The following discussion and analysis provide information which we believe is
relevant to an assessment and understanding of our audited consolidated results
of operations and financial condition. You should read the following discussion
and analysis of our financial condition and results of operations together with
our condensed consolidated financial statements and related notes thereto
included elsewhere in this Annual Report on Form 10-K. This discussion contains
forward-looking statements that involve risks and uncertainties. For a complete
discussion of forward-looking statements, see the section in this report
entitled “Forward-Looking Statements.” Certain risk factors may cause our actual
results, performance or achievements to differ materially from those expressed
or implied by the following discussion. For a discussion of such risk factors,
see the sections in this report entitled “Risk Factors” and “Forward-Looking
Statements”. Our historical results are not necessarily indicative of the
results that may be expected for any period in the future.
Overview
We are, through the acquisition and operation of e-commerce platforms and mobile
applications through our direct and indirect wholly or majority-owned
subsidiaries, building the next generation digital ecosystem and loyalty
platform in Southeast Asia (“SEA”) primarily Singapore, Thailand, Indonesia,
Vietnam and the Philippines.
The companies by the Company form the Society Pass Group (the “Group”). The
Group currently markets to both consumers and merchants in SEA while maintaining
an administrative headquarters in Singapore and a software development center in
the Philippines. We continue to expand our e-commerce ecosystem throughout the
rest of SEA by making selective acquisitions of leading e-commerce companies and
applications with particular focuses on the VIP countries (Vietnam, Indonesia
and Philippines) of SEA. Material acquisitions include:
• In February 2021, we acquired an online lifestyle platform of Leflair branded
assets (the “Leflair Assets”).
• In February 2022, we acquired NREI and Dream Space in February 2022 which
operate the food delivery companies Pushkart in the Philippines and Handycart
in Vietnam, respectively.
• In May 2022, we acquired Gorilla Net and Gorilla Mobile in May 2022. • In July 2022, through our wholly-owned subsidiary, New Retail Experience
Incorporated, we acquired Mangan PH Food Delivery Services Corp., a corporation
registered in [Philippines;
• In July 2022, through our wholly-owned subsidiary, Thoughtful Media Group
Incorporated, a Nevada corporation, we acquired a digital marketing company
with significant operations in Thailand and the United States.
• In August 2022, we acquired entities that give us ownership of the Nusatrip
travel services marketing platform. 29
Operating in SEA, we are focused on six operating verticals: loyalty, lifestyle,
grocery and food delivery, telecommunications, digital media, and travel.
Loyalty
The Company spent over two years building a cutting edge, proprietary IT
architecture to effectively scale and support our ecosystem’s companies,
consumers and merchants. Using our loyalty platform, which we plan to introduce
in 2023, consumers may earn, and merchants may issue, Society Points. The
Company will aggregate the data across various touch points and build a
realistic view or consumer behavior and use this behavior to increase sales
across our ecosystem by: cross-pollinating acquired companies with other
existing verticals, customer re-targeting, offline and online behavior
prediction and cross promotions and loyalty points. The Company ecosystem
becomes a key enabler for our users by converting this aggregation of data into
creation of loyalty for our ecosystem companies to generate revenue.
Lifestyle
The Company has an online lifestyle platform to enable the consumers to purchase
high-end brands of all categories under its own brand name of “Leflair”. Under
the deployment of the Company’s smart search engine, consumers search or review
their favorite brands among hundreds of choices in Apparel, Bags & Shoes,
Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and
Kids & Babies categories. The platform also allows consumers to order from
hundreds of vendor choices with personalized promotions based on purchase
history and location. The platform has also partnered up with a Vietnam-based
delivery company, Amilo, to offer seamless delivery of product from merchant to
consumer’s home or office at the touch of a button. Consumers can place orders
for delivery or collect at the Company’s logistics center.
Grocery and Food Delivery
The Company owns several online platforms include brand name of “Mangan,”
“Handycart” and “Pushkart” to enable the consumers to purchase meals from
restaurants or grocery and food from difference local grocery and food merchants
and deliver to them in their area.
Digital Media
The acquisition of a digital media platform, Thoughtful Media, amplifies the
reach and engagement of the Company’s e-commerce ecosystem and retail partners.
Originally founded in 2010, Thoughtful Media 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
Thoughtful Media’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. And according to
Accenture, the social commerce market is poised to grow to $1.2 trillion by 2025
at a CAGR of 26%. 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.
Telecommunications
The Company also has online telecommunication reseller platform operate under
brand name of “Gorilla” to enable the consumers to subscribe local mobile data
and overseas internet data in different subscription package. Established in
Singapore in 2019, Gorilla utilizes Web3 technology to operate a MVNO for its
users in Southeast Asia. With network coverage to over 160 countries, Gorilla
offers a full suite of mobile communication services such as local calls,
international roaming, data, and SMS texting. More importantly, Gorilla enables
its customers to convert unused mobile data into digital assets or Gorilla GO
Tokens through its innovative proprietary blockchain-based SwitchBack feature.
Gorilla GO Tokens in turn can be redeemed for eVouchers, to offset future bills,
or be redeemed for other value-added services.
30 Travel
The Company purchased Nusatrip, a leading Jakarta-based Online Travel Agency
(“OTA”) in Indonesia and across SEA. The Nusatrip acquisition extended SoPa’s
business reach into SEA regional travel industry and marked the Company’s first
foray into Indonesia. Established in 2013 as the first Indonesian OTA accredited
by the International Air Transport Association, Nusatrip pioneered offering a
comprehensive range of airlines and hotels to Indonesian corporate and retail
customers. With its first mover advantage, Nusatrip has onboarded over 1.2
million registered users, over 500 airlines and over 200,000 hotels around the
world as well as connected with over 80 million unique visitors.
Our loyalty-focused and data-driven e-commerce marketing platform interfaces
connect consumers with merchants in the F&B and lifestyle sectors, assisting
local brick-and-mortar businesses to access new customers and markets to thrive
in an increasingly convenience-driven economy. Our Platform integrates with both
global and country-specific search engines and applications and accepts
international address and phone number data, providing a consumer experience
that respects local languages, address formats and customs. Our Strategic
Partners (as defined below) work with us to penetrate local markets, while our
Platform allows effortless integration with existing technological applications
and websites.
As of March 21, 2023, we have onboarded over 3.3 million registered consumers
and over 200,000 registered merchants on our Platform.
Impact of the COVID-19 Pandemic and other Global Events
The full impact of the COVID-19 pandemic on our business, financial condition
and results of operations remains unpredictable due to the evolving nature of
the COVID-19 pandemic and the extent of its impact across industries and
geographies and numerous other uncertainties. For example, we cannot predict the
duration and spread of the outbreak of new variants of the virus, additional
actions that may be taken by governmental entities, or the impact the pandemic
may have on the ability of us, our customers, our suppliers, our manufacturers,
and our other business partners to conduct business. To date, COVID-19 has led
to the implementation of various responses, including government-imposed
quarantines, business closures, travel restrictions, and other public health
safety measures. The extent to which the COVID-19 pandemic impacts our business
will depend on future developments, which are highly uncertain and cannot be
predicted at this time, including:
• new information which may emerge concerning the severity of the disease in
Vietnam and SEA;
• the duration and spread of the outbreak; • the severity of travel restrictions imposed by geographic areas in which we
operate, mandatory or voluntary business closures;
• regulatory actions taken in response to the pandemic, which may impact merchant
operations, consumer and merchant pricing, and our product offerings;
• other business disruptions that affect our workforce; • the impact on capital and financial markets; and • action taken throughout the world, including in markets in which we operate, to
contain the COVID-19 outbreak or treat its impact.
In addition, the current outbreak of COVID-19 has resulted in a widespread
global health crisis and adversely affected global economies and financial
markets, and similar public health threats could do so in the future. Such
events have impacted, and could in the future impact, demand for merchants and
consumer purchase patterns, which in turn, could adversely affect our revenue
and results of operations.
31
Since the onset of the COVID-19 pandemic in March and April 2020, all our POS
merchant clients are affected by COVID-19 measures for F&B to temporary stop
restaurant dine ins.
• Some of our restaurant clients ceased operations permanently and many were
closed since June 2020 without any notice of reopening their business to date.
• Our largest POS client, a hotel chain for which we provide POS services to
their F&B business in their hotels, ceased operations in two out of nine hotels
since April 2020.
• The Company faces challenges to onboard new clients but at the same time losing
many existing ones.
With the ongoing pandemic, Company faces challenges in our operation as follows:
• Disruption of operation in Vietnam, Philippines, India, Singapore and US where
staffs have to work from home.
• The coordination of rebooting of company’s recent asset acquisition of NREI and
Dream Space, which are the F&B Delivery platforms in operate in Philippines and
Vietnam respectively.
• Application of licenses are delayed as government agencies take longer time to
review and process time.
• HR process to hire personnel are generally slow due to people not willing to
leave their current job, company have to spend more time and resource
The spread of COVID-19 has caused us to modify our business practices, including
employee travel, employee work locations in certain cases, and cancellation of
physical participation in certain meetings, events and conferences and further
actions may be taken as required or recommended by government authorities or as
we determine are in the best interests of our employees, customers, and other
business partners. We are monitoring the global outbreak of the pandemic, in
SEA, especially Vietnam and are taking steps in an effort to identify and
mitigate the adverse impacts on, and risks to, our business posed by its spread
and the governmental and community reactions thereto.
The Russian-Ukraine war and the supply chain disruption have not affected any
specific segment of our business.
Software and Development
Our ability to compete depends in large part on our continuous commitment to
research and development, our ability to rapidly introduce new features and
functionality and our ability to improve proven applications for established
markets in which we have competitive advantages. We intend to work closely with
our customers to continuously enhance the performance, functionality, usability,
reliability and flexibility of our applications.
Our software and development team are responsible for the design enhancements,
development, testing and certification of the Application. In addition, we may,
in the future, utilize third parties for our automated testing, managed
upgrades, software development and other technology services.
Intellectual Property Portfolio
We strive to protect and enhance the proprietary technology and inventions that
are commercially important to our business, including seeking, maintaining and
defending patent rights. Our policy is to seek to protect our proprietary
position through a combination of intellectual property rights, including
trademarks, copyrights, trade secret laws and internal procedures. Our
commercial success will depend in part on our ability to protect our
intellectual property and proprietary technologies.
32
Financial Condition
Results of Operations
The following table sets forth certain operational data for the year ended
December 31, 2022 and 2021:
YEAR ENDED
DECEMBER 31,
2022 2021
Revenue, net $ 5,635,553 $ 519,885
Cost of revenue $ (4,668,580 ) $ (710,683 )
Gross profit/ loss $ 966,973 $ (190,798 )
Less operating expenses:
Sales and marketing expenses $ (997,784 ) $ (327,195 )
Software development costs $ (72,999 ) $ (95,809 )
Impairment loss $ (3,499,881 ) $ (200,000 )
General and administrative expenses $ (30,552,365 ) $ (33,398,401 )
Total operating expenses
$ (35,123,029 ) $ (34,021,405 ) Loss from operations $ (34,156,056 ) $ (34,212,203 )
Other income (expense):
Change in contingent service payable $ 2,442 $ –
Gain from early lease termination $ 2,166 $ 2,454
Interest income
$ 84,116 $ 116 Interest expense $ (25,105 ) $ (41,514 ) Loss on disposal of fixed assets $ (19,964 ) - Loss on settlement of litigation $ - $ (550,000 ) Warrant modification expense $ - $ (58,363 ) Other income $ 101,010 $ 5,906 Total other expense $ 144,665 $ (641,401 ) Loss before income taxes $ (34,011,391 ) $ (34,853,604 ) Income taxes $ (3,631 ) $ (11,136 ) NET LOSS $ (34,015,022 ) $ (34,864,740 )
Revenue. For the year ended December 31, 2022 and 2021 we generated revenue of
$5,635,553 and $519,885 respectively. The significant increase in revenue was
mainly due to an increase in the sales from our online platforms and newly
acquired subsidiaries.
Revenue by business segment. For the year ended December 31, 2022 and 2021
e-Commerce generated revenue of $2,118,191 and $482,002 respectively, as online
ordering increased as a result of a marketing boost. Merchant POS revenue
decrease from $37,883 to $23,951 from year ended December 31, 2021 to December
31, 2022 due to business downsizing. The other business segments are online F&B
and Groceries Deliveries, Telecommunication Reseller, Digital Marketing, and
Online Ticketing and Reservation, generated revenue of $150,999, $23,747,
$2,593,674 and $724,991 respectively, are newly acquired during the year 2022.
Revenue by geographic segment. From the year ended December 31, 2021 to December
31, 2022, Vietnam revenue increased from $485,055 to $2,186,007 mainly arise
from our e-Commerce business segment. Indonesia revenue increased from $34,830
to $443,147 as a result of our newly acquired Online Ticketing and Reservation
business segment. During the year ended December 31, 2022, we generated revenue
from our new geographic segments in the Philippines, Singapore, United States,
Thailand, Malaysia, and Hong Kong, from the newly acquired business segments.
Top Customers Revenue for the year ended December 31, 2022 and 2021
For the year ended December 31, 2022 and 2021, the following customer exceeded
10% of the Company’s revenues:
Year ended December 31, 2022 December 31, 2022
Customer Revenues Percentage of revenues Accounts receivable
Customer C $ 2,310,933 41.01 % $ 385,183
Year ended December 31, 2021 December 31, 2021
Percentage Accounts
Customer Revenues of revenues receivable
Customer A** $ 387,213 74 % $ 54,160 *
Customer B*** 94,698 18 % (9,298 )****
* This included value added taxed (“VAT”)
** The Company engaged Tiki Smart Logistic for collection of cash on delivery
arrangement from their end customer.
*** The Company engaged PayDollars for online payment gateway arrangement from
their end customer.
**** Due to order cancelation the amount became credit balance.
33
The above significant customers are located in United States and Vietnam.
Cost of Revenue. For the year ended December 31, 2022 and 2021, we incurred cost
of revenue of $4,668,580 and $710,683 respectively. The increase in revenue cost
was matched by a significant rise in revenue.
Major vendors
For the year ended December 31, 2022 and 2021, there is no vendor accounted for
10% or more of the Company’s cost of revenue as at year-end dates.
Gross Profit/ Loss. For the year ended December 31, 2022 and 2021, we recorded a
gross profit and gross loss of $966,973 and $190,798 respectively. The
turnaround from gross loss to gross profit is due to increased revenue from
e-commerce and our newly acquired digital marketing and online ticketing and
hotel reservation business.
Sales and Marketing Expenses (“S&M”). For the year ended December 31,2022 and
2021, we have incurred S&M expenses of $997,784 and $327,195 respectively. The
increase in S&M is primarily attributable to the increased in sales activity and
the related promotion expenses needed for new merchants joining our e-commerce
platform. Further, there was an increase marketing cost in 2022 to attract
attention of customers to our e-commerce platform.
Software Development Cost (“SDC”). For the year ended December 31, 2022 and
2021, we incurred SDC expenses of $72,999 and $95,809 respectively. The decrease
in SDC in 2022 is primarily attributable to the restructuring of our technology
development team.
Impairment Charge (“IC”). For the year ended December 31,2022 and 2021, we
incurred IC expenses of $3,499,881 and $200,000 respectively. The increase is
primarily attributable to the impairment of goodwill related to the acquisition
of the NREI, Gorilla, TMG and Nusatrip which were expensed during the period due
to the short life term of the asset and the quantum of consideration.
General and Administrative Expenses (“G&A”). For the year ended December 31,
2022 and 2021, we incurred G&A expenses of $30,552,365 and $33,398,401
respectively. The decrease in G&A is primarily attributable to the decrease in
professional costs associated with costs related to business acquisitions, the
Company’s filing for listing on the Nasdaq Stock Exchange, stock based
compensation for services, and D&O insurance cost.
Loss on settlement of litigation. On May 21, 2021, the Company agreed to settle
a litigation matter for $550,000 in cash. The settlement was paid in two
tranches, with both tranches paid in the second quarter of 2021. In connection
with the settlement, the Company recognized litigation settlement expense in the
amount of $550,000 in the year ended 2021. There were no such expenses incurred
in the comparative year ended 2022.
Income Tax Expense. Our income tax expenses for the year ended December 31,2022
and 2021 was $3,631 and $11,136, respectively.
Net Loss. As a result of the items noted above, for the year ended December 31,
2022, we incurred a net loss of $34,015,022, as compared to $34,864,740 for the
same year ended December 31, 2021. The net loss is primarily attributable to
general and administrative expenses.
34
Liquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents of $18,930,986,
accounts receivable of $951,325, deposits, prepayments and other receivables of
$2,711,042 and inventories of $310,932.
As of December 31, 2021, we had cash and cash equivalents of $23,264,777,
accounts receivable of $52,588, deposits, prepayments and other receivables of
$6,094,254 and inventories of $221,068.
As of December 31, 2022, the Company’s stockholders’ equity was $20,011,317
which decreased as a result of a net loss partially offset by additional
paid-in-capital primarily from a secondary public offering. For the year ended
December 31, 2022, the Company incurred net loss of $34,015,022 and net cash
used in operating activities of $14,453,759. Net cash provided by investing
activities was $177,393. For the year ended December 31, 2021, net cash provided
by financing activities was $10,182,905, resulting principally from the
$10,402,891 net proceeds from a public offering and $412,890 of net proceeds
from the C1 warrants exercised during the period ended December 31, 2022,
partially offset by repayment of the First Insurance Funding loan in the amount
of $632,876 during 2022.
While the Company believes that it will be able to continue to grow the
Company’s revenue base and control expenditures, there is no assurance it will
be able to do so. The Company continually monitors its cash, capital structure
and operating plans and evaluates various potential funding alternatives that
may be needed in order to finance the Company’s business development activities,
general and administrative expenses and growth strategy. We expect to continue
to rely on cash generated through financing from public offerings or private
offerings of our or one or more of our subsidiaries’ securities, to finance our
operations and future acquisitions. The Company believes that it has sufficient
liquidity to continue its current business plans and operations for more than
one year.
Year Ended December 31,
2022 2021
Net cash (used in) operating activities $ (14,453,759 ) $ (10,813,938 )
Net cash provided by (used in) investing activities 177,393 (246,837 )
Net cash provided by financing activities
10,182,905 33,823,757 Effect on exchange rate change (167,980 ) (4,871 ) Net change in cash and cash equivalents (4,261,441 ) 22,758,111 Cash and cash equivalent at beginning of year 23,264,777 506,666 Cash and cash equivalent at end of year 19,003,336 23,264,777
Net Cash Used in Operating Activities.
For the year ended December 31, 2022, net cash used in operating activities was
$14,453,759, which consisted primarily of a net loss of $34,015,022, partially
offset by non-cash stock based compensation for services of $8,299,566, a
decrease in deposits, prepayments and other receivables of $6,374,684,
depreciation and amortization of $3,307,832, and a non-cash goodwill impairment
loss of $3,499,881.
For the year ended December 31, 2021, net cash used in operating activities was
$10,813,938, which consisted primarily of net loss of $34,864,740, partially
offset by non-cash stock based compensation for services of $25,889,909, a loss
on settlement of litigation of $550,000, a decrease in accrued liabilities and
other payables of $413,974, depreciation and amortization of $3,210,448 and a
non-cash impairment loss of $200,000.
Until we generate cash flows from operations, we expect to continue to rely on
cash generated through financing from public offerings or private offerings by
the Company or one or more of our subsidiaries’ securities, however, to finance
our operations and future acquisitions.
35
Net Cash Provided by (Used In) Investing Activities.
For the year ended December 31, 2022, there was a net cash inflow of $177,393
primarily as a result of the cash from business acquisition of $1,643,659,
partially offset by acquisition of subsidiaries of $820,000 and purchase of
property, plant, and equipment of $566,266.
For the year ended December 31, 2021, there was a net cash outflow of $246,837
for a deposit paid related to the Leflair asset acquisition.
Net Cash Provided by Financing Activities.
For the year ended December 31, 2022, net cash provided by financing activities
was $10,182,905, consisting primarily of funds raised from a public offering and
Series C-1 warrants exercised partially offset by repayment of the First
Insurance Funding Loan.
For the year ended December 31, 2021, net cash provided by financing activities
was $33,823,757, consisting primarily of funds raised from shareholders for
Series C Preferred Stock and warrants exercised.
Critical Accounting Policies and Estimate
• Basis of presentation
These accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America (“US GAAP”).
• Emerging Growth Company
We are an “emerging growth company” under the JOBS Act. For as long as we are an
“emerging growth company,” we are not required to: (i) comply with any new or
revised financial accounting standards that have different effective dates for
public and private companies until those standards would otherwise apply to
private companies, (ii) provide an auditor’s attestation report on management’s
assessment of the effectiveness of internal control over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new
requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”)
or a supplement to the auditor’s report in which the auditor would be required
to provide additional information about the audit and the financial statements
of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after
April 5, 2012, unless the SEC determines otherwise. However, we have elected to
“opt out” of the extended transition period discussed in (i) and will therefore
comply with new or revised accounting standards on the applicable dates on which
the adoption of such standards are required for non-emerging growth companies.
Section 107 of the JOBS Act provides that our decision to opt out of such
extended transition period for compliance with new or revised accounting
standards is irrevocable.
• Use of estimates and assumptions
In preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheet and revenues and expenses during the years reported. Actual
results may differ from these estimates. If actual results significantly differ
from the Company’s estimates, the Company’s financial condition and results of
operations could be materially impacted. Significant estimates in the period
include the allowance for doubtful accounts on accounts receivable, the
incremental borrowing rate used to calculate right of use assets and lease
liabilities, useful lives of intangible assets, impairment of long-lived assets
and goodwill, valuation of common stock and stock warrants, stock option
valuations, inventory valuation, revenue recognition, the allocation of purchase
consideration in business combinations, and deferred tax assets and liabilities
and the related valuation allowance.
• Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries. All significant inter-company balances and
transactions have been eliminated upon consolidation.
36 • 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 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”).
• 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 December 31, 2022 and 2021, the cash and cash
equivalents amounted to $19,003,336 and $23,264,777, respectively.
The Company currently has bank deposits with financial institutions in the U.S.
which exceed FDIC insurance limits. FDIC insurance provides protection for bank
deposits up to $250,000, so there was uninsured balance of $9,256,175 and
$13,699,082 as of December 31, 2022 and 2021, respectively. In addition, the
Company has uninsured bank deposits of $9,047,911 and $9,315,695 with a
financial institution outside the U.S as of December 31, 2022 and 2021,
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 December 31, 2022 and 2021, the restricted cash amounted to
$72,350 and $0, 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 December 31, 2022 and
2021, there was no need for allowance for doubtful accounts.
37 • 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
years ended December 31, 2022 and 2021, the Company recorded an allowance for
obsolete inventories of $0 and $0, respectively. The inventories were amounted
to $310,932 and $221,068 as at December 31, 2022 and 2021, 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.
• 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.
38
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.
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 Media
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
SoPa’s business reach into SEA regional travel industry and marked the Company’s
first foray into Indonesia. Established in 2013 as the first Indonesian OTA
accredited by the International Air Transport Association, Nusatrip pioneered
offering a comprehensive range of airlines and hotels to Indonesian corporate
and retail customers. With its first mover advantage, Nusatrip has onboarded
over 1.2 million registered users, over 500 airlines and over 200,000 hotels
around the world as well as connected with over 80 million unique visitors.
39
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 years ended December 31, 2022 and 2021, the Company generated revenue
of $2,118,191 and $482,002 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 years ended December 31, 2022 and 2021, the Company generated revenue
of $23,801 and $37,481, respectively, from software fees.
Hardware sales – the Company generally is involved with the sale of on-premises
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.
40
The Company records its revenues, net of value added taxes (“VAT”), which is
levied at the rate of 10% on the invoiced value of sales.
Grocery and food delivery consists of online grocery under brand name “Pushkart”
and food delivery service under brand name “Handycart” as follows:
Customers place order for groceries and take-out food through our online
platforms of “Pushkart” 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 years ended December 31, 2022 and 2021, the Company generated revenue
of $150,999 and $0, 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 years ended December 31, 2022 and 2021, the Company generated revenue
of $23,747 and $0, respectively, from telecommunications.
Digital marketing provides the services that affiliate with multiple YouTube
channels to offer services that include audience development, content
programming, creator collaborations, digital right managements, monetization,
and/or sales as follows:
The Company is required to establish as Multi-Channel Network (MCN) for YouTube
Creators and fulfilled the basic MCN guidelines on timely basis. The Company
engages the creator in contract as a platform to nurture the creator in
brainstorming creative content ideas, coaching on growing their audience size
and connection with top brands.
During the years ended December 31, 2022 and 2021, the Company generated revenue
of $2,593,674 and $0, respectively, from this stream.
Online ticketing and reservation provide 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 years ended December 31, 2022 and 2021, the Company generated revenue
of $724,991 and $0, respectively, from this stream.
41 Contract assets
In accordance with ASC Topic 606, a contract asset arises when the Company
transfers a good or performs a service in advance of receiving consideration
from the customer as agreed upon. A contract asset becomes a receivable once the
Company’s right to receive consideration becomes unconditional.
There were contract assets balance was $20,310 and $0 on December 31, 2022 and
2021, 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 $1,405,090 and $25,229 on December 31,
2022 and 2021, 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 years
ended December 31, 2022, and 2021, software development costs were $72,999 and
$95,809, 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.
• 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 consist of the cost of software and
payroll costs, which are directly attributable to the sales 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.
42
• 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 $997,784 and $327,195
for the years ended December 31, 2022 and 2021, 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 December 31, 2022 and
2021. To date, product allowance and returns have been minimal and, based on its
experience, the Company believes that returns of its products will continue to
be minimal, 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 of paragraph 740-10-25-13,
which addresses the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the consolidated financial
statements. Under paragraph 740-10-25-13, the Company may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in
the consolidated financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent (50%)
likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13
also provides guidance on de-recognition, classification, interest and penalties
on income taxes, accounting in interim periods and requires increased
disclosures. The Company had no material adjustments to its liabilities for
unrecognized income tax benefits according to the provisions of paragraph
740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying balance sheets, as
well as tax credit carry-backs and carry-forwards. The Company periodically
reviews the recoverability of deferred tax assets recorded on its balance sheets
and provides valuation allowances as management deems necessary.
In addition to U.S. income taxes, the Company and its wholly-owned foreign
subsidiary, is subject to income taxes in the jurisdictions in which it
operates. Significant judgment is required in determining the provision for
income tax, there may be transactions and calculations for which the ultimate
tax determination is uncertain. The company recognizes liabilities for
anticipated tax audit issues based on the Company’s current understanding of the
tax law. Where the final tax outcome of these matters is different from the
carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
• Foreign currencies translation and transactions
The reporting currency of the Company is the United States Dollar (“$”) and the
accompanying consolidated financial statements have been expressed in $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 $ are translated into $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 statements of changes
in shareholder’s equity.
43
Schedule of Foreign currencies translation and transactions
Translation of amounts from SGD into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end SGD$:$ exchange rate $ 0.7450 $ 0.7409
Period average SGD$:$ exchange rate $ 0.7254 $ 0.7404
Translation of amounts from VND into $ has been made at the following exchange
rates for the years December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end VND$:$ exchange rate $ 0.000042 $ 0.000044
Period average VND$:$ exchange rate $ 0.000043 $ 0.000043
Translation of amounts from INR into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end INR$:$ exchange rate $ 0.0121 $ 0.0134
Period average INR$:$ exchange rate $ 0.0127 $ 0.0135
Translation of amounts from PHP into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end PHP:$ exchange rate $ 0.0179 $ N/A
Period average PHP:$ exchange rate $ 0.0184 $ N/A
Translation of amounts from THB into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end THB:$ exchange rate $ 0.0288 $ N/A
Period average THB:$ exchange rate $ 0.0286 $ N/A
Translation of amounts from MYR into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end MYR:$ exchange rate $ 0.2265 $ N/A
Period average MYR:$ exchange rate $ 0.2275 $ N/A
Translation of amounts from IDR into $ has been made at the following exchange
rates for the years ended December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Period-end IDR:$ exchange rate $ 0.000064 $ N/A
Period average IDR:$ exchange rate $ 0.000067 $ N/A
44
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 years ended December 31, 2022 and 2021, diluted weighted-average common
shares outstanding is equal to basic weighted-average common shares, due to the
Company’s net loss position. Hence, no common stock equivalents were included in
the computation of diluted net loss per share since such inclusion would have
been antidilutive.
Schedule of computation of diluted net loss per share:
Years ended December 31,
2022 2021
Net loss attributable to Society Pass
Incorporated $ (33,786,107 ) $ (34,765,145 )
Weighted average common shares outstanding -
Basic and diluted 24,429,526 9,443,741
Net loss per share - Basic and diluted $ (1.38 ) $ (3.68 )
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:
Year ended December 31,
2022 2021
Options to purchase common stock (a) 1,945,270 1,945,270
Warrants granted to underwriter 3,793,929 144,445
Warrants granted with Series C-1 Convertible
Preferred Stock (b) - 1,158,000
Total of common stock equivalents 5,739,199 3,247,715
(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. 45 • 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.
As of December 31, 2022 and 2021, the Company recorded the right of use asset of
$1,537,670 and $627,968 respectively.
• Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are
charged to general and administrative expenses in the accompanying consolidated
statements of operation as the related employee service is provided.
• Share-based compensation
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 December
31, 2022, 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 years ended December 31, 2022, and
2021. 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.
46 • 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 consolidated financial statements shall include disclosures of material
related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However,
disclosure of transactions that are eliminated in the preparation of
consolidated or combined financial statements is not required by ASC 850. The
disclosures shall include: a) the nature of the relationship(s) involved; b) a
description of the transactions, including transactions to which no amounts or
nominal amounts were ascribed, for each of the periods for which income
statements are presented, and such other information deemed necessary to an
understanding of the effects of the transactions on the financial statements; c)
the dollar amounts of transactions for each of the periods for which income
statements are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d) amount due
from or to related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
• Commitments and contingencies
The Company follows the ASC 450, Commitments, to account for contingencies.
Certain conditions may exist as of the date the financial statements are issued,
which may result in a loss to the Company, but which will only be resolved when
one or more future events occur or fail to occur. The Company assesses such
contingent liabilities, which assessment inherently involves an exercise of
judgment. In assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in such
proceedings, the Company evaluates the perceived merits of any legal proceedings
or unasserted claims as well as the perceived merits of the amount of relief
sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company’s consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available, that these matters will have
a material adverse effect on the Company’s financial position, results of
operations or cash flows. However, there is no assurance that such matters will
not materially and adversely affect the Company’s business, financial position,
and results of operations or cash flows if the current level of facts and
circumstances changes in the future.
47
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
(“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the reporting
date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as
cash and cash equivalents, accounts receivable, deposits, prepayments and other
receivables, contract liabilities, accrued liabilities and other payables,
amounts due to related parties 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, 2022 Accounting Standards
Updates are not expected to have an effect on the Company.
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