”) to cover over-allotments. The Company raised gross proceeds of $26,000,001 and $2,124,999 from its initial public offering and from the sale of the Option Shares, respectively.

 

On February 8, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with the “Underwriter, related to the offering of 3,030,300 shares (the “Shares”) of the Company’s common stock and warrants to purchase up to 3,030,300 shares of common stock of the Company (the “Warrants”). Each Share was sold together with one Warrant to purchase one Share at a combined offering price of $3.30. In addition, the Company granted the Underwriter a 45-day over-allotment option to purchase up to an additional 454,545 Shares and/or Warrants, at the public offering price, less discounts and commissions. On February 10, 2022, the Underwriter gave notice to the Company of the full exercise of their over-allotment option and that delivery of the overallotment securities was made on February 11, 2022.

 

On June 30, 2023, NextGen Retail Inc., a Nevada corporation (the “Buyer”), a wholly-owned subsidiary of the Company, entered into a Securities Purchase Agreement with Story-I Ltd., an Australian corporation (“Story-I Australia”), Story-I Pte Ltd., a Singapore corporation (“Story-I Singapore”), a wholly-owned subsidiary of Story-I Australia, and Michael Chan, to purchase 95% of the outstanding shares (the “Majority Shares”) of PT Inetindo Infocom (the “Company”), an Indonesian company and retail reseller of Apple computers and other electronics in Indonesia. The consideration for the Majority Shares to be paid to Story-I Australia and Story-I Singapore by the Buyer is AUS$2,787,173, approximately US$ 1.85 million based on current exchange rates. The acquisition is still in progress at the end of September 30, 2023.

 

6

 

 

Description of subsidiaries incorporated by the Company

 

Name  Place and date of
incorporation
  Principal activities  Particulars of
registered/ paid
up share capital
  Effective
interest held
 
Society Technology LLC  United States,
January 24, 2019
  IP Licensing  US$1   100%
SOPA Cognitive Analytics Private Limited  India
February 5, 2019
  Computer sciences consultancy and data analytics  INR 1,238,470   100%
SOPA Technology Pte. Ltd.  Singapore,
June 4, 2019
  Investment holding  SGD 1,250,000   95%
SOPA Technology Company Limited  Vietnam
October 1, 2019
  Software production  Registered: VND 2,307,300,000;
Paid up: VND 1,034,029,911
   100%
Hottab Pte Ltd. (HPL)  Singapore
January 17, 2015
  Software development and marketing for the F&B industry  SGD 620,287.75   100%
Hottab Vietnam Co. Ltd  Vietnam
April 17, 2015
  Sale of POS hardware and software  VND 1,000,000,000   100%
Thoughtful Media Group Co. Ltd (FKA: Hottab Asset Company Limited)  Vietnam
July 25, 2019
  Digital marketing  VND 5,000,000,000   100%
Nextgen Retail Inc (FKA: Leflair Incorporated)  United States
December 7, 2021
  Investment holding  US$1   100%
SOPA Capital Limited  United Kingdom
December 07, 2021
  Investment holding  GBP 1   100%
Thoughtful Media (Philippines) Incorporated (FKA: SOPA (Phil) Incorporated)  Philippines
Jan 11, 2022
  Investment holding  PHP 11,000,000   100%
New Retail Experience Incorporated  Philippines
Jan 16, 2020
  On-line Grocery delivery platform  PHP 3,750,000   100%
Dream Space Trading Co. Ltd  Vietnam
May 23, 2018
  On-line Grocery and food delivery platform  VND 500,000,000   100%
Push Delivery Pte Ltd  Singapore
January 7, 2022
  Investment holding  US$2,000   100%
Gorilla Networks Pte. Ltd.  Singapore
September 3, 2019
  Investment holding  US$2,620,000 and SGD 730,000   100%
Gorilla Connect Pte. Ltd.  Singapore
May 18, 2022
  Telecommunications resellers  SGD 100   100%
Gorilla Mobile Singapore Pte. Ltd.  Singapore
August 6, 2020
  Telecommunications resellers  SGD 100   100%
Gorilla Networks (VN) LLC  Vietnam
December 16, 2020
  Telecommunications resellers  VND 233,000,000   100%
Thoughtful Media Group Incorporated  United States
June 28,2022
  Investment holding  US$10   100%
Thoughtful (Thailand) Co. Ltd  Thailand
September 2, 2014
  Digital marketing  THB 4,000,000   99.75%
AdActive Media CA Inc.  United States
April 12, 2010
  Digital marketing  Preferred: US$1,929.1938
Common: US$4,032.7871
   100%
PT Tunas Sukses Mandiri  Indonesia
February 8, 2010
  Online ticketing and reservation  IDR 26,000,000   99%
Nusatrip Malaysia Sdn Bhd  Malaysia
March 1, 2017
  Online ticketing and reservation  MYR 52,000   99%
Nusatrip Singapore Pte Ltd  Singapore
December 6, 2016
  Online ticketing and reservation  SGD 212,206   99%
Nusatrip International Pte Ltd  Singapore
January 9, 2015
  Online ticketing and reservation  SGD 905,006.51   99%
PT Thoughtful Media Group Indonesia (FKA: PT Wahana Cerita Indonesia)  Indonesia
January 14, 2022
  Digital marketing and event organizer  IDR 51,000,000   100%
Mekong Leisure Travel Company Limited  Vietnam
October 6, 2011
  Online ticketing, reservation and system  VND 875,460,000   99%
Vietnam International Travel and Service Joint Stock Company  Vietnam
November 16, 2012
  Ticketing  VND 1,900,000,000   100%
Sopa Incorporated  Unites States
May 22, 2023
  Investment holding  Common: US$0.10   100%
Nusatrip Incorporated  United States
May 22,2023
  Investment holding  Common: US$0.10   100%

7

 

 

The Company and its subsidiaries are hereinafter referred to as (the “Company”).

 

On February 23, 2023, Society Pass Incorporated acquired additional issued capital in Nusatrip International Pte Ltd of 2,225,735 number of ordinary stock and increased its shareholding from 75% to 99%, and to the subsidiaries within the group.

 

On May 22, 2023, Thoughtful Media Group Inc and Society Pass Inc acquired additional issued capital in Thoughtful (Thailand) Co Ltd of 397,000 and 2,000 number of ordinary stocks amounted to THB 1,985,000 and THB 10,000 respectively. Total shareholding interest remain unchanged.

 

On August 1, 2023, The Company 95% owned subsidiary Sopa Technology Pte. Ltd. disposed one of its 100% owned subsidiary Sopa (Phil) Incorporated to the Company 100% owned subsidiary Thoughtful Media Group Incorporated as internal group restructuring. At the same time, Sopa (Phil) Incorporated changed name to Thoughtful Media (Philippines) Inc.

 

NOTE2 LIQUIDITY AND CAPITAL RESOURCES

 

The accompanying unaudited condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

As of September 30, 2023, the Company had cash balances of $8,281,428, a working capital surplus of $2,184,517 and accumulated deficit $93,610,677. For the nine months ended September 30, 2023, the Company had a net loss of $12,617,489 and net cash used in operating activities of $9,817,965. Net cash used in investing activities was $296,287. Net cash used in financing activities was $650,525, resulting principally from share repurchase and purchase of subsidiary.

 

While the Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance that it will be able to achieve these goals. As a result, the Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed to finance the Company’s business development activities, general and administrative expenses and growth strategy.

 

Global Events

 

The Russian-Ukraine war and the supply chain disruption have not affected any specific segment of our business.

 

NOTE3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

 

Basis of presentation

 

The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed consolidated balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent quarter or for the full year ending December 31, 2023 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the 2022 audited financial statements and accompanying notes filed with the SEC.

 

8

 

 

Emerging Growth Company

 

We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

 

Use of estimates and assumptions

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts receivable, the incremental borrowing rate used to calculate right of use assets and lease liabilities, valuation and useful lives of intangible assets, impairment of long-lived assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on amounts due to related parties, inventory valuation, revenue recognition, the allocation of purchase consideration in business combinations, and deferred tax assets and the related valuation allowance.

 

Basis of consolidation

 

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

Business combination

 

The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810, Consolidation (“ASC 810”). ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations. Under ASC 805, all business combinations are accounted for by applying the acquisition method. Accounting for the resulting goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company’s results of operations.

 

Noncontrolling interest

 

The Company accounts for noncontrolling interests in accordance with ASC Topic 810, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.

 

Segment reporting

 

ASC Topic 280, Segment Reporting (“Topic 280”) establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in unaudited condensed consolidated financial statements. The Company currently operates in four reportable operating segments: (i) Online Grocery and Food and Groceries Deliveries, (ii) Digital marketing, (iii) Online ticketing and reservation, (iv) Telecommunications Reseller, (v) e-Commerce, and (vi) Merchant Point of Sale (“merchant POS”).

 

9

 

 

  Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of September 30, 2023 and December 31, 2022, the cash and cash equivalents excluded restricted cash amounted to $8,220,075 and $18,930,986, respectively.

 

The Company currently has bank deposits with financial institutions in the U.S. which exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250,000, so there were uninsured balance of $2,423,390 and $9,256,175 as of September 30, 2023 and December 31, 2022, respectively. In addition, the Company has uninsured bank deposits of $5,285,666 and $9,047,911 with a financial institution outside the U.S as of September 30, 2023 and December 31, 2022, respectively. All uninsured bank deposits are held at high quality credit institutions.

 

Restricted cash

 

Restricted cash refers to cash that is held by the Company for specific reasons and is, therefore, not available for immediate ordinary business use. The restricted cash represented fixed deposit maintained in bank accounts that are pledged. As of September 30, 2023 and December 31, 2022, the restricted cash amounted to $61,353 and $72,350, respectively.

 

Accounts receivable

 

Accounts receivables are recorded at the amounts that are invoiced to customers, do not bear interest, and are due within contractual payment terms, generally 30 to 90-days from completion of service or the delivery of a product. Credit is extended based on an evaluation of a customer’s financial condition, the customer’s creditworthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Quarterly, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company records bad debt expense and records an allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For receivables that are past due or not being paid according to payment terms, appropriate actions are taken to pursue all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Currently, the Company does not have any off-balance-sheet credit exposure related to its customers, and as of both September 30, 2023 and December 31, 2022, there was no need for allowance for doubtful accounts.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the nine months ended September 30, 2023 and 2022, the Company recorded an allowance for obsolete inventories of $0 and $0, respectively. The inventories were amounted to $838,843 and $310,932 at September 30, 2023 and December 31, 2022, respectively.

 

Prepaid expenses

 

Prepaid expenses represent payments made in advance for products or services to be received in the future and are amortized to expense on a ratable basis over the future period to be benefitted by that expense. Since the Company has prepaid expenses categorized as both current and non-current assets, the benefits associated with the products or services are considered current assets if they are expected to be used during the next twelve months and are considered non-current assets if they are expected to be used over a period greater than one year.

 

10

 

 

Property, plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values: 

 

   Expected
useful lives
Computer equipment  3 years
Office equipment  5 years
Renovation  5 years

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations. 

 

Impairment of long-lived assets

 

In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.

 

Revenue recognition

 

The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

 

  Identify the contract with a customer;
     
  Identify the performance obligations in the contract;
     
  Determine the transaction price;
     
  Allocate the transaction price to performance obligations in the contract; and
     
  Recognize revenue as the performance obligation is satisfied.

 

The Company generates its revenues from a diversified a mix of e-commerce activities that correspond to our four business segments (business to consumer or “B2C”), grocery and food delivery (B2C), telecommunication reseller (B2C) and the services providing to merchants for their business growth (business to business or “B2B”).

 

The Company’s performance obligations include providing connectivity between merchants and consumers, generally through an online ordering platform. The platform allows merchants to create an account, display a menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create an account and order from merchants on the consumer facing application. The platform allows a delivery company to accept an online delivery request and deliver or ship an order from a merchant to customer.

 

11

 

 

Lifestyle 

 

The Company has developed an online lifestyle platform (the “Lifestyle Platform”) under its own brand name of “Leflair” to enable consumers to purchase high-end brands in many categories. Using the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in various categories, including Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The Lifestyle Platform also allows customers to order from hundreds of vendor choices with personalized promotions based on their individual purchase history and location. The platform has also partnered with a Vietnam-based delivery company, Amilo, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or can collect their purchases at the Company’s logistics center.

 

Grocery and Food Delivery 

 

Other online platforms include online platforms in Vietnam, under the brand name of “Handycart”, and Philippines, under the brand names of “Pushkart” and “Mangan”, to enable the consumers to purchase meals from restaurants and food from local grocery and food merchants and deliver to them in their area.

 

Telecommunications

 

The Company operates a Singapore-based online telecommunication reseller platform under brand name of “Gorilla” to enable the consumers to subscribe local mobile data and overseas internet data in different subscription package. Established in Singapore in 2019, Gorilla utilizes blockchain and Web3 technology to operate a MVNO for its users in South East Asia (SEA). With network coverage to over 150 countries, Gorilla offers a full suite of mobile communication services such as local calls, international roaming, data, and SMS texting. More importantly, Gorilla enables its customers to convert unused mobile data into digital assets or Gorilla GO Tokens through its innovative proprietary blockchain-based SwitchBack feature. Gorilla GO Tokens in turn can be redeemed for eVouchers, to offset future bills, or be redeemed for other value-added services. Please visit https://gorilla.global/ for more information.

 

Digital Marketing

 

The acquisition of a digital media platform, TMG, amplifies the reach and engagement of the Company’s e-commerce ecosystem and retail partners. Originally founded in 2010, TMG today creates and distributes digital advertising campaigns across its multi-channel network in both SEA and the US. With its intimate knowledge of local markets, digital marketing technology tools and social commerce business focus, advertisers leverage TMG’s wide influencer network throughout SEA to market and sell advertising inventory exclusively with specific placement and effect.

 

As a result, Thoughtful Media’s content creator partners earn a larger share of advertising revenues from international consumer brands. Thoughtful Media’s data-rich multi-channel network has uploaded over 675,000 videos with over 80 billion video views. The current network of 263 YouTube channels has onboarded over 85 million subscribers with an average monthly viewership of over 600 million views.

 

Travel

 

The Company purchased the NusaTrip Group, a leading Jakarta-based Online Travel Agency (“OTA”) in Indonesia and across SEA. The NusaTrip acquisition extended the Company’s business reach into SEA regional travel industry and marked the Company’s first foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited by the International Air Transport Association, NusaTrip pioneered offering a comprehensive range of airlines and hotels to Indonesian corporate and retail customers. With its first mover advantage, NusaTrip has onboarded over 1.2 million registered users, over 500 airlines and over 200,000 hotels around the world as well as connected with over 80 million unique visitors. During the year, NusaTrip Group also acquired two Vietnam based companies having branding name of “VLeisure” and “VIT” selling air ticket, hotel reservation and providing hotel management software to local market.

 

12

 

 

The Company’s e-Commerce business is primarily conducted using Leflair’s Lifestyle Platform, as follows:

 

1)When a customer places an order on either the Leflair website or app, a sales orders report will be generated in the system. The Company will either fulfill this order from its inventory or purchase the item from the manufacturer or distributor. Once the Company has the item in its distribution center, it will contract with a logistics partner delivered to the end customer. The sale is recognized when the delivery is completed by the logistics partner to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to any product warranty. The Company is considered the principal in this e-commerce transaction and reports revenue on a gross basis as the Company establishes the price of the product, has responsibility for fulfillment of the order and retains the risk of collection.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $80,786 and $591,439 respectively, in the Lifestyle sector.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $361,710 and $1,484,154 respectively, in the Lifestyle sector.

 

The Company’s Merchant POS offers both software and hardware products and services to vendors, as follows:-

 

Software sales consist of:

 

  1) Subscription fees consist of the fees that the Company charge merchants to obtain access to the Merchant Marketing Program.
     
  2) The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month.
     
  3) The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $3,809 and $34, respectively, from software fees.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $5,696 and $21,924 respectively, from software fees.

 

Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.

 

The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC Topic 606 when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606 are present in the arrangement, revenue is recognized net of related direct costs since in these instances we act as an agent.

 

Software subscription fee — The Company’s performance obligation includes providing customer access to our software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and the customer is entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with automatic one-year renewal. The subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.

 

The Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of 10% on the invoiced value of sales.

 

13

 

 

Grocery and food delivery consists of online grocery under brand name “Pushkart” and food delivery service under brand name “Handycart” as follows:

 

Customers place order for groceries and take-out food through our online platforms of “Pushkart” and “Handcart” respectively. When the grocery or food merchant receives and order, our platform will assign a third-party delivery service to pick up and deliver the grocery and/or food order to the customer. Revenue is recognized when the grocery and/or food is delivered, at which time the customer pays for the grocery and /or food order with cash, at Net of merchant cost.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $6,415 and $77,471, respectively, from this stream.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $95,262 and $53,635, respectively, from this stream.

 

As a telecommunication reseller we provide local mobile data and overseas internet data plans under the brand name of “Gorilla,” which company we acquired in May 2022. Our telecommunication revenues are recorded for ASC Topic 606 purposes as follows:

 

Local mobile plan - customers choose and subscribe to a monthly local mobile plan through our “Gorilla” online platform. The Company will proceed to register the sim card (effectively, the mobile telephone number activation card) and arrange delivery of that Sim card to the customer. Following Sim card activation, the system will capture the monthly data usage of each customer, calculated in accordance with the package data capacity and monthly subscription rate, which amounts are aggregated and recorded as revenue. Unused data will be converted to Rewards Points and carried forward to next month for potential subsequent data usage. As a result of the rewards points, the company also recognize revenue from Rewards Point redemption for subscription fees offset, voucher redemption, extra data purchases, that the customer chooses to use via our online platform.

 

Overseas internet data plan – a customer will place order for their desired overseas internet data plan through either the “Gorilla” online platform or third-party partner platforms. Subscription revenue is recognized when the Sim card is delivered and activated.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $2,977 and $15,441, respectively, from telecommunications.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $23,648 and $21,083, respectively, from telecommunications.

 

Digital marketing 

 

Marketing services from customers

 

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

 

The Company derives its revenue from the provision of digital marketing services to customers. The Company offers customers with a comprehensive suite of digital marketing services to enhance their social media presence and reach their target audiences, particularly Gen Z and Millennials, to achieve marketing goals. The customers can leverage the Company’s experience in building content and fanbases with creators, their creators’ creativity, engagement, and trust among creators’ loyal fanbases to increase their brand awareness and sell products. The Company offers customized digital marketing solution, including (i) advising on content strategy and budget and recommending specific creators; (ii) communicating with and managing selected creators; (iii) producing and engaging relevant content with creators to promote key messages for customers; (iv) uploading branded content on creators’ social media channels; (v) amplifying the reach of creators’ and customers’ content through precise media planning and buying via boosting marketing services on social media platforms, such as Google; and (vi) providing optimization services through data analysis and reporting.

 

The Company’s customers’ payment terms generally range from 30-60 days of fulfilling its performance obligations and recognizing revenue.

 

Campaign-based marketing services revenue is recognized as a distinct single performance obligation when the Company transferrs services to customers, which occurs over time. The performance obligation may be a promise to place branded content on certain social media platforms and is satisfied upon delivery of such related services to customers. The duration of the service period is short, usually over 1-3 months. Such revenue is recognized at over time, for the amount the Company is entitled to receive, as and when the marketing services are provided and completed.

 

14

 

 

Marketing services from social media platforms (“platform revenue”)

 

The Company also derives its advertising revenue generated from its channel pages and posts on social media platforms, such as YouTube by monetizing its contents. The payments are usually received within 30 days upon completion of performance obligation for platform revenue services.

 

The Company recognizes revenue as performance obligations are satisfied as the creation of contents are published on the social media platforms, which occurs at a point in time. The advertisements are delivered primarily based on impressions of contents on social media platforms, hence the Company provided the advertising services by an on-going basis during the publication period and the outcome of the services can be received and consumed by the social media platform simultaneously.

 

The Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of 10% on the invoiced value of sales.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $1,784,695 and $1,211,428, respectively, from this stream.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $4,579,429 and $1,211,428, respectively, from this stream.

 

Online ticketing and reservation provides information, prices, availability, booking services for domestic and international air travel and hotels as follows:

 

The Company’s revenues are substantially reported on a net basis as the travel supplier is primarily responsible for providing the underlying travel services and the Company does not control the service provided by the travel supplier to the traveler. Revenue from air ticketing services, air ticket commission, hotel reservation and refund margin are substantially recognized at a point of time when the performance obligations that are satisfied.

 

During the three months ended September 30, 2023 and 2022, the Company generated revenue of $390,384 and $178,206, respectively, from this stream.

 

During the nine months ended September 30, 2023 and 2022, the Company generated revenue of $1,433,133 and $178,206, respectively, from this stream.

 

Contract assets

 

In accordance with ASC Topic 606, a contract asset arises when the Company transfers a good or performs a service in advance of receiving consideration from the customer as agreed upon. A contract asset becomes a receivable once the Company’s right to receive consideration becomes unconditional.

 

There were contract assets balance of $29,362 and $20,310 on September 30, 2023 and December 31, 2022, respectively.

 

Contract liabilities

 

In accordance with ASC Topic 606, a contract liability represents the Company’s obligation to transfer goods or services to a customer when the customer prepays for a good or service or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.

 

Contract liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue. The Company’s contract liability balance was $1,209,211 and $1,405,090 on September 30, 2023 and December 31, 2022, respectively.

 

  Software development costs

 

In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985, Software, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. These capitalized software costs are ratably amortized over the period of the software’s estimated useful life. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.

 

Research and development expenditures arising from the development of the Company’s own software are charged to operations as incurred. For the nine months ended September 30, 2023, and 2022, software development costs were $41,777 and $56,627, respectively. For the three months ended September 30, 2023 and 2022, the software development costs were $12,649 and $19,759, respectively. Based on the software development process, technological feasibility is established upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release have, to date, been immaterial and have been expensed as incurred.

 

15

 

 

  Cost of sales

 

Cost of sales under online ordering consist of the cost of merchandizes ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.

 

Cost of sales related to software sales and licensing consist of the cost of software and payroll costs, which are directly attributable to the sales and licensing of software. Cost of sales related to hardware sales consist of the cost of hardware and payroll costs, which are directly attributable to the sales of hardware.

 

Cost of sales related to grocery and food delivery consist of the cost of the outsourced delivery and the outsource payment gateway, which are directly attributable to the sales of grocery and food delivery.

 

Cost of sales related to our telecommunication data reseller segment consist of the cost of the primary telecommunication service, which are directly attributable to the sales of telecommunication data.

 

Cost of sales under digital marketing consist of the cost of primary digital marketing service, which are directly attributable to the sales of digital marketing.

 

  Shipping and handling costs

 

No shipping and handling costs are associated with the distribution of the products to the customers since those costs are borne by the Company’s suppliers or distributors for our merchant POS business.

 

The shipping and handling costs for all segments other than our e-commerce segment are recorded net in sales. For shipping costs related to our e-commerce business, those shipping costs are recorded in cost of sales.

 

  Sales and marketing

 

Sales and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $466,252 and $662,058 for the nine months ended September 30, 2023 and 2022, respectively. Advertising expense was $236,874 and $212,666 for the three months ended September 30, 2023 and 2022, respectively.

 

  Product warranties

 

The Company’s provision for estimated future warranty costs is based upon the historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company’s suppliers, the Company has concluded that no warranty liability is required as of September 30, 2023 and December 31, 2022. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal, although it looks at this issue every quarter to continue to support its assertion. 

 

  Income tax

 

The Company adopted the ASC 740 Income Tax provisions, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC Topic 740, nor did it record any uncertain tax positions for the three and nine month ended September 30, 2022, and 2021.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. On a quarterly basis, the Company reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances to reduce those amounts to the amounts management believes will be realized in future income tax returns.

 

In addition to U.S. income taxes, the Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax, there may be transactions and calculations for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

 

16

 

 

Foreign currencies translation and transactions

 

The reporting currency of the Company is the United States Dollar (“US$”) and the accompanying consolidated unaudited condensed financial statements have been expressed in US$s. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore, India and Philippines and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”), Indian Rupee (“INR”), Philippines Pesos (“PHP”), Malaysian Ringgit (“MYR), Thailand Baht (“THB”) and Indonesian Rupiah (“IDR”), respectively, which are the functional currencies in which the subsidiary’s operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$s, in accordance with ASC Topic 830, “Translation of Financial Statement” (“ASC 830”) using the applicable exchange rates on the balance sheet date. Shareholders’ equity is translated using historical rates. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from the translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited condensed statements of changes in shareholder’s equity.

 

Schedule of Foreign currencies translation and transactions

 

Translation of amounts from SGD into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
   September 30,
2022
 
Period-end SGD$:US$ exchange rate  $0.73165   $0.72692 
Period average SGD$:US$ exchange rate  $0.74578   $0.69708 

 

Translation of amounts from VND into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
   September 30,
2022
 
Period-end VND$:US$ exchange rate  $0.000041   $0.000042 
Period average VND$:US$ exchange rate  $0.000042   $0.000043 

 

Translation of amounts from INR into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
   September 30,
2022
 
Period-end INR$:US$ exchange rate  $0.012021   $0.012268 
Period average INR$:US$ exchange rate  $0.012143   $0.012928 

 

Translation of amounts from PHP into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
  

September 30,

2022

 
Period-end PHP:US$ exchange rate  $0.017639   $0.017022 
Period average PHP:US$ exchange rate  $0.018016   $0.018682 

 

17

 

 

Translation of amounts from THB into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
   September 30,
2022
 
Period-end THB:US$ exchange rate  $0.027272   $0.026390 
Period average THB:US$ exchange rate  $0.028947   $0.028899 

 

Translation of amounts from MYR into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
  

September 30,

2022

 
Period-end MYR:US$ exchange rate  $0.212764   $0.215560 
Period average MYR:US$ exchange rate  $0.221567   $0.230418 

 

Translation of amounts from IDR into US$ has been made at the following exchange rates for the nine months ended September 30, 2023 and 2022:

 

   September 30,
2023
   September 30,
2022
 
Period-end IDR:US$ exchange rate  $0.000064   $0.000066 
Period average IDR:US$ exchange rate  $0.000066   $0.000069 

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

 

Comprehensive income

 

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Earnings per share

 

Basic per share amounts are calculated using the weighted average shares outstanding during the year, excluding unvested restricted stock units. The Company uses the treasury stock method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury stock method, only “in the money” dilutive instruments impact the diluted calculations in computing diluted earnings per share. Diluted calculations reflect the weighted average incremental common shares that would be issued upon exercise of dilutive options assuming the proceeds would be used to repurchase shares at average market prices for the years.

 

For the three and nine months ended September 30, 2023 and 2022, diluted weighted-average common shares outstanding is equal to basic weighted-average common shares, due to the Company’s net loss position. Hence, no common stock equivalents were included in the computation of diluted net loss per share since such inclusion would have been antidilutive.

 

18

 

 

Schedule of computation of diluted net loss per share:

 

   Three months ended
September 30,
 
   2023   2022 
Net loss attributable to Society Pass Incorporated  $(3,861,929)  $(9,959,793)
Weighted average common shares outstanding – Basic and diluted
   28,483,858    25,302,206 
Net loss per share – Basic and diluted
  $(0.14)  $(0.39)

 

   Nine months ended
September 30,
 
   2023   2022 
Net loss attributable to Society Pass Incorporated  $(12,472,114)  $(24,012,495)
Weighted average common shares outstanding – Basic and diluted   27,917,875    23,856,503 
Net loss per share – Basic and diluted  $(0.45)  $(1.01)

 

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:

 

Schedule of Common stock issued:

 

   Nine months ended
September 30,
 
   2023   2022 
Options to purchase common stock (a)   1,945,270    1,945,270 
Warrants granted to underwriter   3,803,229    3,793,929 
Warrants granted with Series C-1 Convertible Preferred Stock (b)   1,068,000    
 
Total of common stock equivalents   6,186,499    5,739,199 

 

(a) The Board of Directors have approved a 10-year stock option at an exercise price of $6.49 per share that will be exercisable at any time.
   
(b) The expiry date of warrants granted with Series C-1 was extended to June 30, 2022.

 

Leases

 

The Company adopted Topic 842, Leases (“ASC 842”) to determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets. 

 

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

 

When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.

 

19

 

 

As of September 30, 2023 and December 31, 2022, the Company recorded the right of use asset of $1,448,904 and $1,537,670 respectively.

 

Retirement plan costs

 

Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.

 

Share-based compensation

 

The Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee and non-employee), at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option pricing model to estimate the fair value of employee stock options at the date of grant. As of September 30, 2023, those shares issued and stock options granted for service compensation, vest 180 days after the grant date, and therefore these amounts are thus recognized as expense during the nine months ended September 30, 2023 and 2022. Stock-based compensation is recorded in general and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss, with corresponding credits to common stock and accumulated paid-in capital.

 

Warrants

 

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its preferred and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option pricing model to estimate the grant date fair value of the warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital (the accounting treatment for common stock issuance costs). All other warrants are recorded at the grant date fair value as an expense over the requisite service period, or at the date of issuance if the warrants vest immediately.

 

Related parties

 

The Company follows ASC 850-10, Related Party Disclosures (“ASC 850”) for the identification of related parties and the disclosure of related party transactions.

 

Pursuant to ASC 850, the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under ASC 825, Financial Instruments, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The unaudited condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required by ASC 850. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

20

 

 

Commitments and contingencies

 

The Company follows the ASC 450, Commitments, to account for contingencies. Certain conditions may exist as of the date the unaudited condensed financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, which assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows if the current level of facts and circumstances changes in the future.

 

Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

  Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
  Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
  Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

21

 

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties and operating lease liabilities, approximate their fair values because of the short maturity of these instruments.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.

 

In June 2022, the FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03). This ASU was issued to resolve differences in practice regarding how to record the issuance of common stock with sale restrictions that pertain to the receiving party. The FASB concluded in ASU 2022-03 that these types of restrictions were not attributes of the stock issued but related to the parties to whom the stock was issued. As a result, the ASU 2022-03 requires companies to record the issuance of this type of restricted stock at its face value (i.e., not discount the stock because the receiving party can’t immediately sell the stock). From time-to-time, the Company may acquire another company in a transaction in which Company restricted stock is issued. The Company has reviewed ASU 2022-03 and does not expect that it will affect the Company.

 

All other recently issued, but not yet effective, 2023 Accounting Standards Updates are not expected to have an effect on the Company.

 

NOTE4 REVENUE

 

Revenue was generated from the following activities:

 

   Nine months ended
September 30,
 
   2023   2022 
Sales – online ordering  $456,972   $1,561,625 
Sales – digital marketing   4,579,429    1,211,428 
Sales – online ticketing and reservation   1,433,133    178,206 
Sales – data   23,648    21,083 
Software subscription sales   5,696    21,924 
Hardware sales   
    150 
   $6,498,878   $2,994,416 

 

   Three months ended
September 30,
 
   2023   2022 
Sales – online ordering  $87,201   $645,074 
Sales – digital marketing   1,784,695    1,211,428 
Sales – online ticketing and reservation   390,384    178,206 
Sales – data   2,977    15,441 
Software subscription sales   3,809    34 
Hardware sales   
    81 
   $2,269,066   $2,050,264 

 

Contract liabilities recognized was related to online ticketing and reservation, digital marketing, telecommunication reseller and software sales and the following is reconciliation for the periods presented:

 

Schedule of Contract liabilities:

 

   September 30,
2023
   December 31,
2022
 
Contract liabilities, brought forward  $1,405,090   $25,229 
Add: recognized as deferred revenue   1,209,211    1,405,090 
Less: recognized as revenue   (1,405,090)   (25,229)
Contract liabilities, carried forward  $1,209,211   $1,405,090 

 

22

 

 

NOTE5 SEGMENT REPORTING 

 

Currently, the Company has four reportable business segments:

 

(i)e-Commerce – operates an online lifestyle platform under the brand name of “Leflair” covering a diversity of services and products, such as fashion and accessories, beauty and personal care, and home and lifestyle, all managed by SOPA Technology Company Ltd,

 

(ii)Merchant point of sale (“POS”) – is involved in the sale of hardware and software to merchants and this segment is managed by Hottab group and SOPA entities except SOPA Technology Company Ltd,

 

(iii)Online grocery and food deliveries – operate an online food delivery service under the “Handycart” brand name and an online grocery delivery under the “Pushkart” brand name, managed by Dream Space Trading Co Ltd and New Retail Experience Incorporated respectively, and

 

(iv)Telecommunication reseller – provide sales of local mobile phone plans and global internet data provider plans, both services managed by the Gorilla Group.

 

(v)Digital marketing operates the digital marketing business with creator and digital marketing platform.

 

(vi)Online ticketing and reservation - operates the sale of domestic and overseas air ticket, global hotel reservations and provide hotel management software.

 

The Company’s Chief Finance Officer (CFO) evaluates operating segments using the information provided in the following tables that presents revenues and gross profits by reportable segment, together with information on the segment tangible and intangible assets.

 

Schedule of Segment Reporting

 

   Nine Months ended September 30, 2023 
   Online
F&B and
Groceries
Deliveries
   Digital
Marketing
   Online
Ticketing
and
reservation
   e-Commerce   Telecommunication
Reseller
   Merchant
POS
   Total 
Revenue from external customers                            
Sales – online ordering   95,262    
    
    361,710    
    
    456,972 
Sales – digital marketing   
    4,483,923    95,506    
    
    
    4,579,429 
Sales – online ticketing and reservation   
    
    1,433,133    
    
    
    1,433,133 
Sales – data   
    
    
    
    23,648    
    23,648 
Software sales   
    
    4,951    
    
    745    5,696 
Total revenue   95,262    4,483,923    1,533,590    361,710    23,648    745    6,498,878 
                                    
Cost of sales:                                   
Cost of online ordering   (102,677)   
    
    (334,119)   
    
    (436,796)
Cost of digital marketing   
    (3,727,264)   (794)   
    
    
    (3,728,058)
Cost of online platform   
    
    (282,406)   
    
    
    (282,406)
Cost of data   
    
    
    
    (40,409)   
    (40,409)
Software cost   
    
    (21,019)   (162,309)   
    (1,921)   (185,249)
Total cost of revenue   (102,677)   (3,727,264)   (304,219)   (496,428)   (40,409)   (1,921)   (4,672,918)
                                    
Gross income (loss)   (7,415)   756,659    1,229,371    (134,718)   (16,761)   (1,176)   1,825,960 
                                    
Operating Expenses                                   
Sales and marketing expenses   (1,782)   (21,712)   (207,899)   (70,244)   (10,977)   (153,638)   (466,252)
Software development costs   
    
    
    
    
    (41,777)   (41,777)
Depreciation   (25,834)   (11,814)   (65,921)   (31,119)   
    (49,402)   (184,090)
Amortization   
    
    (19,359)   
    (89,757)   (809,994)   (919,110)
General and administrative expenses   (580,999)   (1,065,006)   (1,428,504)   (602,717)   (76,169)   (9,469,886)   (13,223,281)
Total operating expenses   (608,615)   (1,098,532)   (1,721,683)   (704,080)   (176,903)   (10,524,697)   (14,834,510)
                                    
Loss from operations   (616,030)   (341,873)   (492,312)   (838,798)   (193,664)   (10,525,873)   (13,008,550)
                                    
Other income (expense) JV income   7,660    
    
    
    
    
    7,660 
Gain on early lease termination   
    1,064    
    
    
    
    1,064 
Interest income   8    205    2,027    1,002    
    130,565    133,807 
Interest expense   (27)   
    14    
    (917)   
    (930)
Waiver of loan payable   214,959    
    
    
    
    (11,021)   203,938 
Written-off of fixed assets   (7,676)   
    
    
    
    
    (7,676)
Other income   5,342    456    (92,552)   1,983    12,400    127,983    55,612 
Total other income (expense)   220,266    1,725    (90,511)   2,985    11,483    247,527    393,475 
Loss before income taxes   (395,764)   (340,148)   (582,823)   (835,813)   (182,181)   (10,278,346)   (12,615,075)

 

23

 

 

   Three Months ended September 30, 2023 
   Online
F&B and
Groceries
Deliveries
   Digital
Marketing
   Online
Ticketing
and
reservation
   e-Commerce   Telecommunication
Reseller
   Merchant
POS
   Total 
Revenue from external customers                            
Sales – online ordering   6,415    
    
    80,786    
    
    87,201 
Sales – digital marketing   
    1,689,189    95,506    
    
    
    1,784,695 
Sales – online ticketing and reservation   
    
    390,384    
    
    
    390,384 
Sales – data   
    
    
    
    2,977    
    2,977 
Software sales   
    
    3,809    
    
    
    3,809 
Total revenue   6,415    1,689,189    489,699    80,786    2,977    
    2,269,066 
                                    
Cost of sales:                                   
Cost of online ordering   (3,317)   
    
    (73,744)   
    
    (77,061)
Cost of digital marketing   
    (1,456,419)   (794)   
    
    
    (1,457,213)
Cost of online platform   
    
    (110,862)   
    
    
    (110,862)
Cost of data   
    
    
    
    (7,055)   
    (7,055)
Software cost   
    
    (12,386)   (41,925)   
    
    (54,311)
Total cost of revenue   (3,317)   (1,456,419)   (124,042)   (115,669)   (7,055)   
    (1,706,502)
                                    
Gross income (loss)   3,098    232,770    365,657    (34,883)   (4,078)   
    562,564 
                                    
Operating Expenses                                   
Sales and marketing expenses   
    (535)   (59,341)   (14,822)   (10,925)   (151,251)   (236,874)
Software development costs   
    
    
    
    
    (12,649)   (12,649)
Depreciation   (16,607)   (5,544)   (9,230)   (11,685)   
    (5,493)   (48,559)
Amortization   
    
    (19,359)   
    (89,757)   (2,473)   (111,589)
General and administrative expenses   (391,702)   (433,089)   (421,954)   (172,888)   (2,968)   (2,872,797)   (4,295,398)
Total operating expenses   (408,309)   (439,168)   (509,884)   (199,395)   (103,650)   (3,044,663)   (4,705,069)
                                    
Loss from operations   (405,211)   (206,398)   (144,227)   (234,278)   (107,728)   (3,044,663)   (4,142,505)
                                    
Other income (expense) JV income   816    
    
    
    
    
    816 
Gain on early lease termination   
    
    
    
    
    
    
 
Interest income   3    82    681    219    
    33,628    34,613 
Interest expense   
    
    9    
    (287)   
    (278)
Waiver of loan payable   188,738    
    
    
    
    
    188,738 
Written-off of fixed assets   (5,093)   
    
    
    
    
    (5,093)
Other income   2,068