| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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
accompanying unaudited interim consolidated condensed financial statements of Society Pass Incorporated have been prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information
and with Article 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete
financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals necessary for a fair
statement of financial position, results of operations and cash flows, have been included. The information included in this Quarterly
Report on Form 10-Q should be read in conjunction with the financial statements and the accompanying notes included in the Company’s
registration statement on Form S-1 for the year ended December 31, 2020. The year-end balance sheet data presented for comparative purposes
was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the
three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the year ending December 31,
2021 or for any other subsequent interim period. •
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
and other receivables, assumptions used in assessing right of use assets, imputed interest on due to related parties, and impairment
of long-term assets, 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. In addition, certain amounts in the prior periods’
consolidated financial statements have been reclassified to conform to the current period presentation. •
Cash and cash equivalents Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of
September 30, 2021 and December 31, 2020, the cash and cash equivalent was amounted to $ 5,722,450 506,666 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 4,895,306 208,635 •
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 September
30, 2021 and December 31, 2020, the allowance for doubtful accounts amounted to $ 0 0 •
Inventories Inventories
are stated at the lower of cost or net realizable value, cost being determined on a first-in-first-out method. Costs include hardware
equipment and peripheral costs which are purchased from the Company’s suppliers as merchandized goods. The Company provides inventory
allowances based on excess and obsolete inventories determined principally by customer demand. During the nine months ended September
30, 2021 and 2020, the Company recorded an allowance for obsolete inventories of $ 0 0 0 0 0 0 •
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:
Schedule
of Expected useful life
Expected
useful lives
Computer
equipment 3
Office
equipment 5 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 •
Revenue recognition The
Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
• 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
revenues are generated from a diversified a mix of marketplace activities and the services of the Company provide merchants to help them
grow their businesses. The revenue streams consist of Consumer Facing revenues and Merchant Facing revenues. Consumer
Facing Business The
Company’s performance obligation includes providing connectivity between merchant and consumer, 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 allow customers to purchase high-end brands of all catergories: Under the Company’s
smart search engine, consumers search or review their favorite brands among hundreds of choices in Apparel, Bags & Shoes, Accessory,
Health & Beauty, Home & Lifestyle, International, Women, Men and Kids & Babies categories. The platform also allow consumers
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 place orders for delivery or pickup at the Company’s logistics center. Revenue
streams for consumer facing business: F&B
sector
1) Ordering
fees comprise the fees that the different types of merchants pay for every completed transaction on the Platform, exclusive of delivery
fees charged. Monthly/annual subscription fees or 10% commission on order value on each successful order will be charged.
2) Delivery
fees include an upfront fixed fee and additional variable fees based on the distance. Various percentage of commission will be charged
as delivery fee on each successful order received and delivered. The
Company recognizes revenues from consumer facing business upon the completion of delivery and services rendered. During
the period ended September 30, 2021 and 2020, the Company have not generated any revenue from this stream. Lifestyle
sector
1) Customer
placed orders on the website / app, sales orders report will be generated in the system. The Company will start to proceed to packaging
and delivering customer. The sales recognised. During
the nine months ended September 30, 2021 and 2020, the Company have generated $ 73,518 0 73,518 0 Merchant
Facing Business Revenue
streams for merchant facing business include:
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 Chatbox 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.
4) Vendor
Financing. The Company collects brokerage fees whenever the Company facilitates financing transactions between merchants and one
of the Company’s partner financial institutions. During
the nine months ended September 30, 2021 and 2020, the Company have generated $26,970 and $37,752, respectively revenue from this stream.
During the three months ended September 30, 2021 and 2020, the Company have generated $10,016 and $11,044, respectively revenue from
this stream. Hardware
Product Revenues — 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 606-10 Revenue Recognition
– Revenue from Contracts with Customers Software
License Revenues — 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 on hardware product and software license, net of value added taxes (“VAT”) upon the services
are rendered and the title and risk of loss of hardware products are fully transferred to the customers. The Company is subject to VAT
which is levied on the majority of the hardware products 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 September 30, 2021 and December 31, 2020. Contract
liabilities In
accordance with ASC 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 $ 35,582 18,646 Contract
costs Under
ASC-606, the Company applies the following three steps in order to evaluate the costs to be capitalized as it fulfills following three
criteria: •
Incremental costs directly related to a specific contract; •
Costs that generate or enhance resources of the company that will be used to satisfy performance of the terms of the contract; and •
Costs that are expected to be recovered from the customer. No
contract costs are capitalized for the nine months ended September 30, 2021 and 2020. No
contract costs are capitalized for the three months ended September 30, 2021 and 2020. •
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
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 nine months ended September 30, 2021 and 2020, the software development costs were $ 76,698 139,151 9,709 33,658 •
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 September 30, 2021 and December 31, 2020. 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. •
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. •
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 $ 85,027 3,125 42,843 0 •
Income tax The
Company adopted the ASC 740 Income Tax 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 and nine months ended September 30, 2021 and 2020. •
Foreign currencies translation and transactions The
reporting currency of the Company is United States Dollar ("US$") and the accompanying condensed consolidated financial statements
have been expressed in US$. In addition, the Company’s subsidiary is operating in the Republic of Vietnam and India and maintains
its books and record in its local currency, Vietnam Dong (“VND”) 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 and nine months ended September 30, 2021 and
2020:
Schedule of Foreign currencies translation and transactions
September
30, 2021 September
30, 2020
Period-end
SGD$:US$ exchange rate $ 0.73534 $ 0.73118
Period
average SGD$:US$ exchange rate $ 0.74658 $ 0.71922 Translation
of amounts from VND into US$ has been made at the following exchange rates for the three and nine months ended September 30, 2021 and
2020:
September
30, 2021 September
30, 2020
Period-end
VND$:US$ exchange rate $ 0.000044 $ 0.000043
Period
average VND$:US$ exchange rate $ 0.000043 $ 0.000043 Translation
of amounts from INR into US$ has been made at the following exchange rates for the three and nine months ended September 30, 2021 and
2020:
September
30, 2021 September
30, 2020
Period-end
INR$:US$ exchange rate $ 0.013463 $ 0.013570
Period
average INR$:US$ exchange rate $ 0.013576 $ 0.013490 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. Foreign
Exchange Loss (Gain). We recorded a foreign exchange gain of $ 8,859 51,183 0.73534 0.73118 0.013463 0.013570 0.000044 0.000043 •
Comprehensive income ASC
Topic 220, “ Comprehensive Income •
Leases The
Company adopted Topic 842, Leases 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. As
of September 30, 2021 and December 31, 2020, the Company recorded the right of use asset of $ 529,782 79,109 •
Related parties The
Company follows the ASC 850-10, Related Party 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 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. •
Cost of goods sold Cost
of goods sold consists of the cost of hardware, software and payroll, which are directly attributable to the sales of products. The cost
also consists of costs of materials which has been sold attributable to the sales of high-end products. Additional costs may include
freight paid to acquire the goods, custom duties, sales or use taxes not recoverable paid on materials used, and any fee for purchase. •
Share-based compensation Pursuant
to ASU 2018-07, the Company follows ASC 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. As of September 30, 2021, those shares issued for service compensations were immediately
vested, and therefore this amount is thus recognized as expense with an offset to preferred or September 30, 2021 and 2020, the stock-based
compensations are recorded in the General and administrative expenses within the Condensed Consolidated Statements of Operations and
Other Comprehensive Loss.” •
Business combinations The
Company follows ASC 805, Business Combinations (“ASC 805”) and ASC 810-10-65, Consolidation. ASC 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 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. •
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 period. As
of September 30, 2021 and December 31, 2020, the Company has the number of shares of common stock to be issued upon conversion of below:
Schedule of Common stock issued
As
of September 30, As
of December 31,
2021 2020
Series
A Convertible Preferred Stock (a) 8,000 8,000
Series
B Convertible Preferred Stock 764,400 764,400
Series
B-1 Convertible Preferred Stock 48,000 48,000
Series
C Convertible Preferred Stock 465,600 108,600
Series
C-1 Convertible Preferred Stock 4,195,200 865,500
Warrants
granted — —
Warrants
granted with Series C-1 Convertible Preferred Stock 1,178,700 614,100
Total: 6,659,900 2,408,600
(a) The
Series A the conversion formula is aggregate Stated Value divided by IPO price (Stated Value for each Series A preferred
share is $1,000). There 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 |
