Society Pass rporated(SOPA) - 2023 Q4 - Annual Report

PART I Item 1. Business Society Pass is building a digital ecosystem and loyalty platform in Southeast Asia through strategic acquisitions across various verticals - The company's primary business is building a digital ecosystem and loyalty platform in Southeast Asian (SEA) countries through the acquisition and operation of e-commerce platforms and mobile applications[58][288] - The company operates across five main verticals: loyalty, lifestyle, telecommunications, digital media, and travel, having scaled back its food and beverage delivery operations in 2023[61][318] - A key growth strategy is the continued opportunistic acquisition of regional e-commerce companies to expand service offerings and increase registered consumers and merchants[45] - The company plans to market its universal "Society Points" loyalty program in 2024 to generate additional merchant revenue and create customer loyalty[46] - The company owns multiple registered trademarks, including "Society Pass", "SOPA", "Leflair", and "HOTTAB", central to its brand identity and intellectual property strategy[52][89] Item 1A. Risk Factors The company faces substantial risks including limited operating history, capital needs, intense competition, international operations, evolving regulations, and potential Nasdaq delisting - The company has a limited operating history in an evolving industry, increasing the risk of failure[54][91] - A failure to raise additional capital would materially adversely affect the company's business, financial condition, and results of operations[55][93] - The business is subject to risks from its international operations in Southeast Asia, including economic and political instability, currency exchange rate fluctuations, and complex legal environments[185][162][188] - The company received a Nasdaq notice on May 25, 2023, for failing to maintain the minimum $1.00 bid price, requiring compliance by May 20, 2024, to avoid delisting[205][230] - The founder, Dennis Nguyen, beneficially owns stock providing approximately 52.0% of the voting power, making the company a "controlled company" with significant influence over corporate matters[211][237][218] - As an "emerging growth company," the company is subject to reduced disclosure requirements, potentially making its common stock less attractive to some investors[215][242] Item 1B. Unresolved Staff Comments The company reports no unresolved comments from the Securities and Exchange Commission staff - No unresolved staff comments[221] Item 1C. Cybersecurity The Board of Directors oversees cybersecurity risks, managed daily by the Group Chief Technology Officer, with no material incidents reported to date - The Board of Directors oversees cybersecurity risk management, with the audit committee monitoring major financial risk exposures[273] - The Group Chief Technology Officer is primarily responsible for day-to-day cybersecurity risk assessment and management[224] - The company has not been aware of any cybersecurity threats that have materially affected its business strategy, operations, or financial condition[250][274] Item 2. Properties The company operates from leased office spaces across Southeast Asia, recording a $1,411,226 Right-of-Use asset and lease obligation as of December 31, 2023 - The company does not own any real estate and leases all its office properties across Singapore, Vietnam, Philippines, Thailand, and Indonesia[275][252] - As of December 31, 2023, the company recorded a Right-of-Use (ROU) asset and lease obligation of $1,411,226[275] Item 3. Legal Proceedings The company is involved in three significant New York legal cases, including employment actions by former employees and counterclaims for intellectual property misappropriation - The company is involved in three pending lawsuits in the Supreme Court of the State of New York, New York County[252][276] - Former employee Rahul Narain has claims for compensation and stock damages, with a court entering a judgment of $1,082,078.91 against the company, which is under appeal[277] - Former employee Thomas O'Connor has claims for salary, expenses, and significant damages related to undelivered stock valued at $9.9 million, plus an entity claim for $8 million in preferred stock, with the case in discovery[254] - The company has filed its own lawsuit against former employees Narain and O'Connor, alleging misappropriation of intellectual property and other related torts[278] Item 4. Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[257] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "SOPA", with 110 stockholders as of March 31, 2024, and no cash dividends paid or share repurchases in Q4 2023 - The company's common stock trades on the Nasdaq Capital Market under the symbol "SOPA"[282] - As of March 31, 2024, there were 110 stockholders of record[282] - The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain earnings for business operations and expansion[283] - The company did not repurchase any equity securities during the fourth quarter ended December 31, 2023[285] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2023, revenue increased to $8.17 million, net loss reduced to $18.1 million, but cash declined to $3.6 million, indicating continued reliance on external financing Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a "Smaller Reporting Company," the company is not required to provide disclosures for this item - Disclosure for this item is not required as the company qualifies as a "Smaller Reporting Company"[469] Item 8. Financial Statements and Supplementary Data Audited financial statements for 2023 and 2022 are presented, with the auditor's report highlighting "going concern" doubt due to significant net losses and negative operating cash flow Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting principles, financial disclosure, or auditing scope - None reported[969] Item 9A. Controls and Procedures As of December 31, 2023, management concluded that both disclosure controls and internal control over financial reporting were effective, with no material changes in Q4 2023 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[970] - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2023[971] - There were no material changes in internal control over financial reporting during the fourth quarter of 2023[972] Item 9B. Other Information The company reports no other information for this item - None[973] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[974] PART III Item 10. Directors, Executive Officers and Corporate Governance This section details the company's executive officers and five-member Board of Directors, including its four established committees and adopted Code of Ethics - The report lists executive officers and directors, including Raynauld Liang (Group CEO), Tan Yee Siong (Group CFO), and Tan Bien Kiat (Vice Chairman of the Board)[949][976] - The Board of Directors has established an Audit Committee, a Remuneration Committee, a Nominating and Corporate Governance Committee, and an Executive Committee[956] - The company has adopted a Code of Ethics applicable to all employees and directors, designed to deter wrongdoing and promote ethical conduct[1008] Item 11. Executive Compensation This section details executive compensation for FY2023 and FY2022, including former CEO Dennis Nguyen's $2.08 million and current CEO Raynauld Liang's $755,571 total compensation Summary Compensation Table (2023) | Name and Principal Position | Salary/Bonus ($) | Stock Awards ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Dennis Nguyen, Former CEO | 547,500 | — | 1,530,642 | 2,078,142 | | Raynauld Liang, CEO | 310,281 | — | 445,290 | 755,571 | | Tan Yee Siong, CFO | 119,533 | 22,500 | 35,000 | 177,033 | - Dennis Nguyen resigned as CEO on October 5, 2023, and entered into a consulting agreement through December 31, 2025[1013] - Raynauld Liang was appointed CEO on October 5, 2023, with a 5-year employment agreement including an annual base salary of $600,000 and 250,000 incentive stock options[994] Director Compensation (2023) | Name | Fees Paid in Cash ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Tan Bien Kiat | 50,000 | 100,000 | 150,000 | | Jeremy Miller | 50,000 | 100,000 | 150,000 | | Linda Cutler | 50,000 | 100,000 | 150,000 | | John Mackay | 50,000 | 100,000 | 150,000 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 31, 2024, founder Dennis Nguyen beneficially owned 55.4% of total voting stock, primarily via Series X Super Voting Preferred Stock, with 1,188,490 shares available for future issuance - As of March 31, 2024, there were 37,762,362 shares of common stock outstanding[1017][1041] - Founder and former CEO Dennis Nguyen beneficially owns 94.3% of Series X Super Voting Preferred Stock, equating to 55.4% of the company's total voting power[1042][1043] - All officers and directors as a group beneficially own 14.9% of the common stock and 7.7% of the total voting stock[1042] - Under the 2021 Equity Incentive Plan, 1,188,490 securities remained available for future issuance as of December 31, 2023[1045][1023] Item 13. Certain Relationships and Related Transactions, and Director Independence The company discloses several related party transactions, primarily involving founder Dennis Nguyen and director Tan Bien Kiat, including a software development agreement and stock issuances - The company entered a software development agreement with CVO Advisors Pte. Ltd., an entity for which former CEO Dennis Nguyen holds a call option, with parties currently in litigation over its exercise[1024] - In 2021, entities controlled by director Tan Bien Kiat and former CEO Dennis Nguyen were issued shares of Series C-1 Preferred Stock[1047][1025] - In August and September 2021, the company issued 3,300 shares of Super Voting Preferred Stock to Dennis Nguyen and 200 shares to Raynauld Liang, with each share carrying 10,000 votes[1048] Item 14. Principal Accountant Fees and Services The company's independent auditor, Onestop Assurance PAC, billed $432,237 in total fees for FY2023, a decrease from 2022, with all services subject to Audit Committee pre-approval Accountant Fees (2023 vs. 2022) | Fee Category | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | $420,737 | $364,600 | | Audit-related fees | $11,500 | $25,000 | | All other fees | $0 | $90,000 | | Total fees | $432,237 | $479,600 | - The Audit Committee's policy is to pre-approve all audit and non-audit services performed by the independent registered public accounting firm[1066][1028] PART IV Item 15. Exhibits, Financial Statement Schedules This section provides an index of all exhibits filed with the Annual Report on Form 10-K, including governance documents, material contracts, and required certifications - The report includes an index of all filed exhibits, such as governance documents, material contracts, and required certifications[1030] - Key exhibits listed include various share and asset purchase agreements, employment agreements, and the 2021 Equity Incentive Plan[1056][1032] Item 16. Form 10-K Summary The company has elected not to provide a summary for this item - The company has elected not to include summary information[1057][1070]