UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
Or
For the transition period from _____ to _____
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
| The
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company, in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company
|
|
| Emerging
Growth Co |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).
Yes
☐
As of May 17, 2022, there were shares of the registrant’s common stock, $0.0001 par value, outstanding.
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Table of Contents
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2022 AND DECEMBER 31, 2021
(Currency expressed in United States Dollars (“US$”))
| March 31, 2022 (Unaudited) | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Deposits, prepayments and other receivables | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Property, plant and equipment, net | ||||||||
| Right of use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payables | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued liabilities and other payables | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Due to first insurance funding | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Convertible preferred shares; $ par value, shares authorized, and shares undesignated as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Series A shares: shares designated; and Series A shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Series B shares: shares designated; and Series B shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Series B-1 shares: shares designated; and Series B-1 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Series C shares: shares designated; and Series C shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, net of issuance cost | ||||||||
| Series C-1 shares: shares designated; and Series C-1 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, net of issuance cost | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series X Super Voting Preferred Stock, $par value, shares designated; and Series X shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Common shares; $ par value, shares authorized; and shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity attributable to Society Pass Incorporated | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue, net | ||||||||
| Sales – online ordering | $ | $ | ||||||
| Software sales | ||||||||
| Hardware sales | ||||||||
| Total revenue | ||||||||
| Cost of sales: | ||||||||
| Cost of online ordering | ( | ) | ||||||
| Software sales | ( | ) | ( | ) | ||||
| Hardware sales | ( | ) | ||||||
| Total cost of revenue | ( | ) | ( | ) | ||||
| Gross loss | ( | ) | ( | ) | ||||
| Operating expenses: | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||
| Software development costs | ( | ) | ( | ) | ||||
| Impairment loss | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on settlement of litigation | ( | ) | ||||||
| Other income | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | ( | ) | ( | ) | ||||
| NET LOSS | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ( | ) | ||||||
| NET LOSS ATTRIBUTABLE TO SOCIETY PASS INCORPORATED | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to non-controlling interest | ( | ) | ||||||
| Foreign currency translation adjustment attributable to non-controlling interest | ( | ) | ||||||
| Comprehensive loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to Society Pass Incorporated : | ||||||||
| – Basic | $ | ( | ) | $ | ( | ) | ||
| – Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding: | ||||||||
| – Basic | ||||||||
| – Diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Preferred Stock | Common stock | |||||||||||||||||||||||||||||||||||
| Number of share | Amount | Number of shares | Amount | Additional
paid-in capital | Accumulated other comprehensive (loss) income | Accumulated deficits | Non-controlling interests | Total equity | ||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||||||||||
| Shares issued for accrued salaries | — | |||||||||||||||||||||||||||||||||||
| Sale of units in public offering (net of expense) | — | |||||||||||||||||||||||||||||||||||
| Shares issued to acquire subsidiary | — | |||||||||||||||||||||||||||||||||||
| Share issued upon the exercise of warrant | — | |||||||||||||||||||||||||||||||||||
| Share issued for accrued services | — | |||||||||||||||||||||||||||||||||||
| Fair value of stock option granted for director’s bonus | — | — | ||||||||||||||||||||||||||||||||||
| Shares issued to acquire non-controlling interest | — | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the period | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
No. of shares | Amount | Additional paid-in capital | Accumulated other comprehensive (loss) income | Accumulated deficits | Total shareholders’ deficit | ||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Imputed interest | — | ||||||||||||||||||||||
| Net loss for the period | — | ( | ) | ( | ) | ||||||||||||||||||
| Foreign currency translation adjustment | — | ||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
SOCIETY PASS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Impairment loss | ||||||||
| Imputed interest | ||||||||
| Financing charges – first insurance funding | ||||||||
| Loss on settlement of litigation | ||||||||
| Stock based compensation for services | ||||||||
| Shares issued to acquire non-controlling interest | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Deposits, prepayments and other receivables | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Accounts payables | ( | ) | ( | ) | ||||
| Accrued liabilities and other payables | ||||||||
| Advances to related parties | ( | ) | ||||||
| Right of use assets | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of investment assets | ( | ) | ||||||
| Purchase of subsidiary | ( | ) | ||||||
| Purchase of property, plant, and equipment | ( | ) | ||||||
| Cash from purchase subsidiary | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from the issuance of preferred stock and exercise of warrants into preferred stock | ||||||||
| Proceeds from public offering, net of offering expenses | ||||||||
| Repayment of loan | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect on exchange rate change on cash and cash equivalents | ( | ) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENT AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENT AT END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES ACTIVITIES | ||||||||
| Common stock issued for accrued salaries | $ | $ | ||||||
| Shares issued to acquire subsidiary | $ | |||||||
| Shares issued for accrued services | $ | |||||||
| Impact of adoption of the ASC Topic 842 - lease obligation and ROU asset | $ | $ | ||||||
| Purchase consideration accrued for assets purchase transactions | $ | $ | ||||||
| Preferred stock issued but amount collected subsequently | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
SOCIETY PASS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE－1 DESCRIPTION OF BUSINESS AND ORGANIZATION
Society Pass Incorporated (the “Company”) is incorporated in State of Nevada on June 22, 2018 under the name of Food Society Inc. On October 3, 2018, the Company changed its company name to Society Pass Incorporated. The Company through its subsidiaries, mainly sells and distributes the hardware and software of Point of Sales (POS) application in Vietnam. The Company also has online lifestyle platform to enable the consumers to purchase high-end brands of all categories under its own brand name of “Leflair”. In February 2022, the Company completed the acquisition of 100% equity interest of New Retail Experience Incorporated and Dream Space Trading Company Limited through its subsidiary, mainly provide on-line Grocery and food delivery platform in Philippine and Vietnam respectively.
On
February 10, 2021, the Company effected a
On
September 21, 2021, the Company effected a
An additional result of the stock split was that the stated value of preferred stock, the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance to the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged.
The
registration statement for the Company’s Initial Public Offering became effective on November 8, 2021. On November 8, 2021, the
Company entered into an underwriting agreement with Maxim Group LLC, related to the offering of shares of the Company’s common stock (the
“Firm Share”), at a public offering price of $per share. Under the terms of the Underwriting
Agreement, the Company granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the “Option Shares”)
to cover over-allotments. The Company raised $
and $
On February 8, 2022, the Company entered into
an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (the “Underwriter”), related to
the offering of shares (the “Shares”) of the Company’s common stock and warrants to purchase up to
Description of subsidiaries incorporated by the Company
Schedule of Description of subsidiaries
| Name | Place and date of incorporation | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| Registered:
VND 2,307,300,000; Paid up: VND 1,034,029,911 | % | |||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
| 7 |
NOTE－ 2 LIQUIDITY AND CAPITAL RESOURCES
As
of March 31, 2022, the Company had cash balances of
The Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance. In parallel, the Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed in order to finance the Company’s business development activities, general and administrative expenses and growth strategy.
COVID-19 (Delta and Omicron variants)
Due to the current or future resurgence of the pandemic (including the potential emergence of new and more transmissible variants, such as the Delta and Omicron variants), it has significantly impacted health and economic conditions throughout Vietnam, Singapore and Southeast Asia. National, regional and local governments took a variety of actions to contain the spread of COVID-19, including office and store closures, quarantining suspected COVID-19 patients, and capacity limitations. These developments have significantly impacted the results of operations, financial condition and cash flows of the Company included in this reporting. The impact included the difficulties of working remotely from home including slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise have in an office environment and issues arising from mandatory state quarantines.
While it is not possible at this time to estimate with sufficient certainty the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have also had and may continue to have an adverse impact on global and domestic economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company has taken temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. These measures are continuing. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
NOTE－3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
• Basis of presentation
The Company has prepared the accompanying condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2022 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed financial statements should be read in conjunction with the 2021 audited financial statements and accompanying notes filed with the SEC.
| 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”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
• Use of estimates and assumptions
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts, assumptions used in assessing right of use assets, valuation and useful lives of intangible assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, business acquisition allocation of purchase consideration, and deferred tax valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiary. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
• Business Combination
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810-10-65, Consolidation. ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under ASC Topic 805, all business combinations are accounted for by applying the acquisition method. Accounting for goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company’s results of operations.
• Noncontrolling interest
The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
| 9 |
• Segment Reporting
ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. The Company currently operates in two reportable operating segments: (i) e-commerce and (ii) 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
March 31, 2022 and December 31, 2021, the cash and cash equivalent was amounted to $
The
Company currently has bank deposits with financial institutions in the U.S. which does not exceed FDIC insurance limits. FDIC insurance
provides protection for bank deposits up to $
• Accounts receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30
to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness
and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due
balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company
specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor
the progress of the collection of accounts receivables. The Company considers the allowance for doubtful accounts for any estimated losses
resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according
to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court
of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March
31, 2022 and December 31, 2021, the allowance for doubtful accounts amounted to $
• Inventories
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company’s suppliers as merchanized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the three months ended March 31, 2022 and 2021, the Company recorded an allowance for obsolete inventories of $0 and $0, respectively. The inventories was amounted to $267,409 and $221,068 at March 31, 2022 and December 31, 2021, respectively.
• Prepaid Expenses
Prepaid expenses represent future expenses paid in advance , until the associated benefits are realized, the future expense remains at current asset within the next twelve months and non-current asset after twelve months.. Since prepaid expenses are categorized as “current and non-current” assets, the benefits associated with the products or services paid for upfront are expected to be used for the next twelve months and thereafter. Once the benefits of the assets are gradually realized, the prepaid expense is reduced as the asset is expensed off on the statement of operations.
| 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 | |||
| Office equipment | |||
| Renovation |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
• Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | identify the contract with a customer; |
| • | identify the performance obligations in the contract; |
| • | determine the transaction price; |
| • | allocate the transaction price to performance obligations in the contract; and |
| • | recognize revenue as the performance obligation is satisfied. |
The Company generates its revenues from a diversified a mix of e-commerce activities (B2C) and the services providing to merchants for their business growth (B2B), which are operated under two business segments of e-Commerce (previously mentioned as Consumer Facing Business) and Merchant POS (previously mentioned as Merchant Facing Business).
The Company’s performance obligation includes providing the connectivity among merchants and consumers, generally through an online ordering platform. The platform allows merchants to create account, place menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create account and make orders from merchants on the consumer facing application. The platform allows delivering company to accept online delivery request and ship order from merchant to consumer.
The Company also has online lifestyle platform to enable the consumers to purchase high-end brands of all categories under its own brand name of “Leflair”. Under the deployment of the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The platform also allows consumers to order from hundreds of vendor choices with personalized promotions based on purchase history and location. The platform has also partnered up with a Vietnam-based delivery company, Tikinow, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or collect at the Company’s logistics center.
| 11 |
e-Commerce mainly offers lifestyle platform under the brand name of “Leflair”, as follows:-
| 1) | Customer placed orders on the website / app, sales orders report will be generated in the system. The Company will inform its business partners proceed to packaging to the logistic partner warehouse and therefore, logistic partner delivered to the end customer. The sales is recognized when the delivery is completed by the shipper to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to no product warranty. The Company is considered as a principal in this e-commerce transaction and reported revenue in gross basis as the Company takes the responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. |
During
the three months ended March 31, 2022 and 2021, the Company has generated the revenue of $
Merchant POS offers both software and hardware products and services, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to get on the Merchant Marketing Program. |
| 2) | The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month. |
| 3) | The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants. |
During
the three months ended March 31, 2022 and 2021, the Company has generated $
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC Topic 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606-10 are present in the arrangement, revenue is recognized net of related direct costs.
Software subscription fee — The Company’s performance obligation includes providing connectivity to software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and to be entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with the automatic renewal of another one year, and the subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
The Company records its revenues, net of value added taxes (“VAT”), which is levied at the rate of 10% on the invoiced value of sales.
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Contract assets
In accordance with ASC Topic 606-10-45-3, contract asset is when the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.
There
were
Contract liabilities
In accordance with ASC Topic 606-10-45-2, a contract liability is Company’s obligation to transfer goods or services to a customer when the customer prepays consideration or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract
liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing
of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition
of revenue. The Company’s contract liability balance was $
• Software development costs
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC Topic 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research
and development expenditures in the development of its own software are charged to operations as incurred. Based on the software development
process, technological feasibility is established upon completion of a working model, which also requires certification and extensive
testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general
release are immaterial. For the three months ended March 31, 2022 and 2021, the software development costs were $
• Cost of sales
Cost of sales under online ordering consist of the cost of merchandizes ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales under software sales consist of the cost of software and payroll, which are directly attributable to the sales of software.
Cost of sales under hardware sales consist of the cost of hardware and payroll, which are directly attributable to the sales of hardware.
• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers which are borne by the Company’s suppliers or distributors for merchant POS business.
Except for e-Commerce business, the shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales.
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• Sales and marketing
Sales
and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel,
and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense
was $
• Product warranties
The Company’s provision for estimated future warranty costs is based upon historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company’s suppliers, the Company has concluded that no warranty liability is required as of March 31, 2022 and December 31, 2021. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
The Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
• Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2022 and 2021.
• Foreign currencies translation and transactions
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore and India and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”), Indian Rupee (“INR”) and Philippine Pesos (“PESO”), respectively, which are the functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Shareholders’ equity is translated using the historical rates. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholder’s equity.
Translation of amounts from SGD into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
Schedule of Foreign currencies translation and transactions
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end SGD:US$ exchange rate | $ | $ | ||||||
| Period average SGD:US$ exchange rate | $ | $ | ||||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end VND$:US$ exchange rate | $ | $ | ||||||
| Period average VND$:US$ exchange rate | $ | $ | ||||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end INR$:US$ exchange rate | $ | $ | ||||||
| Period average INR$:US$ exchange rate | $ | $ | ||||||
Translation of amounts from PESO into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end PESO$:US$ exchange rate | $ | $ | N/A | |||||
| Period average PESO$:US$ exchange rate | $ | $ | N/A | |||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
• Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
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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 months ended March 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
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding – Basic and diluted | ||||||||
| Net loss per share – Basic and diluted | $ | ( | ) | $ | ( | ) | ||
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
| Three months ended March 31, | Three month ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Series A Convertible Preferred Stock (a) | ||||||||
| Series B Convertible Preferred Stock | ||||||||
| Series B-1 Convertible Preferred Stock | ||||||||
| Series C Convertible Preferred Stock | ||||||||
| Series C-1 Convertible Preferred Stock | ||||||||
| Options to purchase common stock (b) | ||||||||
| Warrants granted to underwriter | ||||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (c) | ||||||||
| Total of common stock equivalents | ||||||||
| (a) | |
| (b) | |
| (c) |
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• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the condensed consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
As
of March 31, 2022 and December 31, 2021, the Company recorded the right of use asset of $
• Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
• Share-based compensation
Pursuant to ASU 2018-07, the Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee or non-employee), are measured at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option model to estimate the fair value of employee stock options at the date of grant. As of March 31, 2022, those shares issued and stock options granted for service compensations were immediately vested, and therefore these amounts are thus recognized as expense with an offset to preferred or March 31, 2022 and 2021, the stock-based compensations are recorded in the General and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss.”
• Common stock awards
The Company grants common stock awards to employees and non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided is recorded in the general and administrative expenses and charged to the same account as if such settlements had been made in cash. The fair value of the Common Stock Awards to the Company’s director was estimated using a Black-Scholes Option Pricing Model.
| 16 |
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its Preferred stock and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option model to estimate the fair value of compensation warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period, or at the date of issuance, if there is not a service period.
• Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
• Commitments and contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
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.
| 17 |
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties 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. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
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Accounting Standards Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact and timing of adoption of this guidance
No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our condensed consolidated Financial Statements.
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NOTE－4 REVENUE
Revenue consisted of the following deliverables:
| Three Months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Sales – online ordering | $ | $ | ||||||
| Software subscription sales | ||||||||
| Hardware sales | ||||||||
| $ | $ | |||||||
Contract liabilities recognized was related to software sales only and the following is reconciliation for the years presented:
Schedule of Contract liabilities
| Three Months ended March 31, 2022 | Year ended December 31, 2021 | |||||||
| Contract liabilities, brought forward | $ | $ | ||||||
| Add: recognized as deferred revenue | ||||||||
| Less: recognized as revenue | ( | ) | ( | ) | ||||
| Contract liabilities, carried forward | $ | $ | ||||||
NOTE－5 SEGMENT REPORTING
Currently, the Company has two reportable business segments:
| (i) | e-Commerce operates an online lifestyle platform under the brand name of “Leflair” covering a diversity of services and products, such as Fashion & Accessories, Beauty & Personal Care, and Home & Lifestyle, and managed by SOPA Technology Company Ltd, and | ||
| (ii) | Merchant POS operates the sale of hardware and software, managed by Hottab group and SOPA entities except SOPA Technology Company Ltd. | ||
The Company’s Chief Operating Decision Maker (CODM) evaluates operating segments using the following table presents revenues and gross profits by reportable segment and asset except liability information.
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Schedule of Segment Reporting
| Three Months Ended March 31, 2022 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Revenue from external customers: | ||||||||||||
| Sales – online ordering | $ | $ | $ | |||||||||
| Sales – online platform | ||||||||||||
| Software sales | ||||||||||||
| Hardware sales | ||||||||||||
| Total revenue | ||||||||||||
| Cost of sales: | ||||||||||||
| Cost of online ordering | ( | ) | — | ( | ) | |||||||
| Cost of online platform | ( | ) | ( | ) | ||||||||
| Software sales | ( | ) | ( | ) | ( | ) | ||||||
| Hardware sales | ||||||||||||
| Total cost of revenue | ( | ) | ( | ) | ( | ) | ||||||
| Gross income (loss) | ( | ) | ( | ) | ||||||||
| Operating Expenses | ||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||||||
| Software development costs | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Amortization | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expense) | ||||||||||||
| Change in contingent service payable | ||||||||||||
| Gain from early lease termination | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Total other income | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
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| Three Months Ended March 31, 2021 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Revenue from external customers: | ||||||||||||
| Sales – online ordering | $ | $ | $ | |||||||||
| Software sales | ||||||||||||
| Hardware sales | ||||||||||||
| Total revenue | ||||||||||||
| Cost of sales: | ||||||||||||
| Cost of online ordering | ||||||||||||
| Software sales | ( | ) | ( | ) | ||||||||
| Hardware sales | ( | ) | ( | ) | ||||||||
| Total cost of revenue | ( | ) | ( | ) | ||||||||
| Gross loss | ( | ) | ( | ) | ||||||||
| Operating Expenses | ||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||||||
| Software development costs | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||
| Depreciation | ( | ) | ( | ) | ||||||||
| Amortization | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Loss on settlement of litigation | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Total other expense | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||||||
| March 31, 2022 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Intangible assets, net | $ | $ | $ | |||||||||
| Identifiable assets | $ | $ | $ | |||||||||
| December 31, 2021 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Intangible assets, net | $ | $ | $ | |||||||||
| Identifiable assets | $ | $ | $ | |||||||||
| Three Months Ended March 31, 2022 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Capital Expenditure: | ||||||||||||
| Purchase of property, plant, and equipment | $ | $ | $ | |||||||||
| Total capital expenditure | $ | $ | $ | |||||||||
| Three Months Ended March 31, 2021 | ||||||||||||
| e-Commerce | Merchant POS | Total | ||||||||||
| Capital Expenditure: | ||||||||||||
| Purchase of property, plant, and equipment | $ | $ | $ | |||||||||
| Total capital expenditure | $ | $ | $ | |||||||||
| 22 |
The below sales are based on the countries in which the customer is located. Summarized financial information concerning our geographic segments is shown in the following tables:
Schedule of geographic segments
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Indonesia | $ | $ | ||||||
| Vietnam | ||||||||
| Phillipine | ||||||||
| $ | $ | |||||||
NOTE－6 BUSINESS COMBINATION
On
February 14, 2022 and February 25, 2022, the Company completed the acquisition of
(i) Acquisition of New Retail:
The
total consideration of the acquisition is
| Purchase price allocation: | ||||
| Fair value of stock at closing | $ | |||
| Cash paid | ||||
| Less cash received | ( | ) | ||
| Purchase price | $ | |||
The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.
The
purchase price allocation resulted in $
| Acquired assets: | ||||
| Trade receivables | $ | |||
| Other receivables | ||||
| Cash | ||||
| Property and equipment | ||||
| Total acquired assets | ||||
| Less: Assumed liabilities | ||||
| Trade payables | ||||
| Accrued liabilities and other payable | ||||
| Total Assumed liabilities | ||||
| Fair value of net assets assumed | ||||
| Goodwill recorded | ||||
| Total consideration allocated | $ | |||
Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
The goodwill is not expected to be deductible for tax purposes. The goodwill recognised impairment of $528,583 during the three months ended March 31, 2022, because there were continuous operating losses and negative cash flows incurred subsequently. Under ASC 350-20-50, the Company recognized the goodwill impairment loss by comparing the actual operating results of New Retail to the profit forecast and a negative performance is resulted.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. No additional assets or liabilities were recognized during the measurement period, or the changes to the amounts of assets or liabilities previously recognized.
The following unaudited pro forma information presents the combined results of operations as if the acquisitions had been completed on January 1, 2022.
| Three months ended March 31, 2022 | Three months ended March 31, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss per share | ( | ) | ( | ) | ||||
| 23 |
(ii) acquisition of Dream Space:
The
total consideration of the acquisition is cash consideration VND$,
approximately US$
| Purchase price allocation: | ||||
| Cash paid | $ | 104 | ||
| Less cash received | — | |||
| Purchase price | $ | 104 | ||
The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values.
The
purchase price allocation resulted in $
| Acquired assets: | ||||
| Trade receivables | $ | |||
| Other receivables | ||||
| Cash | ||||
| Property and equipment | ||||
| Total acquired assets | ||||
| Less: Assumed liabilities | ||||
| Trade payables | ||||
| Accrued liabilities and other payable | ||||
| Total Assumed liabilities | ||||
| Fair value of net liabilities assumed | ( | ) | ||
| Goodwill recorded | ||||
| Cash consideration allocated | $ | |||
Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets
acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The Acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”. The Company has allocated the purchase price consideration based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from management estimation. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.
The goodwill is not expected to be deductible for tax purposes. No impairment goodwill was recgonised during the period ended March 31, 2022, because there were continuous operating losses and negative cash flows incurred subsequently. Under ASC 350-20-50, the Company recognized the goodwill impairment loss by comparing the actual operating results of Hottab to the profit forecast and a negative performance is resulted.
| 24 |
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. No additional assets or liabilities were recognized during the measurement period, or the changes to the amounts of assets or liabilities previously recognized.
NOTE－7 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES
March 31, 2022 (Unaudited) | December 31, 2021 | |||||||
| Deposits | $ | $ | ||||||
| Prepayments | ||||||||
| Prepayments for consultancy fee (a) | ||||||||
| Prepayments for first insurance funding (b) | ||||||||
| Value added tax | ||||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
| Less: non-current portion | ||||||||
| Prepayments for consultancy fee | ( | ) | ||||||
| Current portion | $ | $ | ||||||
| (a) |
| (b) |
NOTE－ 8 INVENTORIES
March 31, 2022 (Unaudited) | December 31, 2021 | |||||||
| Finished goods | $ | $ | ||||||
| Less | ||||||||
| Reserve for excess and obsolete inventory | ||||||||
| Total Inventories | $ | $ | ||||||
| 25 |
All
finished goods inventories were related to e-commerce business and was held by the third party logistic. The cost of sales totaled $
NOTE－ 9 INTANGIBLE ASSETS
As of March 31, 2022 and December 31, 2021, intangible assets consisted of the following:
| Useful life | March 31, 2022 | December 31, 2021 | ||||||||
| At cost: | (Unaudited) | |||||||||
| Software platform | $ | $ | ||||||||
| Other intangible assets | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
On November 1 2018, the Company entered software development agreement with CVO Advisors Pte Ltd (CVO) 2018 to design and build App and Web-based platform for the total consideration of $8,000,000. CVO who is a third party vendor in the business of designing, developing, operating computer software applications including mobile and web application for social media, big data, point of sales, loyalty rewards, food delivery and technology platforms in Asia. The CVO developer performed and accepted technical work, of software development phase, which was materially completed by December 23, 2018. The Company obtained a third party license (Wallet Factory International Ltd) for their technology build up by CVO.
The delivered platform was further developed by the Company’s in-house technology team (based in Noida that Sopa is currently using for the loyalty platform. The platform can be downloaded from Apple store or Googleplay store (ie. SoPaApp) and the Company’s web version is on www.sopa.asia. The platform was completed developed on September 30, 2020 and has estimated life of 2.5 years. The platform started to be amortized from October 1, 2020.
Further,
the Company entered subscription agreement with CVO to issued shares of preferred stocks for the software development,
equal to the aggregate of $8,000,000 or at the stated value of $
Pursuant
to the subscription agreement entered with CVO, the Company issued shares of Series A convertible preferred stock
for the purchase of software development at the stated value of $
Also, owner of CVO entered into call option agreement with the CEO of the Company to sale all the shares of CVO for the sum of $10 per share, as of date, these options were exercised by the CEO of the Company, but the equity holders of CVO Advisors Pte. Ltd. have not honored the exercise of the call. The parties are currently in litigation (refer Note 19). As a result of this option exercise, there were no accounting effect on the Company’s financial statement during the period ended March 31, 2022.
Amortization of intangible assets attributable to future periods is as follows:
| Year ending December 31: | Amount | ||||
| 2022 (remaining period) | $ | ||||
| 2023 | $ | ||||
| Total | $ | ||||
Amortization
of intangible assets was $
| 26 |
NOTE－10 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| At cost: | ||||||||
| Computer | $ | $ | ||||||
| Office equipment | ||||||||
| Renovation | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: exchange difference | ||||||||
| $ | $ | |||||||
Depreciation
expense for the three months ended March 31, 2022 and 2021 were $
NOTE － 11 ASSET PURCHASE AGREEMENT
On
February 16, 2021, the Company entered into an agreement to acquire assets of Goodventures SEA Limited (“Goodventure”). The
acquired assets consisted of intellectual property for it lifestyle e-commerce retail business. As consideration for entering into the
Asset Purchase Agreement, the Company agreed to pay Goodventure a total of $
| Acquired assets: | ||||
| Intellectual property | $ | |||
| Less: Assumed liabilities | ||||
| Accrued liabilities and other payable | ||||
| Fair value of net net assets acquired | ||||
| Impairment loss recorded | ( | ) | ||
| Net asset value | $ | |||
The Company has paid $40,000 during the period ended March 31, 2021. As of March 31, 2021, the Company has a payable of $160,000 on the balance sheet.
The
Company paid the purchase price of $200,000 during the year ended December 31, 2021. The purchase price of $200,000 shall be allocated
amongst the intangible assets acquired, further, these intangible have a short term life as well as the quantum of the value, the company
decided to expense it and accounted $
The shares issued as part of this transaction do not give the holders the right to influence or control SoPa Pte Ltd. The holders do not have any special voting rights or the right to appoint any board members.
| 27 |
SOPA
Technology Pte Ltd is a private company that was incorporated under the laws of Singapore on June 6, 2019. SOPA Technology Pte Ltd manages
Society Pass Incorporated’s operating activities in SEA countries and South Asia. As a pass-through holding company, the value
of the
The following table summarizes the changes in non-controlling interest from December 31, 2021 to March 31, 2022:
Schedule of non-controlling interest
| Balance, December 31, 2021 | % | |||
| Transfer (to) from the non-controlling interest as a result of Leflair Purchase Agreement | % | |||
| Parent Co. acquired/exchanged the non controlling interest holding with their shares | % | |||
| Balance, March 31, 2022 | % | |||
A reconciliation of the non-controlling loss attributable to the Company:
Schedule of reconciliation non-controlling loss attributable to the company
| Non Controlling Interest, December 31, 2021 | $ | ( | ) | |
| Acquisition cost | ||||
| Net loss attributable to non-controlling interest | ( | ) | ||
| Foreign currency translation adjustment | ( | ) | ||
| Non Controlling Interest, March 31, 2022 | $ | ( | ) | |
Net loss attributable to non-controlling interest for the three monts ended March 31, 2022:
| Schedule of Net loss attributable to non-controlling interest | ||||
| Net loss generated by SOPA Technology Pte Ltd for the three months ended March 31, 2022 | $ | ( | ) | |
| Non controlling interest percentage | % | |||
| Net loss attributable to non-controlling interest | $ | ( | ) | |
| Foreign currency translation adjustment | ( | ) | ||
| Non Controlling Interest | $ | ( | ) |
| 28 |
For the
three months ended March 31, 2022,
NOTE－12 AMOUNTS DUE TO RELATED PARTIES
Amounts due to related parties consisted of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Amounts due to related parties (a) | $ | $ | ||||||
| Amount due to a director (b) | ||||||||
| $ | $ | |||||||
| (a) | The
amounts represented temporary advances to the Company including related parties (two officers),
which were unsecured, interest-free and had no fixed terms of repayments. n September 30,
2021, the Company received the notifications that the outstanding amounts of $ |
| (b) | The
amount represented paid salaries and bonus to the Director which was unsecured, interest-free
and had no fixed terms of repayments. As of June 30, 2021, the Director had $ |
NOTE－13 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables- Related Party (a) | ||||||||
| Accrued liabilities and other payables (b) |
| |||||||
| Total Accounts payable | $ | $ | ||||||
| (a) | The
amount represented due to two related parties in respect to unpaid salaries and unpaid professional fees amounting to $ |
The
amount represented due to two related parties in respect to unpaid salaries and unpaid legal fees amounted to $
| 29 |
(b) Accrued liabilities and other payables consisted of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Accrued payroll | $ | $ | ||||||
| Accrued vat expenses | ||||||||
| Accrued taxes | ||||||||
| Other accrual | ||||||||
| Other payables (c) | ||||||||
| Total Accrued liabilities | $ | $ | ||||||
| (c) | This
included $75,000 related to SOSV. In January 2019, the HPL entered into stock purchase agreement
and accelerator contract for equity (ACE) with SOSV IV LLC (SOSV) whereby the HPL will issue
shares representing 5% of their capital stock for the amounts of $ |
NOTE－14 LEASES
We adopted ASU No. 2016-02, Leases, on January 1, 2019, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.
Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of March 31, 2022 and December 31, 2021.
The
Company adopts a
During
the three months ended March 31, 2022, the Company enter into new lease arrangements, and accounted as per ASC Topic 842, the ROU asset
and lease obligation of $
| 30 |
The Company excluded short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets. The following tables summarize the lease expense, as follows:
| March 31, 2022 | March 31, 2021 | |||||||
| Operating lease expense (per ASC 842) | $ | $ | ||||||
| Short-term lease expense (other than ASC 842) | ||||||||
| Total lease expense | $ | $ | ||||||
As of March 31, 2022, right-of-use assets were $
As
of December 31, 2021, right-of-use assets were $
Components of Lease Expense
We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying consolidated statement of operations.
Future Contractual Lease Payments as of March 31, 2022
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the next three years ending March 31:
| Years ended March 31, | Operating lease amount | ||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Total | |||||
| Less: interest | ( | ) | |||
Present value of lease liabilities | $ | ||||
| Less: non-current portion | |||||
| Present value of lease liabilities – current liability | $ | ||||
NOTE－15 DUE TO FIRST INSURANCE FUNDING
On
October 7, 2021, the Company purchased the Directors and Officers (D&O) insurance at a premium fee of $
| 31 |
During
the three months ended March 31, 2022 the Company has repaid the installments for $
During
the year ended December 31, 2021 the Company has repaid the installments for $
Future contractual amortization of debt as of March 31, 2022
The below table summarizes our (i) minimum payments in the next twelve months, (ii) implied interest, and (iii) present value of future payments in the next twelve months:
Schedule of Future contractual amortization of debt
| Year ending March 31, | Future payment | |||
| 2023 | $ | |||
| Less: imputed interest | ( | ) | ||
| Present value of first insurance funding – current liability | $ | |||
NOTE－16 SHAREHOLDERS’ DEFICIT
Authorized stock
The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 100,000,000 shares of capital stock, consisting of shares of common stock, $par value per share, and shares of preferred stock, $par value per share.
The holders of the Company’s common stock are entitled to the following rights:
Voting Rights: Each share of the Company’s common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of the Company’s common stock are not entitled to cumulative voting rights with respect to the election of directors.
Dividend Right:. Subject to limitations under Nevada law and preferences that may apply to any shares of preferred stock that the Company may decide to issue in the future, holders of the Company’s common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by the Board of the Company out of funds legally available therefor.
Liquidation Right:. In the event of the liquidation, dissolution or winding up of our business, the holders of the Company’s common stock are entitled to share ratably in the assets available for distribution after the payment of all of the debts and other liabilities of the Company, subject to the prior rights of the holders of the Company’s preferred stock.
Other Matters: The holders of the Company’s common stock have no subscription, redemption or conversion privileges. The Company’s common stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company’s common stock are subject to the rights of the holders of shares of any series of preferred stock which the Company may issue in the future.
Common stock outstanding
As of March 31, 2022 and December 31, 2021, the Company had a total of and shares of its common stock issued and outstanding, respectively.
| 32 |
On February 10, 2021, the Company effected a 750 for 1 stock split of the issued and outstanding shares of the Company’s common stock. The number of authorized shares and par value remain unchanged. All share and per share information in this financial statements and footnotes have been retroactively adjusted for the periods presented, unless otherwise indicated, to give effect to the forward stock split.
On
September 21, 2021, the Company effected a
An additional result of the stock split was that the stated value of preferred stock, the number of designated shares and outstanding shares of each series of preferred stock was unchanged in accordance to the respective certificate of designations. The number of authorized shares of preferred stock remained unchanged.
On November 8, 2021, the Company entered into an underwriting agreement with Maxim Group LLC, related to the offering of shares of the Company’s common stock (the “Firm Share”), at a public offering price of $per share. Under the terms of the Underwriting Agreement, the Company has granted the Underwriters an option, exercisable for 45 days, to purchase an additional shares of common stock (the “Option Shares”) to cover over-allotments. The Company’s common stock was listed on the Nasdaq Capital Market on November 9, 2021 and began trading on such date. The closings (the IPO Closing.) of the offering and sale of the Firm Shares and the sale of 236,111 Option Shares occurred on November 12, 2021. Aggregate gross proceeds from the closings related to the Firm Shares and the Option Shares was $and $, respectively.
The
Cost of IPO related expenses incurred $
During
the three months ended March 31, 2022 and 2021, the Company issued and shares of its common stock for share exchange
with the subsidiary’s 0.08% non-controlling interest at $
On February 8, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (the “Underwriter”), related to the offering of 3,484,845 shares including over-allotment (the “Shares”) of the Company’s common stock,. Each Share is being sold together with one Warrant to purchase one Share at a combined offering price of $3.30.
During three months ended March 31, 2022, the Company issued shares of our common stock to two consultants in exchange for consulting services value of $.
During
the three months ended March 31, 2022 , the Company issued of our share of common stock to six of our employees
as compensation value of $
During
three months ended March 31, 2022, the Company issued
During February 2022, the Company issued shares of its common stock for share exchange with the subsidiary’s 100% non-controlling interest at $3.53, total amounting to $800,000 and valued it at par as there was no change in the control over the subsidiary.
| 33 |
Warrants
In
August 2019, the
In
December 2020, the Company issued certain numbers of warrants pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant
is entitled the holder to purchase one C-1 preferred share at a price of $per share. The warrants shall be exercisable
on or before December 31, 2020 and June 30, 2021. During the three months ended March 31, 2021, the Company issued
In December 2020, a total of 838 warrants are exercised in exchanged to 838 Series C-1 preferred shares. (refer note 13 for details).
Below is a summary of the Company’s issued and outstanding warrants as of March 31, 2022 and December 31, 2021:
| Warrants | Weighted average exercise price | Weighted average remaining contractual life (in years) | ||||||||||
| Outstanding as of December 31, 2020 (b) | $ | |||||||||||
| Issued (b) | $ | |||||||||||
| Issued (a) | $ | |||||||||||
| Exercised | ( | ) | $ | ( | ) | — | ||||||
| Expired | — | |||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||
| Issued (c) | $ | |||||||||||
| Exercised | ( | ) | ( | ) | ||||||||
| Expired | — | |||||||||||
| Outstanding as of March 31, 2022 | $ | |||||||||||
There is no intrinsic value for warrants as of March 31, 2022 and December 31, 2021.
| (a) |
| (b) |
| (c) |
On
April 19, 2021, the Company extended the expiry date of the Warrant issued to Preferred Series C-1 holder by six months from June 30,
2021 to December 31, 2021. Further, on November 16, 2021, the Company extended the expiry date of the Warrant issued to Preferred Series
C-1 holder by six months from December 31, 2021 to June 30, 2022. The Company considered this warrant as permanent equity per ASC Topic
815-40-35-2, the warrants would not be marked to market at each financial reporting date. However, where there is a subsequent changes
in assumptions related warrants (in the instant case, an extension of the expiration date of the warrants), the difference between the
amount originally recorded and the newly calculated amount, based upon the changed assumptions, is determined and the difference between
the before and after valuation is recorded as an expense, with the corresponding credit to additional paid-in capital. The Company recorded
additional warrants modification expense of $
| 34 |
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions
Schedule of Stock options assumptions
| Before modification | After Modification | |||||||
| Dividend rate | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Weighted average expected life (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| (a) | The Company considered 25% volatility as from inception through the date of the Company common stocks. |
Director’s Stock option
On December 8, 2021, the Board of Directors approved a grant to Dennis Nguyen of a 10-year options to purchase 1,945,270 shares options at an exercise price of $6.49 per share that will be exercisable at any time.
Schedule of Stock Option
| Share option | Weighted average exercise price | Weighted average remaining contractual life (in years) | |||||||||||
| Outstanding as of December 31, 2020 | — | ||||||||||||
| Granted | |||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of December 31, 2021 | $ | ||||||||||||
| Granted | — | ||||||||||||
| Exercised | — | ||||||||||||
| Expired | — | ||||||||||||
| Outstanding as of March 31, 2022 | $ | ||||||||||||
The total fair value of options vested during the three months ended March 31, 2022 and year ended December 31, 2021 was $ and $respectively.
The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions for the three months ended March 31, 2022 and years ended December 31, 2021
| March 31, 2022 | December 31, 2021 | |||||
| Dividend rate | % | % | ||||
| Risk-free rate | % | % | ||||
| Weighted average expected life (years) | ||||||
| Expected volatility | % | % | ||||
| Share price | $ | $ | ||||
| 35 |
Director’s stock awards
| Unvested as of December 31, 2020 | — | ||||||||||||
| Issued | years | ||||||||||||
| Vested | ( | ) | — | ||||||||||
| Cancelled | — | ||||||||||||
| Unvested as of December 31, 2021 | $ | years | |||||||||||
| Issued | — | ||||||||||||
| Vested | ( | ) | — | ||||||||||
| Cancelled | — | ||||||||||||
| Unvested as of March 31, 2022 | $ | years | |||||||||||
| Shares Unvested at period-end | $ |
Below is the unvested shares vesting schedule at future years
| Year ended December 31 2022 | |||||
| Year ended December 31 2023 | |||||
| Total |
NOTE－17 PREFERRED STOCKS AND WARRANTS
As of March 31, 2022 and December 31, 2021, the Company’s preferred stocks have been designated as follow:
| No. of shares | Stated Value | |||||||
| Series A Convertible Preferred Stock | $ | |||||||
| Series B Convertible Preferred Stock | $ | |||||||
| Series B-1 Convertible Preferred Stock | $ | |||||||
| Series C Convertible Preferred Stock | $ | |||||||
| Series C-1 Convertible Preferred Stock | $ | |||||||
| Series X Super Voting Preferred Stock | $ | |||||||
All of the Series A, B, B-1, C and C-1 Preferred Shares were issued at a value of respective stated value per share. These all Series of Preferred Shares contain a conversion option, are convert into a fixed number of common shares or redeemable with the cash repayment at the liquidation, so as a result of this liquidation preference, under U.S GAAP, the Company has classified the all these Series of Preferred Shares within mezzanine equity in the condensed consolidated balance sheet.
Series X Super Voting Preferred Stock was issued at a par value. This Series of Preferred Shares does not contain a conversion option, so as a result of this liquidation preference, under U.S GAAP, the Company has classified the this Series of Preferred Shares within permanent equity in the consolidated balance sheet.
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Voting Rights: (1) The affirmative vote of at least a majority of the holders of each series of preferred stock shall be necessary to:
| (a) | increase or decrease the par value of the shares of the Series A Preferred Stock, alter or change the powers, preferences or rights of the shares of Series A Preferred Stock or create, alter or change the powers, preferences or rights of any other capital stock of the Company if after such alteration or change such capital stock would be senior to or pari passu with Series A Preferred Stock; and |
| (a) | adversely affect the shares of Series A Preferred Stock, including in connection with a merger, recapitalization, reorganization or otherwise. |
(2) The affirmative vote of at least a majority of the holders of the shares of the Series A Preferred Stock shall be necessary to:
| (a) | enter into a transaction or series of related transactions deemed to be a liquidation, dissolution or winding up of the Corporation, or voluntarily liquidate or dissolve; |
| (b) | authorize a merger, acquisition or sale of substantially all of the assets of the Company or any of its subsidiaries (other than a merger exclusively to effect a change of domicile of the Company to another state of the United States); |
| (c) | increase or decrease (other than decreases resulting from conversion of the Series A Preferred Stock) the authorized number of shares of the Company’s preferred stock or any series thereof, the number of shares of the Company’s common stock or any series thereof or the number of shares of any other class or series of capital stock of the Company; and |
| (d) | any repurchase or redemption of capital stock of the Company except any repurchase or redemption at cost upon the termination of services of a service provider to the Company or the exercise by the Company of contractual rights of first refusal as applied to such capital stock. |
Dividend Rights: The holders of the Company’s preferred stock are not entitled to any dividend rights.
Conversion Rights (Series A Preferred Stock): Upon the consummation of this offering, the issued and outstanding shares of Series A Preferred Stock automatically convert into a number of shares of the Company’s common stock equal to the quotient obtained by dividing (x) the aggregate Stated Value of the issued and outstanding Series A Preferred Stock plus any other amounts due to the holders thereof divided by (y) the offering price of the Company’s common stock. If 90 days after conversion, the closing market price of the Company’s common stock as quoted on Nasdaq (the “Market Value”) has decreased below the initial public offering price, each holder of the Series A Preferred Stock shall be issued a warrant to purchase a number of shares of the Company’s common stock equal to 40% of the quotient of the (a) aggregate Stated Value held by such holder before conversion at the initial public offering price and the Market Value of the shares of common stock that were issuable upon conversion divided by (b) the Market Value. The warrants shall have a term of five years and shall be exercisable at the Market Value.
Conversion Rights (Preferred Stock other than Series A Preferred Stock): Upon the consummation of this offering, each issued and outstanding share of Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock will automatically convert into 750 shares of the Company’s common stock.
Liquidation Rights: In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (a "Liquidation Event"), the holders of each series of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Company’s common stock by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the aggregate Stated Value for all shares of such series of Preferred Stock then held by then or (y) the amount payable per share of the Company’s common stock which such holder of preferred stock would have received if such holder had converted to common stock immediately prior to the Liquidation Event all of such series of preferred stock then held by such holder (the "Series Stock Liquidation Preference"). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the holders of the preferred stock shall be insufficient to permit the payment to the holders of the preferred stock the full Series Stock Liquidation Preference for all series, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the preferred stock in proportion to the aggregate Series Liquidation Preferences that would otherwise be payable to each of the holders of preferred stock. Such payment shall constitute payment in full to the holders of the preferred stock upon the Liquidation Event. After such payment shall have been made in full, or funds necessary for such payment shall have been set aside by the Company in trust for the account of the holders of preferred stock, so as to be immediately available for such payment, such holders of preferred stock shall be entitled to no further participation in the distribution of the assets of the Company. The sale of all or substantially all of the assets of the Company, or merger, tender offer or other business combination to which the Company is a party in which the voting stockholders of the Company prior to such transaction do not own a majority of the voting securities of the resulting entity or by which any person or group acquires beneficial ownership of 50% or more of the voting securities of the Company or resulting entity shall be deemed to be a Liquidation Event.
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Other Matters: The holders of the Company’s preferred stock have no subscription or redemption privileges and are not subject to redemption. The Company’s Series Preferred Stock does not entitle its holders to preemptive rights. All of the outstanding shares of the Company’s preferred stock are fully paid and non-assessable.
Series A Preferred Shares
There was Series A Preferred Shares issued during the three months ended March 31, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series A Preferred Shares were automatically converted into shares of the Company’s common stock in
the value of $
As of March 31, 2022 and December 31, 2021, there were and shares of Series A Preferred Shares issued and outstanding, respectively.
Series B Preferred Shares
There was Series B Preferred Shares issued during the three months ended March 31, 2022 and 2021.
Upon
the IPO Closings, all outstanding shares of Series B Preferred Stock were automatically converted into shares of the Company’s common stock at
a value of $
As of March 31, 2022 and December 31, 2021, there were and shares of Series B Preferred Shares issued and outstanding, respectively.
Series B-1 Preferred Shares
There was Series B-1 Preferred Shares issued during the three months ended March 31, 2022 and 2021.
During
the year ended December 31, 2020, the Company issued shares of its Series B-1 Preferred Shares for
the consulting services rendered at a value of $
Upon
the IPO Closings, all outstanding shares of Series B-1 Preferred Shares were automatically converted into shares of the Company’s common stock at
a value of $
As of March 31, 2022 and December 31, 2021, there were and shares of Series B-1 Preferred Shares issued and outstanding, respectively.
Series C Preferred Shares
During
the year ended December 31, 2021, the Company issued and shares of Series C Preferred Shares for cash
in private placement and consulting services rendered at a value of $
| 38 |
During
the year ended December 31, 2021, the Company incurred the issuance cost in connection with the private placement of Series C Preferred
Shares amounting to $
There was Series C Preferred Shares issued during the year ended December 31, 2020.
Upon
the IPO Closings, all outstanding shares of Series C Preferred Shares were automatically converted into shares of the Company’s common stock at
a value of $
As of March 31, 2022 and December 31, 2021, there were and shares of Series C Preferred Shares issued and outstanding, respectively.
Series C-1 Preferred Shares
The Company accounts for warrants issued in accordance with the guidance on “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” in Topic 480. These warrants did not meet the criteria to be classified as a liability award and therefore were treated as an equity award and classified the Series C-1 Preferred Shares within mezzanine equity in the condensed consolidated balance sheet.
During
the year ended December 31, 2020, the Company issued and shares of Series C-1 Preferred Shares for cash
in private placement and consulting services for the value of $
During
the year ended December 31, 2021, the Company issued ,
and shares of Series C-1 Preferred Shares for cash
in private placement, director’s salaries and consulting services at a value of $
During
the year ended December 31, 2021, the Company incurred the issuance cost in connection with the private placement of Series C-1 Preferred
Shares amounting to $
Upon
the IPO Closings, all outstanding shares of Series C-1 Preferred Shares were automatically converted into shares of the Company’s common stock in
a value of $
As of March 31, 2022 and December 31, 2021, there were and shares of Series C-1 Preferred Shares issued and outstanding, respectively.
Series X Super Voting Preferred Shares
In August 2021, the Company created a new series of preferred stock to be titled “Series X Super Voting Preferred Stock”, at par value, consisting of 2,000 shares and to provide to such preferred stock certain rights and privileges including but not limited to the right to 10,000 votes per share (post reverse split: 4,000 votes per share) to vote on all matters that may come before the stockholders of the Corporation, voting together with the common stock as a single class on all matters to be voted or consented upon by the stockholders but is not entitled to any dividends, liquidation preference or conversion or redemption rights, so accordingly it is accounted as an equity classification.
As of March 31, 2022 and December 31, 2021, there were and shares of Series X Super Voting Preferred Shares issued and outstanding, respectively.
| 39 |
NOTE－18 INCOME TAXES
For the three months ended March 31, 2022 and 2021, the local (“Neveda”) and foreign components of loss before income taxes were comprised of the following:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Tax jurisdiction from: | ||||||||
| - Local | $ | ( | ) | $ | ( | ) | ||
| - Foreign | ( | ) | ( | ) | ||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
The provision for income taxes consisted of the following:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Current: | ||||||||
| - United States | $ | $ | ||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| Deferred: | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| Income tax expense | $ | $ | ||||||
The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: Singapore and Vietnam that are subject to taxes in the jurisdictions in which they operate, as follows:
United States
The Company is registered in the Nevada and is subject to the tax laws of United States. A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows:
As of March 31, 2022,
the operation in the United States incurred $
| 40 |
Singapore
The Company’s subsidiary is registered in the Republic of Singapore and is subject to the tax laws of Singapore.
As
of March 31, 2022, the operation in the Singapore incurred $
Vietnam
The
Company’s subsidiary operating in Vietnam is subject to the Vietnam Income Tax at a standard income tax rate of
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of allowance | ||||||||
| Income tax expense | $ | $ | ||||||
As
of March 31, 2022, the operation in the Vietnam incurred $
India
The
Company’s subsidiary operating in India is subject to the India Income Tax at a standard income tax rate of
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Profit before income taxes | $ | $ | ||||||
| Statutory income tax rate | % | % | ||||||
| Income tax expense at statutory rate | ( | ) | ||||||
| Tax effect of allowance | ( | ) | ||||||
| Income tax expense | $ | $ | ||||||
As
of March 31, 2022, the operation in the India incurred $
| 41 |
Deferred tax assets and liabilities are recognized for future tax consequences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the tax year in which the differences are expected to reverse. Significant deferred tax assets and liabilities of the Company as of December 31, 2022 and 2021 consist of the following:
Schedule of Deferred Tax Assets and Liabilities
| March 31, 2022 | December 31, 2021 | |||||||
| Deferred tax assets: | ||||||||
| Software intangibles (U.S) | $ | $ | ||||||
| Deferred Stock Compensation (U.S.) | ||||||||
| Net operating loss carryforwards | ||||||||
| - United States | ||||||||
| - Singapore | ||||||||
| - Vietnam | ||||||||
| - India | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
The
Internal Revenue Code includes a provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for
a
The
Company is subject to taxation in the U.S. and various foreign jurisdictions. U.S. federal income tax returns for 2018 and after remain
open to examination. We and our subsidiaries are also subject to income tax in multiple foreign jurisdictions. Generally, foreign income
tax returns after 2017 remain open to examination. No income tax returns are currently under examination. As of March 31, 2022 and 2021,
the Company does
NOTE－19 PENSION COSTS
The
Company is required to make contribution to their employees under a government-mandated defined contribution pension scheme for its eligible
full-times employees in all countries operating in the Company. The Company is required to contribute a specified percentage of the participants’
relevant income based on their ages and wages level. During the three months ended March 31, 2022 and 2021, $
NOTE－20 RELATED PARTY TRANSACTIONS
From time to time, the shareholder and director of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.
The
Company paid and accrued to the directors, the total salaries of $
| 42 |
The
company subsidiaries paid their two officers, total professional fee of $
The
Company paid its shareholders, total professional fee of $
Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
NOTE－21 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major customers
For the three months ended March 31, 2022 and 2021, the customers who accounted for 10% or more of the Company’s revenues and its outstanding receivable balances at year-end dates, are presented as follows:
| Three months ended March 31, 2022 | March 31, 2022 | |||||||||||
| Customers | Revenues | Percentage
of revenues | Accounts
receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Three months ended March 31, 2021 | March 31, 2021 | |||||||||||
| Customers | Revenues | Percentage
of revenues | Accounts
receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
The customers are located in Vietnam except one located in Indonesia.
(b) Major vendors
For the three months ended March 31, 2022 and 2021, the vendors who accounts for 10% or more of the Company’s hardware purchases and software cost and its outstanding payable balances as at year-end dates, are presented as follows:
| Three months ended March 31, 2022 | March 31, 2022 | |||||||||||
| Vendors | Purchases | Percentage
of purchases | Accounts
payable | |||||||||
| Vendor A | $ | $ | ||||||||||
| Three months ended March 31, 2021 | March 31, 2021 | |||||||||||
| Vendors | Purchases | Percentage
of purchases | Accounts
payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| 43 |
All vendors are located in Vietnam.
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(d) Exchange rate risk
The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in VND, SGD and INR and a significant portion of the assets and liabilities are denominated in VND, SGD and INR. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and VND, SGD and INR. If VND, SGD and INR depreciates against US$, the value of VND, SGD and INR revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
(e) Economic and political risks
The Company’s operations are conducted in the Republic of Vietnam. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the Vietnam, and by the general state of the Vietnam economy.
The Company’s operations in the Vietnam and India are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the Vietnam and India, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
NOTE－22 COMMITMENTS AND CONTINGENCIES
As of March 31, 2022, the Company has no material commitments or contingencies.
Right issues under Series C-1 preferred stock
The Company has issued warrant pursuant to the Series C-1 Subscription Agreement. Each redeemable warrant entitles the holder to purchase two (2) common shares at a price of $per share. The warrants shall be exercisable on or before December 31, 2020 and June 30, 2021, respectively. On April 19, 2021, the Company extended the termination date of the Warrant issued to Preferred Series C-1 holder by six months from the expiration date of June 30, 2021 to December 31, 2021. On November 16, 2021, the Company has further extended the termination date until June 30, 2022. The Company considers this warrant as permanent equity per ASC Topic 815-40-35-2, the warrants would not be marked to market at each financial reporting date. However, where there is a subsequent change in assumptions related to warrants (in the instant case, an extension of the expiration date of the warrants), the difference between the amount originally recorded and the newly calculated amount, based upon the changed assumptions, is determined and the difference between the before and after valuation is recorded as an expense, with the corresponding credit to accumulated paid-in capital.
| 44 |
Financing arrangement (due to a shareholder)
In February 2018, the Company entered into MOU with Connect Investment Pte Ltd (Enter Asia) for capital alliance for approximately 27% of shareholdings in the Company. Further, in August 2018, the said MOU was modified and shareholding was revised from 27% to 10% in the Company. However, subsequently in October 2020, it was agreed between both the parties to cease the said MOU with the understanding that there is no current and future obligation with either of them i.e., neither Enter Asia to make investment in the Company nor the Company to issue shares to Enter Asia. Further, the Enter Asia is going to get the shares of the Hottab Holdings Ltd (HHL) for the amount so far invested in the Company and therefore the amount due to Enter Asia is reclassified into the amount due to shareholder “Hottab Holdings Ltd”.
SOSV
In
January 2019, the HPL entered into stock purchase agreement and accelerator contract for equity (ACE) with SOSV IV LLC (SOSV) whereby
the HPL will issue shares representing 5% of their capital stock for the amounts of $
Service contracts
The Company carries various service contracts on its vendors for repairs, maintenance and inspections. All contracts are short term and can be cancelled.
Material contracts
On May 28, 2021, the Company entered into a business cooperation agreement with Paytech Company Limited (Strategic Partners) to provide payment integration and loyalty services to the platform that allows merchants to process transactions with consumers. As of date, this program have not started and expected to commence in next year 2022.
On August 15, 2021, the Company entered into a business cooperation agreement with Rainbow Loyalty Company Limited (Strategic Partners) to provide loyalty services for merchants on the platform. As of date, this program have not started and expected to commence in next year 2022.
On May 26, 2021, the company entered into a business cooperation agreement with TikiNow Smart Logistic Limited Company to provide warehouse service, packing service, delivery service and payment collection of online orders that paid by cash (COD). The agreement have been implemented since October 1, 2021.
On May 15, 2021, the company entered into a business cooperation agreement with AisaPay Company Limited (Partner) to provide payment gateway service for customers who make payment by credit cards on the platform. The agreement has been implemented since September 7th, 2021.
On
December 6, 2021, the Company entered into two consulting agreements with China-America Culture Media Inc. and New Continental Technology
Inc., acting as Consultant to assist the Company in completing certain Business Opportunities with potential partners until February
28, 2023. The consideration of the service are $
| 45 |
Executive service agreements
On
April 1, 2017 the Company entered into an at-will employment agreement with Dennis Nguyen, its Chairman and Chief Executive Officer.
The Employment Agreement provides for a monthly salary of $
On
September 1, 2021 the Company
entered into a 5-year employment agreement with Raynauld Liang, its Chief Financial Officer and Singapore Country General Manager. The
employment agreement provides Mr. Liang with compensation of (i) an annual base salary of $
On November 16, 2021, the Board of Directors awarded Dennis Nguyen a 10-year option to purchase shares of the Company’s common stock at an exercise price of $as the settlement for accrued and unpaid bonuses.
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. The Company is not aware of any such legal proceedings that will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
The litigation docket of Carmel, Milazzo & Feil LLP discloses the following actual, pending or threatened litigation for the Company:
Rahul Narain v. Society Pass, Inc.
Supreme Court of the State of New York, County of New York, Index 656956/2019
Thomas O’Connor & CVO Advisors Pte. Ltd. v. Society Pass, Inc.
Supreme Court of the State of New York, County of New York, Index 656938/2019
Dennis Nguyen v. Thomas O’Connor
| 46 |
Supreme Court of the State of New York, County of New York, Index 651015/2020
The Company is currently litigating three cases pending in the Supreme Court for the State of New York, New York County.
Two cases are employment actions filed by former employees who seek compensation alleged to be due pursuant to agreements with the Company. Both of the employees are represented by the same counsel and filed their cases in the Supreme Court of the State of New York, County of New York, in December 2019.
In one of those actions, a
In
the other employment action, another
The third case also involves one of those former employees; therein, a Company affiliate filed suit in February 2020 seeking enforcement, by way of specific performance, of an agreement which entitles the affiliate to purchase all of the 99 percent of the shares of the plaintiff-entity which alleges entitlement to $8 million in shares of the Company’s Series A Preferred Stock in one of the employment actions described above. The former employee has responded to the Company’s complaint in this action with a motion to dismiss, which was later withdrawn by same, and then by way of an answer without counterclaims. The judge assigned to this action has announced his retirement at the end of the calendar year; it is unclear to whom the case will be assigned in the future.
The Company was in an AAA arbitration defending allegations of breach of an agreement. The Demand for Arbitration therein, dated August 25, 2020, asserts that the Petitioner, an LLC, had an agreement with the Company and its CEO granting the Petitioner the right to require the Company to redeem certain common stock in the Company for a cash payment.
The
Demand alleges that the Petitioner submitted a Redemption Notice, as required under the alleged agreement, obligating the Company to
redeem the shares. The Demand alleges that the failure of the Company to redeem the shares and pay Petitioner further obligates the Company
to provide additional common stock to the Petitioner.
The
Company has submitted a total and general denial of the allegations of the Demand. The matter has been assigned to an arbitrator and
a Preliminary Hearing and Scheduling Order was issued in or around November 9, 2020. Dispositive motions are due at the end of January
2021 but otherwise this matter is in the discovery phase with any Final Hearing before the arbitrator tentatively scheduled for mid-September
2021. On May 21, 2021, the Company has agreed to settle the matter for the sum of $
As these matters are in the discovery phase, it is too early to assess the likelihood of success. The Company denies the accusations by both O’Connor and Narain and intends to vigorously defend these matters.
| 47 |
SOSV IV LLV v. Society Pass Inc., et al.
United States District Court for New Jersey, Index No. 21-cv-12386
On or about March 5, 2021, SOSV IV LLC (“SOSV”) sent a demand letter to the Company in regard to its investment in Hottab Pte. Ltd. (“Hottab”). Thereafter, SOSV filed suit in the District Court for New Jersey on June 10, 2021.
In
this lawsuit, SOSV alleges that it entered into an investment arrangement with Hottab in which SOSV was to receive five percent (5%)
of the common stock of Hottab and entered into an Accelerator Contract for Equity (the “ACE”) pursuant to which it alleges
to have invested a sum of $
SOSV further alleges that subsequent to a term sheet between the Company and Hottab being executed, the Company entered into an agreement to purchase one hundred percent (100%) of the issued and outstanding shares of Hottab from Hottab Holdings Limited (“Hottab Holdings”). As SOSV does not have any interest in Hottab Holdings, it alleges it did not receive any consideration as allegedly provided under the ACE.
Upon
these allegations, SOSV asserts causes of action sounding in fraudulent misrepresentation/concealment, breach of contract, breach of
the covenant of good faith and fair dealing, quantum meruit and/or unjust enrichment, promissory estoppel, oppression of minority shareholder,
and breach of fiduciary duties. SOSV seeks damages in the amount of $
Initially, SOSV filed suit in the District Court for New Jersey on June 10, 2021. SOSV voluntarily dismissed its New Jersey lawsuit and on October 29, 2021, re-filed the action in the Southern District of New York. The Southern District of New York lawsuit was also voluntarily dismissed by SOSV. SOSV has recently re-filed the suit in the Supreme Court of the State of New York, County of New York. The most recently filed complaint contains largely similar allegations and asserts causes of action sounding in fraudulent misrepresentation/concealment, intentional interference with contract, breach of the implied covenant of good faith and fair dealing, quantum meruit/unjust enrichment, oppression of minority shareholder, breach of fiduciary duty, and recission (or in the alternative declaration of ownership interest). The most recently filed complaint demands $336,000.00 and damages equal to the value of SOSV’s alleged ownership interest in Hottab, or alternatively an Order compelling the issuance of shares in SoPa in an amount equal to Plaintiff’s ownership interest in Hottab at the time of the Agreement of Purchase and Sale. SOSV also seeks disgorgement, though this does not include any pertinent dollar figure.
The
Company denies the accusations of SOSV and intends to vigorously defend this matter. As the lawsuit is still in the pleadings stage,
we are unable to prognosticate a likelihood of success. The Company reserved a provision for $
As
of March 31, 2022, the Company had a total of $
As of March 31, 2022, the Company expects no possible loss from these legal proceedings and no provision is accrued accordingly.
NOTE－23 SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the consolidated balance sheet date through May 17, 2022, which is the date the consolidated financial statements were issued.
| 48 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
BASIS OF PRESENTATION
The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”), including our unaudited condensed consolidated financial statements and the related notes and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 30, 2022, and other reports that we file with the SEC from time to time.
References in this Quarterly Report on Form 10-Q to “us”, “we”, “our” and similar terms refer to Society Pass Incorporated.
Overview
We acquire and operate e-commerce platforms and mobile applications through our direct and indirect wholly or majority-owned subsidiaries, including but not limited to Society Technology LLC, SOPA Technology Pte Ltd, SOPA Cognitive Analytics Pte Ltd, SOPA Technology Co Ltd, HOTTAB Pte Ltd and HOTTAB Vietnam Co Ltd. Along with HOTTAB Asset Vietnam Co Ltd (currently wholly-owned by one employee of HOTTAB Vietnam Co Ltd and contractually operated by HOTTAB Vietnam Co Ltd), Leflair Incorporated, Push Delivery Pte Ltd, New Retail Experience Incorporated (“NREI”), and Dream Space Co., Ltd (“Dream Space”), these twelve companies form the Society Pass Group (the “Group”). The Group currently markets to both consumers and merchants in Vietnam and Philippines while maintaining an administrative headquarters in Singapore and a software development center, which was located in India but is transitioning to a location in SEA. In February 2021, we acquired an online lifestyle platform of Leflair branded assets (the “Leflair Assets”). We recently acquired NREI and Dream Space in February 2022 and have integrated the Leflair Assets, NREI and Dream Space onto the Society Pass corporate structure and ecosystem. We continue to expand our e-commerce ecosystem throughout the rest of SEA by making selective acquisitions of leading e-commerce companies and applications with particular focuses on the VIP countries (Vietnam, Indonesia and Philippines) of SEA.
Our business currently comprises of the following four verticals: lifestyle, food and beverage (“F&B”) delivery, merchant software and loyalty. Lifestyle includes Leflair App and Leflair.com website; F&B Delivery includes Pushkart App, Pushkart.ph website, Handycart App, and Handycart.vn website. The merchant software segment includes #HOTTAB Biz App, #HOTTAB POS App and Hottab.net website, while the loyalty vertical includes Society Pass App and SoPa.asia website. In addition, we are looking at acquiring companies in the travel and digital media verticals. These current four and prospective e-commerce interfaces are collectively referred to in this Annual Report as the “Platform”.
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Our loyalty-focused and data-driven e-commerce marketing platform interfaces connect consumers with merchants in the F&B and lifestyle sectors, assisting local brick-and-mortar businesses to access new customers and markets to thrive in an increasingly convenience-driven economy. Our Platform integrates with both global and country-specific search engines and applications and accepts international address and phone number data, providing a consumer experience that respects local languages, address formats and customs. Our Strategic Partners (as defined below) work with us to penetrate local markets, while our Platform allows effortless integration with existing technological applications and websites.
Leflair.com website and Leflair App are marketed in Vietnam. Pushkart.ph website and Pushkart App are marketed in Philippines. Handycart.vn website and Handycart App are marketed in Vietnam.
Branded as “#HOTTAB”, our merchant software business helps merchants increase revenues and streamline costs with an online and multilingual store front, fully integrated POS software solution, joint marketing program, payment infrastructure, loyalty administration, customer profile analytics, and SME financing packages. Through #HOTTAB Biz App, #HOTTAB POS and Hottab.net merchant administration website interfaces, #HOTTAB functions both online and offline and facilitates transactions, orders, voucher redemption, and rewards. Merchants only need a smart device in order to quickly access our #HOTTAB product ecosystem. In addition, our Customer Care department provides attentive after-sales service.
The Hottab.net admin website and #HOTTAB Biz App, #HOTTAB POS APP are marketed in both Vietnam and Indonesia.
SoPa.asia website and Society Pass App are marketed in Vietnam.
As of May 16, 2022 we have onboarded over 1.6 million registered consumers and over 5,500 registered merchants on our Platform.
Impact of the COVID-19 Pandemic
The current outbreak of COVID-19 has globally resulted in loss of life, business shutdowns, restrictions on travel, and widespread cancellation of social gatherings. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including:
| • | new information which may emerge concerning the severity of the disease in Vietnam and SEA; |
| • | the duration and spread of the outbreak; |
| • | the severity of travel restrictions imposed by geographic areas in which we operate, mandatory or voluntary business closures; |
| • | regulatory actions taken in response to the pandemic, which may impact merchant operations, consumer and merchant pricing, and our product offerings; |
| • | other business disruptions that affect our workforce; |
| • | the impact on capital and financial markets; and |
| • | action taken throughout the world, including in markets in which we operate, to contain the COVID-19 outbreak or treat its impact. |
In addition, the current outbreak of COVID-19 has resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health threats could do so in the future. Such events have impacted, and could in the future impact, demand for merchants and consumer purchase patterns, which in turn, could adversely affect our revenue and results of operations.
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Since the onset of the COVID-19 pandemic in March and April 2020, all our POS merchant clients are affected by COVID-19 measures for F&B to temporary stop restaurant dine ins.
| • | Some of our restaurant clients ceased operations permanently and many were closed since June 2020 without any notice of reopening their business to date. |
| • | Our largest POS client, a hotel chain for which we provide POS services to their F&B business in their hotels, ceased operations in two out of nine hotels since April 2020. |
| • | The Company faces challenges to onboard new clients but at the same time losing many existing ones. |
With the ongoing pandemic, Company faces challenges in our operation as follows;
| • | Disruption of operation in Vietnam, Philippines, India, Singapore and US where staffs have to work from home. |
| • | The coordination of rebooting of company’s recent asset acquisition of NREI and Dream Space, which are the F&B Delivery platforms in operate in Philippines and Vietnam respectively. |
| • | Application of licenses are delayed as government agencies take longer time to review and process time. |
| • | HR process to hire personnel are generally slow due to people not willing to leave their current job, company have to spend more time and resource |
The spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences and further actions may be taken as required or recommended by government authorities or as we determine are in the best interests of our employees, customers, and other business partners. We are monitoring the global outbreak of the pandemic, in SEA, especially Vietnam and are taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and the governmental and community reactions thereto. See “Risk Factors--Our business may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.
Financial Condition
Results of Operations
The following table sets forth certain operational data for the three months ended March 31, 2022 and 2021:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue, net | 445,090 | 9,506 | ||||||
| Cost of revenue | (459,883 | ) | (18,295 | ) | ||||
| Gross loss | (14,793 | ) | (8,789 | ) | ||||
| Less operating expenses: | ||||||||
| Sales and marketing expenses | (196,102 | ) | (900 | ) | ||||
| Software development costs | (19,548 | ) | (30,161 | ) | ||||
| Impairment loss | (528,583 | ) | (200,000 | ) | ||||
| General and administrative expenses | (5,840,698 | ) | (1,954,097 | ) | ||||
| Total operating expenses | (6,584,931 | ) | (2,185,097 | ) | ||||
| Loss from operations | (6,599,724 | ) | (2,193,947 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 45 | 6 | ||||||
| Interest expense | (4,045 | ) | (12,057 | ) | ||||
| Loss on settlement of litigation | — | (550,000 | ) | |||||
| Other income | 13,621 | 755 | ||||||
| Total other income (expense) | 9,621 | (561,296 | ) | |||||
| Loss before income taxes | (6,590,103 | ) | (2,755,243 | ) | ||||
| Income taxes | (1,302 | ) | (1,737 | ) | ||||
| NET LOSS | $ | (6,591,405 | ) | $ | (2,756,980 | ) | ||
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Revenue. We generated revenues of $445,090 and $9,506 for the three months ended March 31, 2022 and 2021 respectively. The significant increase in revenue for three months was mainly due to increase in the sales from our online platforms.
During the three months ended March 31, 2022 and 2021, the following customer exceeded 10% of the Company’s revenues:
| Three months ended March 31, 2022 | March 31, 2022 | |||||||||||
| Customer | Revenues | Percentage
of revenues | Accounts
receivable | |||||||||
| Customer A | $ | 390,397 | 88 | % | $ | 54,160 | ||||||
| Three months ended March 31, 2021 | March 31, 2021 | |||||||||||
| Customer | Revenues | Percentage
of revenues | Accounts
receivable | |||||||||
| Customer A | $ | 8,044 | 84.6 | % | $ | — | ||||||
All of our customers are located in Vietnam except one above significant customer located in Indonesia.
Cost of Revenue. We incurred cost of revenue of $459,883 and $18,295 for three months ended March 31, 2022, and 2021 respectively. Cost of revenue increased primarily as a result of the increased in cost of products and cost of logistic.
Major vendors
For the three months ended March 31, 2022 and 2021, the vendors who accounts for 10% or more of the Company’s hardware purchases and software cost its outstanding payable balances as at year-end dates, are presented as follows:
| Three months ended March 31, 2022 | March 31, 2022 | |||||||||||
| Vendor | Purchases | Percentage
of purchases | Accounts
payable | |||||||||
| Vendor A | $ | — | — | $ | — | |||||||
| Three months ended March 31, 2021 | March 31, 2021 | |||||||||||
| Vendor | Purchases | Percentage
of purchases | Accounts
payable | |||||||||
| Vendor A | $ | 16,405 | 90.0 | % | $ | 42,652 | ||||||
All vendors are located in Vietnam.
Gross Loss. We recorded a gross loss of $14,793 and $8,789 for three months ended March 31, 2022 and 2021 respectively. The increase in gross loss is primarily attributable to increase in the cost of products and cost of logistic.
Sales and Marketing Expenses (“S&M”). We incurred S&M expenses of $196,102 and $900 for three months ended March, 31 2022 and 2021 respectively. The increase in S&M is primarily attributable to the increased in sales and promotion expenses related to get more merchants joining our e-commerce platform to operate their business. Also, increase marketing cost to attract attention of customer to our e-commerce platform.
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Software Development Cost (“SDC”). We incurred SDC expenses of $19,548 and $30,161 for three months ended March 31, 2022 and 2021 respectively. The decrease in SDC is primarily attributable to the restructuring of our technology development team.
Impairment Charge (“IC”). We incurred impairment charge of $528,583 and $200,000 for the three months ended March 31, 2022 and 2021 respectively. The increase is primarily attributable to the acquisition of NREI ecommerce asset in February 2022 which was expensed in the same period due to the short life term of the asset and the quantum of consideration.
General and Administrative Expenses (“G&A”). We incurred G&A expenses of $5,840,698 and $1,954,097 for three months ended March 31, 2022 and 2021 respectively. The increase in G&A is primarily attributable to the professional cost associated with cost related to company looking for business opportunities, amortization of intangible assets and Stock based compensation for services.
Loss on settlement of litigation. On May 21, 2021, the Company has agreed to settle the matter for the sum of $550,000. No additional shares were included in the settlement agreement. The settlement sum is required to be paid in two tranches, with $250,000 to have been paid on or before May 28, 2021 and the remaining $300,000 to be paid on or before June 30, 2021. The Company made the first payment of $250,000 on May 25, 2021 and complete the settlement sum as provided under the settlement agreement by paying the remaining $300,000 on June 29, 2021. In connection with the settlement, the Company recognized litigation settlement expense and a related accrued liability of $550,000 in the period ended March 31, 2021. There is no such expenses incurred in the comparative period ended March 31, 2022.
Income Tax Expense. Our income tax expenses for the three months ended March 31, 2022 and 2021 was $1,302 and $1,737 respectively.
Net Loss. As a result for the three months ended March, 2022, we incurred a net loss of $6,591,405 as compare to the same period ended March 31, 2021 of $2,756,980. The increase in net loss is primarily attributable to the professional cost associated with cost related to company looking for business opportunities, sales and marketing expenses and amortization of intangible assets.
Liquidity and Capital Resources
As of March 31, 2022, we had cash and cash equivalents of $30,967,561, accounts receivable of $47,574, deposits, prepayments and other receivables of $5,798,748 and inventories of $267,409.
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 March 31, 2022, the Company suffered from an accumulated deficit of $53,900,834. For the three months ended March 31, 2022, the Company incurred net loss of $6,591,405 and net cash used by operating activities of $2,507,886. Net cash used by investing activities was $225,134. Net cash provided by financing activities was $10,532,676, resulting principally from $10,402,891 net proceeds from IPO public offering and $357,000 net proceeds from the C1 warrants exercised. The Company also repaid $227,215 of First Insurance Funding loan during 2022.
The Company believes that it will be able to continue to grow the Company’s revenue base and control expenditures, there is no assurance. In parallel, the Company continually monitors its capital structure and operating plans and evaluates various potential funding alternatives that may be needed in order to finance the Company’s business development activities, general and administrative expenses and growth strategy.
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| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash (used in) operating activities | $ | (2,560,917 | ) | $ | (449,911 | ) | ||
| Net cash (used in) investing activities | (225,134 | ) | (40,000 | ) | ||||
| Net cash provided by financing activities | 10,532,676 | 818,415 | ||||||
| Effect on exchange rate change | (43,841 | ) | 35,903 | |||||
| Net change in cash and cash equivalents | 7,702,784 | 364,407 | ||||||
| Cash and cash equivalent at beginning of period | 23,264,777 | 506,666 | ||||||
| Cash and cash equivalent at end of period | 30,967,561 | 871,073 | ||||||
Net Cash Used In Operating Activities.
For the three months ended March 31, 2022, net cash used in operating activities was $2,560,917, which consisted primarily of a net loss of $6,591,405, adjusted by increase in stock based compensation for services of $1,856,073, increase in Shares issued to acquire non-controlling interest of $22,470, increase in inventories of $46,341, decrease in accounts receivables of $9,743, decrease in deposits, prepayments and other receivables of $1,163,776, decrease in contract liabilities $6,585, increase in accounts payables of $60,134, increase in accrued liabilities and other payable of $250,988, decrease in advance to related parties of $499,352, decrease in operating lease liabilities of $61,465, increase in depreciation and amortization of $806,622, increase in impairment loss of $528,583.
For the three months ended March 31, 2021, net cash used in operating activities was $449,911, which consisted primarily of net loss of $2,756,980, adjusted by increase in stock based compensation for services of $613,200, increase in account receivable of $391, decrease in deposits, prepayment and other receivables of $3,690, decrease in contract liabilities of $8,107, decrease in accounts payable of $2,802, increase in accrued liabilities and other payables of $17,462 and increase in advance to related parties of $122,500, decrease in operating lease liabilities of $9,063, increase in depreciation and amortization of $802,237, increase in impairment loss of $200,000.
We expect to continue to rely on cash generated through financing from public offerings or private offerings of our or one or more of our subsidiaries’ securities, however, to finance our operations and future acquisitions.
Net Cash (Used In) Investing Activities.
For the three months ended March 31, 2022, there is net cash of $225,134 being deposit paid for subsidiaries asset acquisition investing activities and purchase of property, plant, and equipment.
For the three months ended March 31, 2021, there is net cash of $40,000 being paid for purchase of investment assets.
Net Cash Provided By Financing Activities.
For the three months ended March 31, 2022, net cash provided by financing activities was $10,532,676, consisting primarily of funds raised from follow on offering and Series C-1 warrants exercised.
For the three months ended March 31, 2021, net cash provided by financing activities was $818,415, consisting primarily of funds raised from shareholders for Series C and warrant exercised.
Critical Accounting Policies and Estimate
• Basis of presentation
The Company has prepared the accompanying condensed financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our condensed balance sheets, statements of operations and other comprehensive loss, statements of stockholders’ deficit and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2022 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These condensed financial statements should be read in conjunction with the 2021 audited financial statements and accompanying notes filed with the SEC.
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• Emerging Growth Company
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
• Use of estimates and assumptions
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted. Significant estimates in the period include the allowance for doubtful accounts on accounts, assumptions used in assessing right of use assets, valuation and useful lives of intangible assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, business acquisition allocation of purchase consideration, and deferred tax valuation allowance.
• Basis of consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
• Business combinations
The Company follows Accounting Standards Codification (“ASC”) ASC Topic 805, Business Combinations (“ASC 805”) and ASC Topic 810-10-65, Consolidation. ASC Topic 805 requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “fair value.” The statement applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under ASC Topic 805, all business combinations are accounted for by applying the acquisition method. Accounting for goodwill requires significant management estimates and judgment. Management performs periodic reviews of the carrying value of goodwill to determine whether events and circumstances indicate that an impairment in value may have occurred. A variety of factors could cause the carrying value of goodwill to become impaired. A write-down of the carrying value of goodwill could result in a non-cash charge, which could have an adverse effect on the Company’s results of operations.
• Noncontrolling interest
The Company accounts for noncontrolling interest in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to the its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
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• Segment Reporting
ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in consolidated financial statements. The Company currently operates in two reportable operating segments: (i) e-commerce and (ii) 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 March 31, 2022 and December 31, 2021, the cash and cash equivalent was amounted to $30,967,561 and $23,264,777, respectively.
The Company currently has bank deposits with financial institutions in the U.S. which does not exceed FDIC insurance limits. FDIC insurance provides protection for bank deposits up to $250,000, so there were uninsured balance of $10,725,021 and $13,699,082 in parent entity as of March 31, 2022 and December 31, 2021, respectively. In addition, the Company has uninsured bank deposits with a financial institution outside the U.S. All uninsured bank deposits are held at high quality credit institutions.
• Accounts receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company considers the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2022 and December 31, 2021, the allowance for doubtful accounts amounted to $0 and $0, respectively.
• Inventories
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware equipment and peripheral costs which are purchased from the Company’s suppliers as merchanized goods. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. During the three months ended March 31, 2022 and 2021, the Company recorded an allowance for obsolete inventories of $0 and $0, respectively. The inventories was amounted to $267,409 and $221,068 at March 31, 2022 and December 31, 2021, respectively.
• Prepaid Expenses
Prepaid expenses represent future expenses paid in advance, until the associated benefits are realized, the future expense remains at current asset within the next twelve months and non-current asset after twelve months. Since prepaid expenses are categorized as “current and non-current” assets, the benefits associated with the products or services paid for upfront are expected to be used for the next twelve months and thereafter. Once the benefits of the assets are gradually realized, the prepaid expense is reduced as the asset is expensed off on the statement of operations.
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• Property, plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | ||
| Computer equipment | 3 years | |
| Office equipment | 5 years | |
| Renovation | 5 years |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
• Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the periods presented.
• Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). Under ASU 2014-09, the Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| • | identify the contract with a customer; | |
| • | identify the performance obligations in the contract; | |
| • | determine the transaction price; | |
| • | allocate the transaction price to performance obligations in the contract; and | |
| • | recognize revenue as the performance obligation is satisfied. | |
The Company generates its revenues from a diversified a mix of e-commerce activities (B2C) and the services providing to merchants for their business growth (B2B), which are operated under two business segments of e-Commerce (previously mentioned as Consumer Facing Business) and Merchant POS (previously mentioned as Merchant Facing Business).
The Company’s performance obligation includes providing the connectivity among merchants and consumers, generally through an online ordering platform. The platform allows merchants to create account, place menu and track their sale reports on the merchant facing application. The platform also allows the consumers to create account and make orders from merchants on the consumer facing application. The platform allows delivering company to accept online delivery request and ship order from merchant to consumer.
The Company also has online lifestyle platform to enable the consumers to purchase high-end brands of all categories under its own brand name of “Leflair”. Under the deployment of the Company’s smart search engine, consumers search or review their favorite brands among hundreds of choices in Apparel, Bags & Shoes, Accessories, Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The platform also allows consumers to order from hundreds of vendor choices with personalized promotions based on purchase history and location. The platform has also partnered up with a Vietnam-based delivery company, Tikinow, to offer seamless delivery of product from merchant to consumer’s home or office at the touch of a button. Consumers can place orders for delivery or collect at the Company’s logistics center.
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e-Commerce mainly offers lifestyle platform under the brand name of “Leflair”, as follows:-
| 1) | Customer placed orders on the website / app, sales orders report will be generated in the system. The Company will inform its business partners proceed to packaging to the logistic partner warehouse and therefore, logistic partner delivered to the end customer. The sales is recognized when the delivery is completed by the shipper to the end customer. Sale of products are offered with a limited right of return ranging from 3 to 30 days, from the date of purchase and not subject to no product warranty. The Company is considered as a principal in this e-commerce transaction and reported revenue in gross basis as the Company takes the responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. |
During the three months ended March 31, 2022 and 2021, the Company has generated the revenue of $434,141 and $0 respectively, in the Lifestyle sector.
Merchant POS offers both software and hardware products and services, as follows:-
Software sales consist of:
| 1) | Subscription fees consist of the fees that the Company charge merchants to get on the Merchant Marketing Program. |
| 2) | The Company provides optional add-on software services which includes Analytics and Chat box capabilities at a fixed fee per month. |
| 3) | The Company collects commissions when they sell third party hardware and equipment (cashier stations, waiter tablets and printers) to merchants. |
During the three months ended March 31, 2022 and 2021, the Company has generated $10,949 and $9,240, respectively revenue from this stream.
Hardware sales — the Company generally is involved with the sale of on-premise appliances and end-point devices. The single performance obligation is to transfer the hardware product (which is to be installed with its licensed software integral to the functionality of the hardware product). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. It is concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. Payments for hardware contracts are generally due 30 to 90 days after shipment of the hardware product.
The Company records revenues from the sales of third-party products on a “gross” basis pursuant to ASC Topic 606-10 Revenue Recognition – Revenue from Contracts with Customers, when the Company controls the specified good before it is transferred to the end customer and have the risks and rewards as principal in the transaction, such as responsibility for fulfillment, retaining the risk for collection, and establishing the price of the products. If these indicators have not been met, or if indicators of net revenue reporting specified in ASC Topic 606-10 are present in the arrangement, revenue is recognized net of related direct costs.
Software subscription fee — The Company’s performance obligation includes providing connectivity to software, generally through a monthly subscription, where the Company typically satisfies its performance obligations prior to the submission of invoices to the customer for such services. The Company’s software sale arrangements grant customers the right to access and use the software products which are to be installed with the relevant hardware for connectivity at the outset of an arrangement, and to be entitled to both technical support and software upgrades and enhancements during the term of the agreement. The term of the subscription period is generally 12 months, with the automatic renewal of another one year, and the subscription license service is billed monthly, quarterly or annually. Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. Payments are generally due 30 to 90 days after delivery of the software licenses.
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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.
Contract assets
In accordance with ASC 606-10-45-3, contract asset is when the Company’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. The Company will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.
There were no contract assets at March 31, 2022 and December 31, 2021.
Contract liabilities
In accordance with ASC Topic 606-10-45-2, a contract liability is Company’s obligation to transfer goods or services to a customer when the customer prepays consideration or when the customer’s consideration is due for goods and services that the Company will yet provide whichever happens earlier.
Contract liabilities represent amounts collected from, or invoiced to, customers in excess of revenues recognized, primarily from the billing of annual subscription agreements. The value of contract liabilities will increase or decrease based on the timing of invoices and recognition of revenue. The Company’s contract liability balance was $18,644 and $25,229 at March 31, 2022 and December 31, 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 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
Research and development expenditures in the development of its own software are charged to operations as incurred. Based on the software development process, technological feasibility is established upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release are immaterial. For the three months ended March 31, 2022 and 2021, the software development costs were $19,548 and $30,161, respectively.
• Cost of sales
Cost of sales under online ordering consist of the cost of merchandizes ordered by the consumers and the related shipping and handling costs, which are directly attributable to the sales of online ordering.
Cost of sales under software sales consist of the cost of software and payroll, which are directly attributable to the sales of software.
Cost of sales under hardware sales consist of the cost of hardware and payroll, which are directly attributable to the sales of hardware.
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• Shipping and handling costs
No shipping and handling costs are associated with the distribution of the products to the customers which are borne by the Company’s suppliers or distributors for merchant POS business.
Except for e-Commerce business, the shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales.
• Sales and marketing
Sales and marketing expenses include payroll, employee benefits and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $196,102 and $900 for the three months ended March 31, 2022 and 2021, respectively.
• Product warranties
The Company’s provision for estimated future warranty costs is based upon historical relationship of warranty claims to sales. Based upon historical sales trends and warranties provided by the Company’s suppliers, the Company has concluded that no warranty liability is required as of March 31, 2022 and December 31, 2021. To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
• Income tax
The Company adopted the ASC 740 Income Tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
The Company and its wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
• Uncertain tax positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2022 and 2021.
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• Foreign currencies translation and transactions
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s subsidiary is operating in the Republic of Vietnam, Singapore and India and maintains its books and record in its local currency, Vietnam Dong (“VND”), Singapore Dollar (“SGD”) and Indian Rupee (“INR”), respectively, which are the functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Shareholders’ equity is translated using the historical rates. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholder’s equity.
Translation of amounts from SGD into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
Schedule of Foreign currencies translation and transactions
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end SGD$:US$ exchange rate | $ | 0.73848 | $ | 0.74317 | ||||
| Period average SGD$:US$ exchange rate | $ | 0.73928 | $ | 0.75039 | ||||
Translation of amounts from VND into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end VND$:US$ exchange rate | $ | 0.000044 | $ | 0.000043 | ||||
| Period average VND$:US$ exchange rate | $ | 0.000044 | $ | 0.000043 | ||||
Translation of amounts from INR into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end INR$:US$ exchange rate | $ | 0.013218 | $ | 0.013631 | ||||
| Period average INR$:US$ exchange rate | $ | 0.013290 | $ | 0.013692 | ||||
Translation of amounts from PESO into US$ has been made at the following exchange rates for the three months ended March 31, 2022 and 2021:
| March 31, 2022 | March 31, 2021 | |||||||
| Period-end PESO$:US$ exchange rate | $ | 0.019278 | $N/A | |||||
| Period average PESO$:US$ exchange rate | $ | 0.019379 | $N/A | |||||
Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.
• Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
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• 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 months ended March 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:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to Society Pass Incorporated | $ | (6,548,378 | ) | $ | (2,756,980 | ) | ||
| Weighted average common shares outstanding – Basic and diluted | 21,892,111 | 18,534,000 | ||||||
| Net loss per share – Basic and diluted | $ | (0.30 | ) | $ | (0.15 | ) | ||
| Three months ended March 31, | Three months ended March 31, | |||||||
| 2022 | 2021 | |||||||
| Series A Convertible Preferred Stock (a) | — | 8,000 | ||||||
| Series B Convertible Preferred Stock | — | 1,911,000 | ||||||
| Series B-1 Convertible Preferred Stock | — | 120,000 | ||||||
| Series C Convertible Preferred Stock | — | 282,750 | ||||||
| Series C-1 Convertible Preferred Stock | — | 5,014,500 | ||||||
| Options to purchase common stock (b) | 1,945,270 | — | ||||||
| Warrants granted to underwriter | 3,803,229 | — | ||||||
| Warrants granted with Series C-1 Convertible Preferred Stock (c) | 1,068,000 | 2,945,250 | ||||||
| Total: | 6,816,499 | 10,281,500 | ||||||
| (a) | The Series A the conversion formula is aggregate Stated Value divided by IPO price (State Value for each Series A preferred shares is $1,000). These are 8,000 shares of Series A Preferred Stock issued and outstanding (10,000 shares are designated Series A). The conversion formula would be $8 million (the aggregate stated value) divided by IPO price. |
| (b) | The Board of Directors have approved a 10-years option at an exercise price of $6.49 per share that will be exercisable at any time. |
| (c) | The expiry date of warrants granted with Series C-1 was extended to June 30, 2022. |
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• Leases
The Company adopted Topic 842, Leases (“ASC 842”) to determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the condensed consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.
As of March 31, 2022 and December 31, 2021, the Company recorded the right of use asset of $807,869 and $627,968 respectively.
• Retirement plan costs
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operation as the related employee service is provided.
• Share-based compensation
Pursuant to ASU 2018-07, the Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards (employee or non-employee), are measured at grant-date fair value of the equity instruments that an entity is obligated to issue. Restricted stock units are valued using the market price of the Company’s common shares on the date of grant. The Company uses a Black-Scholes option model to estimate the fair value of employee stock options at the date of grant. As of March 31, 2022, those shares issued and stock options granted for service compensations were immediately vested, and therefore these amounts are thus recognized as expense with an offset to preferred or March 31, 2022 and 2021, the stock-based compensations are recorded in the General and administrative expenses within the Consolidated Statements of Operations and Other Comprehensive Loss.”
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• Common stock awards
The Company grants common stock awards to employees and non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided is recorded in the general and administrative expenses and charged to the same account as if such settlements had been made in cash. The fair value of the Common Stock Awards to the Company’s director was estimated using a Black-Scholes Option Pricing Model.
• Warrants
In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its Preferred stock and common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using a Black-Scholes Option Pricing Model as of the measurement date. The Company uses a Black-Scholes option model to estimate the fair value of compensation warrants. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period, or at the date of issuance, if there is not a service period.
• Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting ;parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
• Commitments and contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
• Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, contract liabilities, accrued liabilities and other payables, amounts due to related parties and operating lease liabilities, approximate their fair values because of the short maturity of these instruments.
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Critical Accounting Policies and Estimate
• Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company has evaluated and the adoption of this standard does not have a material impact on its financial position, results of operations or cash flows.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
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In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact and timing of adoption of this guidance
No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our condensed consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for “smaller reporting companies.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to be effective can only provide reasonable assurance that their objectives are achieved.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective at the reasonable assurance level.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. This lack of segregation of duties leads management to conclude that the Company’s disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over our Exchange Act reporting disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, from time to time, we have been and may be named as a defendant in various legal proceedings arising in connection with our business activities. We may also be involved, from time to time, in reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business (collectively, “regulatory matters”). We contest liability and/or the amount of damages as appropriate in each such pending matter. We do not anticipate that the ultimate liability, if any, arising out of any such pending matter will have a material effect on our financial condition, results of operations or cash flows.
Our material legal proceedings are described in Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 22, "Commitments and Contingencies".
As of March 31, 2022, the Company had a total of $118,559 outstanding in legal fees to its attorneys related to these matters.
Item 1A. Risk Factors.
Not required under Regulation S-K for “smaller reporting companies.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
All unregistered sales of equity during the period covered by this report were included in a Current Report on Form 8-K and are therefore not required to be furnished hereunder.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits.
EXHIBIT INDEX
** Filed herewith
++ Furnished herewith
In accordance with SEC Release 33-8238, Exhibit 32.1 is furnished and not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOCIETY PASS INCORPORATED. | ||
| Date: May 17, 2022 | /s/ Dennis Nguyen | |
| Dennis Nguyen | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 17, 2022 | /s/ Raynauld Liang | |
| Raynauld Liang | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
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