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Home E-Commerce Marketing

SOCIETY PASS INCORPORATED. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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August 19, 2022
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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, Quarterly Report on
Form 10-Q for the three months ended March 31, 2022, as filed with the SEC on
May 17, 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"), Gorilla
Networks Pte Ltd ("Gorilla Net"), Gorilla Mobile Pte Ltd ("Gorilla Mob"). These
fourteen companies form the Society Pass Group (the "Group"). The Group
currently markets to both consumers and merchants in Vietnam, Philippines and
Singapore 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 acquired NREI and Dream Space
in February 2022 and have integrated the Leflair Assets, NREI and Dream Space
into the Society Pass corporate structure and ecosystem. Society Pass
Incorporate acquired Gorilla Net and Gorilla Mob in May 2022 under Society Pass
Incorporated. 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 five verticals: lifestyle,
grocery and food delivery, merchant software, telecommunication reseller, and
loyalty. Lifestyle includes Leflair App and Leflair.com website; Grocery and
food delivery ("F&B") 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. Telecommunication reseller business
includes Gorilla App and Gorilla.com website. The loyalty vertical includes
Society Pass App and SoPa.asia website. In addition, in the third quarter we
acquired companies in the travel and digital media verticals. These current four
and prospective e-commerce interfaces are collectively referred to in this
Quarterly Report as the "Platform".

  59




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. Gorilla App and Gorilla.com website are marketed in
Singapore.

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 August 17, 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 and other Global Events


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.

  60




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.

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

Financial Condition

Results of Operations

The following table sets forth certain operational data for the three and six
months ended June 30, 2022 and 2021:


                                               Three months ended                     Six months ended
                                                    June 30,                              June 30,
                                            2022               2021                2022               2021
Revenue,net                             $    499,062$       7,783$      944,152$      17,289
Cost of revenue                             (499,200 )          (86,562 )          (959,083 )         (104,857 )
Gross loss                                      (138 )          (78,779 )           (14,931 )          (87,568 )
Less operating expenses:
Sales and marketing expenses                (253,290 )          (41,284 )          (449,392 )          (42,184 )
Software development costs                   (17,320 )          (36,828 )           (36,868 )          (66,989 )
Impairment loss                                   -                  -             (528,583 )         (200,000 )
General and administrative expenses       (7,345,364 )       (4,167,802 )       (13,186,062 )       (6,121,899 )
Total operating expenses                  (7,615,974 )       (4,245,914 )       (14,200,905 )       (6,431,072 )
Loss from operations                      (7,616,112 )       (4,324,693 )  

(14,215,836 ) (6,518,640 )

Other income (expense):
Interest income                                6,027                 10               6,072                 16
Interest expense                                (384 )          (12,157 )            (4,429 )          (24,214 )
Loss on settlement of litigation                  -                  -     
             -            (550,000 )
Other income                                  24,672                992              38,293              1,747
Total other expense                           30,315            (11,155 )            39,936           (572,451 )
Loss before income taxes                  (7,585,797 )       (4,335,848 )  
    (14,175,900 )       (7,091,091 )
Income taxes                                    (797 )           (6,903 )            (2,099 )           (8,640 )
NET LOSS                               $  (7,586,594 )$  (4,342,751 )$  (14,177,999 )$  (7,099,731 )


  61




Revenue. We generated revenues of $499,062 and $7,783 during the three months
ended June 30, 2022 and 2021 respectively. During the six month ended June 30,
2022 and 2021 we generated revenue of $944,152 and $17,289 respectively. The
significant increase in revenue for three months and six month periods was
mainly due to increase in the sales from our online platforms and newly acquired
subsidiaries.

During the six months ended June 30, 2022 and 2021, the following customer
exceeded 10% of the Company’s revenues:

                Six months ended June 30, 2022        June 30, 2022
                                      Percentage         Accounts
 Customer         Revenues           of revenues        receivable
Customer A   $        783,141              82.94 %   $       34,062
Customer B   $        109,567              11.60 %   $      (11,818 )



                Six months ended June 30, 2021         June 30, 2021
                                     Percentage          Accounts
 Customer         Revenues           of revenues        receivable
Customer A   $        14,797               85.59 %   $         -

For the three months ended June 30, 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 June 30, 2022
                                       Percentage
 Customer          Revenues            of revenues
Customer A   $         392,739               78.70 %
Customer B   $          73,876               14.80 %



                 Three months ended June 30, 2021
                                        Percentage
 Customer         Revenues              of revenues
Customer A   $         7,009                   88.11 %

Customer is located in Vietnam.


Cost of Revenue. Cost of revenue was $499,200 and $86,562 during three months
ended June 30, 2022, and 2021 respectively. During the period of six months
ended June 30, 2022 and 2021, we incurred cost of revenue was $959,083 and
$104,857 respectively. Cost of revenue increased primarily as a result of the
increased sales and the cost of logistic.

  62




Major vendors

For the six months ended June 30, 2022 and 2021, only one vendor accounted for
10% or more of the Company’s hardware purchases and software costs:

                    Six months ended June 30, 2022               June 30, 2022
Vendors        Purchases           Percentage of purchases     Accounts payable
Vendor A   $         -                                 -      $             -



              Six months ended June 30, 2021         June 30, 2021
                                   Percentage          Accounts
Vendors        Purchases          of purchases          payable
Vendor A   $        12,436               11.86 %   $         -


For the three months ended June 30, 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 June 30, 2022
Vendors        Purchases            Percentage of purchases
Vendor A   $          -                                  -



              Three months ended June 30, 2021
                                    Percentage
Vendors        Purchases           of purchases
Vendor A   $        12,436               14.37 %

Our one major vendor is located in Vietnam.


Gross Loss. We recorded a gross loss of $138 and $78,779 for three months ended
June 30, 2022 and 2021 respectively. During the six months ended June 30, 2022
and 2021, we recorded a gross loss of $14,931 and $87,568 respectively. The
decrease in gross loss is due to increased revenue from e-commerce and our newly
acquired telecommunication reseller business.

Sales and Marketing Expenses ("S&M"). We incurred S&M expenses of $253,290 and
$41,284 for the three months ended June 30, 2022 and 2021 respectively. During
the six months ended June 30, 2022 and 2021, we have incurred S&M expenses of
$449,392 and $42,184 respectively. The increase in S&M expense in 2022 is
primarily attributable to the increased in sales activity and the related
promotion expenses related needed for new merchants joining our e-commerce
platform. Further, there was an increase in marketing cost in 2022 to attract
the attention of customers to our e-commerce platform.

Software Development Cost ("SDC"). We incurred SDC expenses of $17,320 and
$36,828 for three months ended June 30, 2022 and 2021 respectively. During the
six months ended June 30, 2022 and 2021, we incurred SDC expenses of $36,868 and
$66,989 respectively. The decrease in SDC in 2022 is primarily attributable to
the restructuring of our technology development team.

Impairment Charge ("IC"). We incurred impairment charges of $528,583 and
$200,000 for the six months ended June 30, 2022, and 2021, respectively. No
impairment charge was incurred for the three months ended June 30, 2022 and
2021. The increase is primarily attributable to the impairment of goodwill
related to the acquisition of the NREI ecommerce asset in the first quarter of
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
$7,345,364 and $4,167,802 for the three months ended June 30, 2022 and 2021
respectively. During the six months ended June 30, 2022 and 2021, we incurred
G&A expenses of $13,186,062 and $6,121,899 respectively. The increase in G&A is
primarily attributable to the increased professional costs associated with cost
related to business acquisition and the Company's filing for listing on the
Nasdaq Stock Exchange and stock based compensation for services.

  63




Loss on settlement of litigation. On May 21, 2021, the Company agreed to settle
a litigation matter for $550,000 in cash. The settlement was paid in two
tranches, with both tranches paid in the second quarter of 2021. In connection
with the settlement, the Company recognized litigation settlement expense in the
amount of $550,000 in the period ended June 30, 2021. There was no such expenses
incurred in the comparative period ended June 30, 2022.

Income Tax Expense. Our income tax expenses for the three months ended June
30,2022
and 2021 was $797 and $6,903 and for six months ended June 30, 2022 and
2021 was $2,099 and $8,640, respectively.

Net Loss. As a result of the items noted above, for the three months ended June
30, 2022, we incurred a net loss of $7,586,594 as compare to the same period
ended June 30,2021 of $4,342,751. During the six months ended June 30, 2022 the
Group incurred a loss of $14,177,999, as compared to $7,099,731 for the same
period ended June 30, 2021. The increase in net loss in both periods is
primarily attributable to increased general and administrative expenses.

Liquidity and Capital Resources


As of June 30, 2022, we had cash and cash equivalents of $28,012,846, accounts
receivable of $51,891, deposits, prepayments and other receivables of $4,549,753
and inventories of $336,476.

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.

For the six months ended June 30, 2022, the Company's stockholders' equity was
$34,587,713 which increased as a result of additional paid-in-capital partially
offset by an increase in accumulated deficit. For the six months ended June 30,
2022, the Company incurred net loss of $14,177,999 and net cash used by
operating activities of $5,448,474. Net cash used by investing activities was
$227,873. Net cash provided by financing activities was $10,351,413, resulting
principally from the $10,402,891 net proceeds from a public offering and
$412,890 of net proceeds from the C1 warrants exercised during the period ended
June 30, 2022, partially offset by repayment of the First Insurance Funding loan
in the amount of $464,368 during 2022.

While the Company believes that it will be able to continue to grow the
Company's revenue base and control expenditures, there is no assurance it will
be able to do so. The Company continually monitors its capital structure and
operating plans and evaluates various potential funding alternatives that may be
needed in order to finance the Company's business development activities,
general and administrative expenses and growth strategy. We expect to continue
to rely on cash generated through financing from public offerings or private
offerings of our or one or more of our subsidiaries' securities, to finance our
operations and future acquisitions. The Company believes that it has sufficient
liquidity to continue its current business plans and operations.

                                                     Six Months Ended June 

30,

                                                       2022             

2021

Net cash (used in) operating activities           $ (5,448,474 )$ (1,513,720 )
Net cash (used in) investing activities               (227,873 )       (200,000 )
Net cash provided by financing activities           10,351,413        

1,322,505

Effect on exchange rate change                          73,003           

27,182

Net change in cash and cash equivalents              4,748,069         (364,033 )
Cash and cash equivalent at beginning of period     23,264,777          506,666
Cash and cash equivalent at end of period           28,012,846          

142,633

Net Cash Used In Operating Activities.

For the six months ended June 30, 2022, net cash used in operating activities
was $5,448,474, which consisted primarily of a net loss of $14,177,999,
partially offset by non-cash stock based compensation for services of
$4,208,568, a decrease in deposits, prepayments and other receivables of
$2,470,800, depreciation and amortization of $1,614,617, and a non-cash
impairment loss of $528,583.

  64




For the six months ended June 30, 2021, net cash used in operating activities
was $1,513,720, which consisted primarily of net loss of $7,099,731, partially
offset by non-cash stock based compensation for services of $3,507,275, a loss
on settlement of litigation of $550,000, depreciation and amortization of
$1,604,451 and a non-cash 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, to finance our operations and future acquisitions.

Net Cash (Used In) Investing Activities.

For the six months ended June 30, 2022, there was a net cash outflow of $227,873
primarily as a result of the purchase of property, plant, and equipment.

For the six months ended June 30, 2021, there was a net cash outflow of $200,000
for a deposit paid related to the Leflair asset acquisition.

Net Cash Provided By Financing Activities.


For the six months ended June 30, 2022, net cash provided by financing
activities was $10,351,413, consisting primarily of funds raised from a public
offering and Series C-1 warrants exercised partially offset by repayment of the
First Insurance Funding Loan.

For the six months ended June 30, 2021, net cash provided by financing
activities was $1,322,505, consisting primarily of funds raised from
shareholders for Series C Preferred Stock and warrants 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.

  65




• 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
receivable, incremental borrowing rate used to calculate right of use assets and
lease liabilities, valuation and useful lives of intangible assets, valuation of
impairment of long-lived assets, valuation of common stock and stock warrants,
stock option valuations, imputed interest on due to related parties, inventory
valuation, revenue recognition, 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.

  66




• 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 four reportable operating segments: (i)
e-commerce, (ii) Merchant POS, (iii) Online Grocery and Food Groceries
Deliveries and (iv) Telecommunications Reseller.

• 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 June 30 2022 and December 31, 2021, the cash and
cash equivalent was amounted to $28,012,846 and $23,264,777, respectively.

The Company currently has bank deposits with financial institutions in the U.S.
which exceed FDIC insurance limits. FDIC insurance provides protection for bank
deposits up to $250,000, so there were uninsured balance of $10,780,926 and
$13,699,082 in parent entity as of June 30, 2022 and December 31, 2021,
respectively. In addition, the Company has uninsured bank deposits of
$16,966,211 and $9,315,695 with a financial institution outside the U.S as of
June 30, 2022 and December 2021, respectively. 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 June 30, 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
merchandized goods. The Company provides inventory allowances based on excess
and obsolete inventories determined principally by customer demand. During the
three and six months ended June 30, 2022 and 2021, the Company recorded an
allowance for obsolete inventories of $-0- and $0, respectively. The inventories
was amounted to $336,476 and $221,068 at June 30, 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.

  67



• 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), grocery and food delivery (B2C), telecommunication reseller
(B2C) and the services providing to merchants for their business growth (B2B),
which are operated under four business segments of e-Commerce (previously
mentioned as Consumer Facing Business), grocery and food delivery,
telecommunication reseller, 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 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.

  68




Other online platforms include brand name of "Handcart" and "Pushkart" to enable
the consumers to purchase grocery and food from difference local grocery and
food merchants and deliver to them in their area.

The Company also has online telecommunication reseller platform operate under
brand name of "Gorilla" to enable the consumers to subscribe local mobile data
and overseas internet data in different subscription package.

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 six months ended June 30, 2022 and 2021, the Company has generated
the revenue of $892,715 and $-0– respectively, in the Lifestyle sector.

During the three months ended June 30, 2022 and 2021, the Company has generated
the revenue of $482,410 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 six months ended June 30, 2022 and 2021, the Company has generated
$21,890 and $16,954, respectively revenue from software fees.

During the three months ended June 30, 2022 and 2021, the Company has generated
$10,941 and $7,714, respectively revenue from software fees.


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

The Company records revenues from the sales of third-party products on a "gross"
basis pursuant to ASC Topic 606-10 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.

  69




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.

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


Customers place order of grocery and food through online platform of "Pushkart"
and "Handcart" respectively. Upon received order by the grocery and food
merchant, the platform will assign third party delivery man to pick up and
deliver the grocery and food to the customers. Revenue are thus recognized at
the point of the grocery and food delivered and paid by the customer in cash.

During the six months ended June 30, 2022 and 2021, the Company has generated
$23,836 and $-0-, respectively revenue from this stream.

During the three months ended June 30, 2022 and 2021, the Company has generated
$8,042 and $-0-, respectively revenue from this stream.

Telecommunication resellerprovides local mobile data plan and overseas internet
data plan under brand name of “Gorilla” as follows:

Local mobile plan - customers subscribe their desired monthly local mobile plan
through online platform of "Gorilla" after customer account registration
completed. The Company will proceed to register the Sim card and arrange
delivery to the customer. Upon the Sim card activation, the system will capture
the data usage of each customers at the end of each month, prorated by the
package data capacity and monthly subscription rate for revenue recognition.
Unused data will be converted to Rewards Point and carry forward to next month
for subsequent revenue recognition point. With this, the company also recognize
revenue from Rewards Point redemption for subscription offset, voucher
redemption, extra data purchase, at the point of transaction accepted through
the customer account in the online platform.

Overseas internet data plan - customers place order of their desired overseas
internet data plan through online platform of "Gorilla" or third party partner
platforms. The revenue is recognize at the point of time when the Sim card
delivered and activated.

During the six months ended June 30, 2022 and 2021, the Company has generated
$5,642 and $-0-, respectively revenue from this stream.

During the three months ended June 30, 2022 and 2021, the Company has generated
$5,642 and $-0-, respectively revenue from this stream.

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 June 30, 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 $4,618 and $25,229 at June 30, 2022 and
December 31, 2021, respectively.

  70



• 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 six months ended
June 30, 2022 and 2021, the software development costs were $36,868 and $66,989,
respectively. For the three months ended June 30, 2022 and 2021, the software
development costs were $17,320 and $36,828, 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.


Cost of sales under grocery and food delivery consist of the cost of outsource
delivery and outsource payment gateway, which are directly attributable t the
sales of grocery and food delivery.

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

• 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 $253,290 and $449,392
for the three and six months ended June 30, 2022, respectively. Advertising
expense was $41,284 and $42,184 for the three and six months ended June 30
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 June 30, 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.

  71




• 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 six months ended June 30 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 India and Philippines and maintains its books and record in its local
currency, Vietnam Dong ("VND"), Singapore Dollar ("SGD"), Indian Rupee ("INR")
and Philippines Pesos ("PHP"), 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 period. The gains
and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive loss  within the statements of changes in shareholder's equity.

  72



Translation of amounts from SGD into US$ has been made at the following exchange
rates for the six months ended June 30, 2022 and 2021:

Schedule of Foreign currencies translation and transactions


                                        June 30, 2022June 30, 2021

Period-end SGD:US$ exchange rate $ 0.71874$ 0.74356
Period average SGD:US$ exchange rate $ 0.73258$ 0.75028

Translation of amounts from VND into US$ has been made at the following exchange
rates for the six months ended June 30, 2022 and 2021:


                                        June 30, 2022June 30, 2021

Period-end VND:US$ exchange rate $ 0.000043$ 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 six months ended June 30, 2022 and 2021:


                                        June 30, 2022June 30, 2021

Period-end INR:US$ exchange rate $ 0.012675$ 0.013450
Period average INR:US$ exchange rate $ 0.013126$ 0.013617

Translation of amounts from PHP into US$ has been made at the following exchange
rates for the six months ended June 30, 2022 and 2021:


                                        June 30, 2022June 30, 2021

Period-end PHP:US$ exchange rate $ 0.018176 $ N/A
Period average PHP:US$ exchange rate $ 0.019173 $ 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.

• 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 periods.

For the three and six months ended June 30, 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.

  73



Schedule of computation of diluted net loss per share:


                                                         Three Months Ended 

June 30,

                                                          2022              

2021

Net loss attributable to Society Pass
Incorporated                                        $   (7,504,324 )$ (4,342,751 )
Weighted average common shares outstanding -
Basic and diluted                                       24,347,607         

7,413,600

Net loss per share - Basic and diluted              $        (0.31 )
$      (0.59 )



                                                          Six Months Ended June 30,
                                                         2022                   2021
Net loss attributable to Society Pass
Incorporated                                        $ (14,052,702 )$ (7,099,731 )
Weighted average common shares outstanding -
Basic and diluted                                      23,126,643          

7,413,600

Net loss per share - Basic and diluted              $       (0.61 )

$ (0.96 )



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

                                                      Six months             Six months
                                                    ended June 30,         ended June 30,
                                                         2022                   2021
Series A Convertible Preferred Stock (a)                       -           

8,000

Series B Convertible Preferred Stock                           -           

764,400

Series B-1 Convertible Preferred Stock                         -           

48,000

Series C Convertible Preferred Stock                           -           

113,100

Series C-1 Convertible Preferred Stock                         -           

2,186,400

Options to purchase common stock (b)                    1,945,270          

–

Warrants granted to underwriter                         3,793,929          

–

Warrants granted with Series C-1 Convertible
Preferred Stock (c)                                            -               1,178,700
Total:                                                  5,739,199              4,298,600


(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 expired on June 30,

     2022.


  74




• 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 June 30, 2022 and December 31, 2021, the Company recorded the right of use
asset of $710,586 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 June 30, 2022, those shares issued and
stock options granted for service compensations were vested 180 days later based
on share issuance date, and therefore these amounts are thus recognized as
expense during the six months ended June 30, 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."

  75




• 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.

  76




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, approximate their fair values because of the
short maturity of these instruments.

  77



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 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 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.

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 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, but does not believe that it will have a material affect 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, but does not believe that it will have a
material affect on its consolidated financial statements.

  78



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, however, it appears that
more revenue will be recorded under this new requirement than was previously
allowed.

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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